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EDA Agenda 11-18-2015 (Workshop Meeting)EDA Workshop Agenda: 11/18/15 1 Workshop - Consideration of EDA Work Plan for 2016 (AS) A. REFERENCE AND BACKGROUND: The EDA is asked to consider revisions to its Annual Work Plan for 2016. The EDA’s Enabling Resolution, Section 5.06, states that the “EDA may annually develop and present an economic development strategy and present it to the City Council for consideration and approval.” Additionally, in the Council’s consideration of adoption of the HRA levy, the review of the EDA’s action plan by the Council is one of the tools for providing communication between the two bodies. Sharing the document with Council provides an understanding of the intended activities of the EDA. Staff has included the most recent work plan of the EDA for reference, including a brief statement on the status of the work plan objectives. When this document was presented to the Council in early 2015, it was noted that this was less an “annual work plan”, than a statement of strategic objectives recognized as multi-year efforts. To aid the EDA in developing a 2016 work plan statement, the EDA is asked to fill out the attached worksheet prior to the meeting on Wednesday (please bring with you to the meeting). The worksheet will provide the group with a starting point for discussion. B.ALTERNATIVE ACTIONS: None at this time. C.STAFF RECOMMENDATION: None at this time. D.SUPPORTING DATA: 2015 Work Plan, with Overview Notes 2016 Work Plan Worksheet Abatement Memo Housing Pooling Memo 1 EDA ANNUAL WORK PLAN EDA 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 housing redevelopment. EDA Work Plan Mission Statement: The EDA’s 2015 work plan is adopted in support of achieving the goals of the Monticello Comprehensive Plan. The EDA will be proactive by developing and undertaking actions for achievement of the Comprehensive Plan’s Economic Development goals and will be reactive in responding to economic development opportunities as they arise in the most timely and effective manner possible. The EDA shall utilize the economic development strategies of the Comprehensive Plan as a guide for action. Comprehensive Plan Goals: Attracting & Retaining Jobs Expanding Tax Base Enhancing Downtown Facilitating Redevelopment Housing Choice for Life-Cycle 2015 Action Statements: 1. Research for implementation the adoption of a 2016 EDA (and/or HRA) levy. COMPLETE FOR 2016; CONTINUE REPORTING AND COMMUNICATION EFFORTS TO/WITH COUNCIL 2. Research for implementation the use of tax abatement by the City of Monticello, including specific use criteria. MEMO ATTACHED. 3. Clearly understand allowable uses of available pooled housing increment as a financial resource. 2 POOLED INCREMENT NOW CAPTURED IN TIF 1-22; SEE ATTACHED MEMO INCREMENT CANNOT BE USED FOR RELOCATION 4. Continue to support redevelopment efforts for publicly-owned properties on Block 34. 5. Engage as a partner in other redevelopment opportunities as they arise, actively encouraging redevelopment within the TH25/CSAH 75 area. 6. Market industrial development at the Monticello Business Center (Otter Creek Business Park), targeting businesses which will be a supplier, customer or collaborative partner to existing businesses within the community. 7. Encourage more proactive lead development and response in all market segments to support a diversified tax base. 8. Develop and re-establish a dedicated economic development staff position to facilitate and support the accomplishment of Comprehensive Plan goals. IN PROGRESS. 9. Market EDA incentive programs in a more proactive manner, both within the community and beyond, beginning with the education on these resources at the EDA level. 10. Actively market for sale for development the EDA-owned properties at Cedar Street, 349 West Broadway and 413 W. 4th Street. 11. Examine housing stock for aging or blighted properties and research development of programs for redevelopment and/or revitalization. 12. Support the development of the Destination for Innovation brand and implement in economic development activities. Appendix: Monticello Comprehensive Plan, Chapter 5 - Economic Development ECONOMIC DEVELOPMENT AUTHORITY 2016 ACTION STATEMENT WORKSHEET EDA 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 housing redevelopment. EDA Work Plan Mission Statement: The EDA’s 2015 work plan is adopted in support of achieving the goals of the Monticello Comprehensive Plan. The EDA will be proactive by developing and undertaking actions for achievement of the Comprehensive Plan’s Economic Development goals and will be reactive in responding to economic development opportunities as they arise in the most timely and effective manner possible. The EDA shall utilize the economic development strategies of the Comprehensive Plan as a guide for action. Comprehensive Plan Goals: Attracting & Retaining Jobs Expanding Tax Base Enhancing Downtown Facilitating Redevelopment Housing Choice for Life-Cycle 1. Please rank the following objectives and add additional objectives as desired. Ranking (1 -10, 1 being highest) Objectives Continue to support redevelopment efforts for publicly-owned properties on Block 34. Engage as a partner in other redevelopment opportunities as they arise, actively encouraging redevelopment within the TH25/CSAH 75 area. Market industrial development at the Monticello Business Center (Otter Creek Business Park), targeting businesses which will be a supplier, customer or collaborative partner to existing businesses within the community. Encourage more proactive lead development and response in all market segments to support a diversified tax base. Market EDA incentive programs in a more proactive manner, both within the community and beyond, beginning with the education on these resources at the EDA level. Actively market for sale for development the EDA-owned properties at Cedar Street, 349 West Broadway and 413 W. 4th Street. Examine housing stock for aging or blighted properties and research development of programs for redevelopment and/or revitalization. Support the development of the Destination for Innovation brand and implement in economic development activities. Other: Example: Re-engage in business retention and expansion efforts. Other: Example: Consider housing increment resource in terms of strategic project goals (example – only downtown or elsewhere?) Other: 2. Please provide action statements or activities you believe would support each objective. Objectives Continue to support redevelopment efforts for publicly-owned properties on Block 34. 1 Action: 2 Action: Engage as a partner in other redevelopment opportunities as they arise, actively encouraging redevelopment within the TH25/CSAH 75 area. 1 Action: 2 Action: Market industrial development at the Monticello Business Center (Otter Creek Business Park), targeting businesses which will be a supplier, customer or collaborative partner to existing businesses within the community. 1 Action: Example: Explore broker/agent relationships. 2 Action: Encourage more proactive lead development and response in all market segments to support a diversified tax base. 1 Action: 2 Action: Market EDA incentive programs in a more proactive manner, both within the community and beyond, beginning with the education on these resources at the EDA level. 1 Action: 2 Action: Actively market for sale for development the EDA-owned properties at Cedar Street, 349 West Broadway and 413 W. 4th Street. 1 Action: Explore agent/broker relationships. 2 Action: Examine housing stock for aging or blighted properties and research development of programs for redevelopment and/or revitalization. 1 Action: Example: Tour/inventory core city for potential acquisitions. 2 Action: Support the development of the Destination for Innovation brand and implement in economic development activities. 1 Action: Example: Migrate website to City site for better maintenance. Explore redirecting domain name. 2 Action: Other: Re-engage in business retention and expansion efforts 1 Action: 2 Action: Other: 1 Action: Example: Reinstitute façade improvement program in downtown 2 Action: Example: Understand other available financial resources through partners such as Ifoundation, DEED, etc. 458900v1 MNI MN190-101 Kennedy 470 Pillsbury Center 200 South Sixth Street Minneapolis MN 55402 & Graven (612) 337-9300 telephone (612) 337-9310 fax http://www.kennedy-graven.com C H A R T E R E D MEMORANDUM TO: Board of Commissioners, City of Monticello Economic Development Authority FROM: Martha Ingram, Kennedy & Graven DATE: March 23, 2015 RE: Property Tax Abatement ________________________________________________________________________ Following is a general description of the property tax abatement process under Minnesota Statutes, Sections 469.1812 to 469.1815, as amended (the “Abatement Act”). Generally Cities, towns, counties and school districts are each authorized to rebate the taxes imposed by that entity (but not taxes of any other jurisdiction). The term “abatement” is misleading, as the tax is not forgiven or abated. The tax is paid normally, but the amount levied by the participating jurisdiction is returned to the property owner, similar to “pay as you go” tax increment, or otherwise used to pay the costs of a particular project. (A 1999 amendment also authorizes a political subdivision to defer payment of taxes without interest or penalties, subject to an agreed-upon repayment schedule.) Each governing body must make a finding that the abatement: (1) will produce benefits to the political subdivision at least equal to the costs; and (2) is in the public interest because it will: (a) increase or preserve tax base; (b) provide employment opportunities in the political subdivision; (c) provide or help acquire public facilities; (d) help redevelop or renew blighted areas; 458900v1 MNI MN190-101 2 (e) help provide access to services for residents of the political subdivision; (f) finance or provide public infrastructure; or (g) phase in a property tax increase on the parcel resulting from an increase of 50 percent or more in one year on the estimated market value of the parcel, other than an increase attributable to improvements. Procedure, Terms Each governing body must adopt an abatement resolution after a public hearing with at least 11 days published notice. The notice must identify the property and the total estimated amount of the abatement. The maximum abatement for all properties for each political subdivision in any year is 10% of the current levy or $200,000, whichever is greater. The maximum term of abatement is 15 years if the city, county and school district all approve abatements for the parcel. If only one or two of those entities approve an abatement (for example, the city alone), the maximum term is 20 years. If no term is specified, the term of the abatement is limited to 8 years. After expiration of the specified term, no additional abatement may be granted for that property for eight years, unless the abatement is for new improvements. The political subdivision can abate all the taxes on a parcel (including those related to land and any existing improvements), or only some portion (such as the portion related to new construction, similar to tax increment financing). Mechanics There are four ways to use the abatement process as a financing tool. 1. Developer pay-as-you-go. Process The most common form of abatement is essentially a direct rebate of taxes to the property owner. The City would enter into a contract with the developer that is very similar to a tax increment pay-as-you-go contract. Each participating political subdivision would hold a public hearing and approve an abatement resolution. If the County and School District are amenable, the City could enter into agreements with them to make abatement payments to the City, which are then paid to the Developer under the terms of the abatement/development contract. While there is no statutory requirement to make payments for “qualified costs,” a city may condition abatement payments on receipt of evidence that certain specified development costs have been expended. The levy for the abatements is not subject to levy limits that otherwise apply to the City, County or School District. 458900v1 MNI MN190-101 3 Impact on City Tax Levy Under Section 469.1815, subdivision 1 of the Abatement Act, the City “must add to its levy amount for the current year . . . the total estimated amount of all current year abatements granted.” Under Section 275.70, subdivision 5, clause (9), the levy for an abatement is a special levy, above and beyond levy limits. This is true whether or not the City issues bonds. When abatement is used in a similar fashion to tax increment, the additional tax levy has no impact on the City or the taxpayers in general. The abatement is limited to the taxes created by new development. Presumably, these new taxes would not have been generated if the abatement had not been approved (i.e., but for the abatement, the development would not have occurred). Therefore, the City does not “lose” any taxes by approving the abatement. The City does need to levy to replace the amount of the abatement, but that levy simply ensures that the City has the same amount of general fund dollars and does not affect other taxpayers. This is best explained by an example. Assume: Total City Tax Capacity $100,000 City levy 30,000 City Tax rate .30 Also assume that the average home in the City has a tax capacity of $1,000. The City’s share of the tax on that home is $300. Now assume the City approves an abatement for a private development. Assume the new improvements have a tax capacity of $10,000. The City abatement amount is $3,000 ($10,000 tax capacity times the City tax rate of .3). The City increases its levy by the amount of the abatement, but the entire City tax base is also increased by $10,000: Total City Tax Capacity $110,000 City levy 33,000 City tax rate .30 The average home’s tax is still what it was back in step 1. The city still has $30,000 from its levy to pay for general city costs. The city uses $3,000 from the levy to reimburse the developer for project costs incurred. Taxpayers are held harmless, as long as the $10,000 increased tax capacity would not have occurred but for the improvements. The same analysis holds true for the County or the School District if those entities also approve an abatement. In each case, the abatement diverts taxes to pay project costs. The added levy replaces that amount in the general fund, but is exactly matched by t he added tax capacity. And in all cases the levy is outside of levy limits that might otherwise apply. 458900v1 MNI MN190-101 4 2. Infrastructure pay-as-you-go. Amendments in 1999 also authorized political subdivisions to retain (or pay over to another political subdivision) abatements needed to pay for the cost of public infrastructure. This is permitted whether or not the infrastructure is located adjacent to the parcel for which the tax is abated. Consent of the landowner whose taxes are “abated” is not required. 3. Bonds. Any city, county, town or school district may issue abatement bonds. The maximum amount is the sum of the abatements for the subject property for the years authorized (up to 15 or 20, as the case may be.) If two or more political subdivisions grant abatements for the same property, the municipality in which the property is located may issue bonds up to the amount of the aggregate sum of abatements approved by the participating jurisdictions. The term “municipality” means a city or town, which means that if a county or school district join in an abatement program, the bonds musts be issued by the city or town. Each participating jurisdiction pledges its abatement amount to the bond-issuing city or town. The bonds may be general obligation bonds, issued without election (except as described below), and are not subject to net debt limits. The general rules of Minnesota Statutes, Chapter 475 otherwise apply. The issuing city (or town) and any other contributing political subdivision must each approve an abatement resolution under the procedures required for any abatement under the Act. Proceeds of abatement bonds may be used for: (a) Public improvements that benefit the property. These presumably include the same types of improvements financed with special assessments under Chapter 429. However, it does not appear that the benefit to a parcel must be measured by a dollar-for-dollar increase in fair market value, as in the case of special assessments. A reasonable connection between the improvement and the parcel from which the abatement was derived should be sufficient. (By contrast, no benefit to the affected parcels needs to be shown if infrastructure is financed without bonds, as described above). Note: A 1999 amendment clarifies that the consent of the property owner is not required in order to approve an abatement for a particular parcel. This means that a city may approve abatements for designated parcels and issue general obligation bonds to finance public improvements that benefit those parcels. Effectively, this is an alternative to special assessment financing for public improvements. However, if only the city’s own share of taxes is abated, the effect is the same as simply diverting a portion of city general funds to pay infrastructure costs. A 2001 amendment imposed additional limits on use of general obligation bond proceeds. An election is required if proceeds are used for the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for 458900v1 MNI MN190-101 5 conducting the business of a state, local or federal government. (This is the same limitation that applies to proceeds of tax increment bonds.) (b) to acquire and convey land or other property, as provided under this section. This clearly authorizes use of proceeds to acquire the parcel being abated. It is less clear what other property may be acquired “as provided under this section.” The broadest view is that any acquisition that furthers the public purpose cited for granting the abatement is permissible for financing from bond proceeds. A more cautious approach is to require at least some nexus between the property acquired and the parcels from which the abatement is collected. (c) to reimburse the property owner for the cost of improvements made to the property. There is no apparent limitation on the type of improvements that may be reimbursed, which allows financing of private building construction as well as site preparation. (d) to pay the costs of issuance of the bonds. This presumably includes all costs related to the bonds, including legal and fiscal costs in connection with the project financed by bond proceeds. 4. Tax Deferral. As an alternative, the political subdivision can approve a deferral of taxes for up to 15 or 20 years, as the case may be. In that case, the property owner does not actually pay the taxes until later years. Interest and penalties may be abated entirely. The deferred taxes must be paid according to a repayment schedule that begins after the deferral period. Please let me know if you have any questions on the above.