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7. Modify Tax Increment Financing Agreement with District 112.CITY OF 7 - CHANHASSEN 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 (612) 937 -1900 • FAX (612) 937 -5739 MEMORANDUM TO: Housing & Redevelopment Authority FROM: Don Ashworth, Executive Director DATE: January 3, 1997 SUBJ: Excess Levy Distribution Agreement, HRA /City of Chanhassen/School District 112 This item has appeared before both the city council and HRA on numerous occasions. In each instance, it has been approved. In each instance, one overriding theme has appeared to be consistent between both groups, i.e. the school district should reasonably be reimbursed excess levy tax dollars that they have generated as a result of their referendums. The HRA/city council also agreed that the same philosophy should hold true through the year 2000. In discussing the technical method under which the HRA/city council's approval could occur, the school district rightly noted that two additional referendums were approved by the voters in 1988 and 1989. Agreeing to the world beginning in 1990 /payable 1991 would ensure that the school district would receive the tax increment that they had proposed to be paid to them (see scenario A attached); however, of more importance to the school district, is that by using this is as base year would ensure that the higher level of funding stayed in effect for the City of Chaska for a much longer time frame. I do not anticipate that agreeing to the earlier base year has a significant effect on the HRA, i.e. those are the amounts that were used by the HRA for the past several years. It would also mean that there would not be repayment of previous year payments which were initially thought to have been more than had been generated by the school district. I would recommend that the HRA agree to making future payments to this school district in accordance with the schedule shown on scenario A so long as the amount of increment generated by the school district was greater than the difference between the current levy and the base year levy of 51.6. DEC 05 1 96 12:25 DISTRICT 112 Office of the Superintendent Daivid L. Clough. PhA. 11060o Village Road Chaska. Minnesota 55318 School 612/368 -3601 District P.5 Note: Nancy requested background information in regards to tax increment cooperative agreements with the sch( district/county. Although being lengthy, I thought the attache correspondence would benefit all participants for our Thursda morning meeting. Reading these from earliest to current shot provide an insight as to the "mind set" that existed at each tirr juncture. To: Don Ashworth, Chanhassen City Administrator Don Chmiel, Mayor — City of Chanhassen Nancy Mancino, Mayor -Elect — City of Chanhassen Dave Pokorney, Chaska City Administrator Bob Roepke, Mayor — City of Chaska Qy� From: Frederick R. Whitney, Chairman — District 112 School Board`` David L. Clough, Superintendent --- District 112 Schools Prior to the passage of the 1993 bond referendum, the cities of Chaska and Chanhassen agreed to return to District 112 any additional tax dollars generated in the Tax Increment Districts as a result of the referendum. The School District has been and continues to be grateful for this cooperative support from our communities. Even 'though both cities have made contr for the past two years, the agreement has not been finalized in writing. The school district delivered a proposed agreement drafted by legal counsel to the cities earlier this year. Recently, we received an agreement that had been approved by the Chanhassen City Count# on November 4, 1996, and is awaiting action by the School Board We have not yet finalized the agreement with the City of Chaska. The School Board reviewed the agreement submitted by Chanhassen at a -work session on December 2, 1996. Board members believe the agreement is not consistent with tho original agreement made prior to the referendum The School Board is not interested in being in dispute with its cities and would like to resolve this issue. Therefore, we would request a meeting as soon as possible with the above listed representatives to discuss and, hopefully, resolve any real or perceived discrcp',ancies. We believe this is an urgent matter and that we should meet as soon as possible. Serving the Communities of eastern Carver Countv throuah eaual ooaartunity OMr)1e%%#eA& -4 ­W _.,..__.,__ DEC 05 '96 12:26 DISTRICT 112 P.6 We would suggest the following potential meeting times: Tuesday, December 10 7 :30 a.m. L. Friday, December 13 12:00 coon Friday, December 13 3:30. Tuesday, December 17 :30 Thursday, December 19 :30 a.m. Sandy Neal, Secretary to the School Board and Superintendent, will contact each of you to check availability and arrange the time and place. Thank you for your attention to this matter. CA School District 112 Office of the Superintendent David L. Clough, Ph.D. 110600 Village Road Chaska, Minnesota 55318 612/368 -3601 To: Don Ashworth Nancy Mancino Don Chmiel Dave Pokorney Bob Roepke Frederick Whitney David Peterson From: Dave Clough Subject: TIF Meeting on December 17, 1996 /jZ 707 January 6, 1997 Thanks to all of you for meeting on December 17, 1996, to discuss the TIF agreements between District 112 and the cities of Chanhassen and Chaska. I've done my best to summarize our efforts. Please let me know if I've missed the mark. • Don Ashworth shared information that had been approved by the Chanhassen HRA and City Council. • David Peterson distributed calculations outlining the discrepancies between the District 112 /City of Chaska agreement and the agreement approved by Chanhassen. • Don Ashworth indicated he would work on a modified agreement which would use the levy referendums in the late 1980's as the basis rather than the `93 bond referendum, in anticipation that these numbers would be closer to those anticipated by the School District. • When Don Ashworth has completed the proposed modification, he will forward the modifications to David Peterson and Dave Pokorney for review. At that time, it will be determined whether or not the full group should meet again. • David Peterson agreed to provide Don Ashworth the dates and mill rate or tax capacity changes of the late 1980's levy referendums. (Note: This was completed on the afternoon of December 17th.) Serving the communities of eastern Carver County through equal opportunity in employment and education. Page 2 • City of Chaska representatives indicated that it was important that the agreements with the two cities be similar, while at the same time recognizing that the cities could pay only in accordance with having the funds to do so. Thanks to all of you for your participation. Hopefully, we can have a speedy resolution to this long - lingering matter. //o �� L /_-.' 160 j - 7 A .s 4 — /A e, 041 a.S Cer ra... / `y � Fir �r'�J eC,� ►•.� o S r f/G cr 1-4 e nu �c�S ��� .ra./�r.. /���pi' Scenario A • 1996 Bonds Sited to Remain Under $10 Million City of Chanhassen, Minnesota ChanhassentChaska/Carver County Highway Construction Plan Revenue Sources Tax Increment District 01 Plus: Plus: Less: Less: Less: Less: Less: Collection Captured Year Market Value Tax Capacity Tax Rate Tax Increment HRA Note Debt Service Administrative Cap. Exp. & Development Excess TIF Excess TIF Annual Cumulative (1) (2) (3) (4) (5) (6) Expenses Incentives Pymt to ISD Transferred Balance Balance (7) (8) (9) (10) (11) (12) (13) Bey. Bal.: - -- — - -- — 1995 $3,687,403 149.160% $5,500,131 $0 $3,505,612 $460,000 $843,333 $407,000 284,186 $436,934 721,120 1996 3,902,044 149.551% 5,835,546 0 3,773,574 473,800 748,069 458,000 382,103 1,103,223 1997 4,210,950 149.551% 6,297,518 0 4,639,381 488,014 637,226 366,000 166,897 1,270,120 1998 4,238,807 149.551% 6,339,179 0 5,440,662 502,654 593,544 343,000 (540,681) 729,439 1999 4,266,665 149.551% 6,380,840 0 5,590,766 517,734 555,677 365,000 (648,337) 81,102 2000 4,266,665 149.551% 6,380,840 0 5,067,002 533,266 444,665 343,000 (7,093) 74,008 2001 4,266,665 149.551% 6,380,840 0 4,311,238 168,284 0 1,901,318 0 74,008 2002 4,266,665 149.551% 6,380,840 0 1,787,754 0 4,593,066 0 74,008 2003 4,266,665 149.551% 6,380,840 0 0 0 6,380,840 0 74,008 $55,876,574 $0 $34,115,989 $2,975,469 $3,990,798 $2,282,000 $12,875,244 L Proposed Distribution* Notes: (1) Calendar year. (2) n/a (3) Calculation is based on Information provided by the City of Chanhassen. (4) The Tax Rate is increased 1 % a year. This assumption was provided by the City of Chanhassen. (Pre -1990 districts allow the tax rate to increase). (5) Provided by the City of Chanhassen. (6) Provided by the City of Chanhassen. (7) The Debt Service is taken from schedules provided by the City of Chanhassen. Represents the amount of tax increment transferred for debt payments. (8) The Administrative Expenses increase 3% per year. This assumption was provided by the City of Chanhassen. (9) Provided by the City of Chanhassen. (10) Provided by the City of Chanhassen. Assumed that the payment would end in 2000 since thereafter all funds are distributed back to the taxing jurisdictions. (11) No tax increment shall be paid after April 1, 2001, therefore 4 is transferred to be distributed as excess tax increment. (12) Annual surplus or loss. (13) The Beginning Balance is as of 12/31/94 and was provided by the City of Chanhassen. The TIF balance must equal at least 20% of the CAB bonds in order to qualify as Tax Increment Bonds. *Note: The School District's (112) tax capacity rate is 70 versus 50 at the time of the 88 -89 referendums. Multiplying 20% (70 - 50) times the 1990 tax capacity of approximately 3AM produces a larger number than the amount sought by the school district (column 10), which is Prepared by: SPRINGSTED Inc. ( 06/13198) also the maximum available to the HRA without going into debt. CITY OF )- - CHANHASSEN MEMORANDUM 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 (612) 937 -1900 • FAX (612) 937 -5739 TO: Mayor and City Council FROM: Don Ashworth, City Manager DATE: October 24, 1996 SUBJ: Resolution Authorizing Excess Levy Distribution to ISD 112 The attached Exhibit A provides the background, rationale, and actual method of calculating the excess levy distribution from the City/HRA to School District 112. The exhibit also commits the city to make future excess levy distributions for both the previous referendum as well as any future referendum to the extent that the school district actually does generate those dollars. Should the city council act to approve Exhibit A as representing the rational and method by tivhich payments would be made, I will request that the actual form of that approval be a cover contract which will solely state that Exhibit A governs transfers and that the contract is voided if changes in state law affect our ability to receive /distribute those dollars and in no case shall the amount being distributed be higher than what the city actually receives in any one year. \m--r\isd 112excesslevy.e <✓' r Exhibit A 24- Oct -96 EXCESS LEVY DISTRIBUTION 16:30 TAX INCREMENT REVENUES FROM: CITY OF CHANHASSEN TO: ISD 112 TIF ISD DIFF ADD7 ANTIC. ACT. BASE TAX 112 TAX CURR YR- TAXES PYMT PYMT TO YEAR CAP (1) RATE (2) BASE YR GEN. ISD 112 (3) ISD 112 (4) 1992 1992 3,695,795 62.658 1993 3,488,337 57.172 -5.486 ($191,370) 1994 3,556,465 62.883 0.225 $8,002 1995 3,736,225 71.220 8.562 $319,896 $350,000 $350,000 1996 3,764,225 71.201 8.543 $321,578 $600,000 $600,000 1997 3,764,225 70.000 7.342 $276,369 $276,369 $276,369 1998 3,764,225 70.000 7.342 $276,369 $276,369 $276,369 1999 3,764,225 70.000 7.342 $276,369 $276,369 $276,369 2000 3,764,225 70.000 7.342 $276,369 $276,369 $276,369 ry , NOTES: 1) Although the city and School District 112 agreed to share excess tax increment generated as a result of the school's referendum of 1992/93, significant disagreement occurred in 1993 -1995 as to how the "excess" would be calculated. During this time frame, the HRA entered into various "incentive agreements" essentially agreeing to return three years of "full increment" created by the prospective firms (1995- 2000). All of this occurred during a time frame of substantial deterioration of the existing base valuations of commercial/ industrial properties. (Fallout of the S & L failures of the late 1980's.) Accordingly, the total tax capacity, as presented in this agreement, is the base tax capacity of 53,736.225. The City of Chanhassen will consider increasing this base value to a value between $3,736,225 and any current value if the total debt obligations incurred prior to July 1, 1996 and administrative costs (defined by state statute) and reimbursement agreements (prior to July 1, 1996) is less than the tax increment which was actually received by the HRA. [Note: The calculation in any year that this phenomenon occurs shall be to adjust the "TIF TAX CAP" column to the current value, but the result of that calculation shall not exceed the amount of debt, as defined above, incurred prior to July 1, 1996, including administrative costs and reimbursement agreements.] 2&3 The base tax rate prior to the referendum was 62.658. As the school district levies 1 V2 years in advance of receiving property tax receipts, an overpayment was agreed to by the city, even though the city did not receive the monies in 1995 and 1996 as anticipated in 1992/93. The city, by this agreement, agrees that future capital, operational, or other increases to the school district's total tax levy shall be governed by this agreement through the year 2000 so as to ensure that excess tax increment (current and future) is returned to the school district. [Note: a) The amounts overpaid by the city to ISD 112 will be repaid to the city from future excess levy calculations as a result of a future referendum; and b) The resolution adopting this worksheet as to the city's, ability to make payments to ISD 112 shall override calculations presented here as it would relate to changes in state law regarding calculation of taxes, tax increment received by the city/HRA, calculation of tax capacity rates or tax capacity, etc.] 4) The "Act Pymt to ISD 112" shall be adjusted each year to represent the "TIF TAX CAP" (as referred to above) times the difference between the current total tax rate and the base year tax rate. Stipulations described in 1 -3 above, shall apply. g_1mgr \MI 12lety. �IL���o UPDATE RECEIVED JUL 10 RECD UPDATE 1996 -7 CITY OF CHANHASSEN MONDAY, JULY 8 1996 REPRESENTATIVE ANN REST PRESENTS HER PROPERTY TAX REFORM PROPOSAL TO THE MLC OPERATING COMMITTEE Representative Ann Rest (DFL -New Hope), Chair of the House Tax Committee, presented her ideas for property tax and school funding reform to the MLC Operating Committee on May 28. She spoke with the committee for more than one hour, highlighting the major components of her plan. The primary provisions of Representative Rest's proposal include the following. Simplify local property tax class rates. The ratio of the class rate for lower tier homes to commercial properties would be reduced from 4.6:1 to 2:1. The total number of class rates would be as follows: - 0.5% for agricultural property - 1% for homes and 1 to 3 unit rental properties - 1.5% for apartment buildings with 4 or more units - 2% for commercial - industrial properties The state would levy an education property tax, at a rate of 2.2 %, on commercial industrial properties over $60,000; rental housing; residential homes valued at more than $115,000; and seasonal recreational properties. The 6.5% sales tax would be expanded to include clothing. The expanded sales tax and state imposed education property tax would enable the state to fully fund general education expenses. In lieu of referendum levies that increase property taxes, school districts could raise additional operating revenues to be used for discretionary programs by imposing local income taxes - if approved by voters. The MLC Update Is prepared by Robert G. Renner, Jr. and Jennifer J. Peterson Merrerli & Kramer P.A., 145 University Avenue Wert, Suite 450, St. Paul, MN 55103 Telephone (612) 228.9757 Fax (612) 228.9787 State aid formulas for cities and counties would be re- worked based on need. LGA "grandfathers" would be phased out, and HACA would be eliminated. A state fund would be created for the purpose of ensuring that cities could meet their outstanding TIF obligations. The property tax refund program (circuit breaker) would receive additional funding, and the limited market value law would be extended. If you would like more detailed information on this proposal, please contact Jennifer Peterson at 228 -9757 and materials will be mailed to you. MINNESOTA TAXPAYERS ASSOCIATION RELEASES PROPERTY TAX STUDY A study released on June 25 by the Minnesota Taxpayers Association (MTA) ranked Minnesota as the state with the highest property taxes in the nation for higher - valued commercial property, and second - highest for large apartment buildings. The study also showed that higher - valued cabins rank number one in a comparison of rural areas in the fifty states. Property taxes paid by Minnesota homeowners for the first $70,000 of value are 12% below the U.S. average, while a home valued at $150,000 is taxed at a rate that is 24% above the national average. Residential property taxes for these values are ranked 27th and 14th respectively. Homes between $350,000 and $1 million are ranked 9th in the nation. By comparing property taxes to personal income, the MTA study also showed that Minnesota's overall property taxes collected per $1,000 of personal income rank 16th in the nation. The MTA stated that the results of this study illustrate an extreme disparity in property taxes paid by the many different property classifications. The study also showed that, as a percentage of its market value, a high - valued business in Minnesota pays 366% more than a lower - valued home. The MTA contends that this disparity is ultimately paid for in the form of higher consumer prices, lower worker wages, and lower investment returns. Prior to release of the study, the MTA released a property tax reform proposal that was aimed at "reducing the rate of growth in local spending and property taxes by unmasking the true cost of local government." The MTA hopes that the legislature will utilize the MTA study and property tax reform proposal as tools when revamping the property tax system. Many observers believe that the 1997 Legislature may seriously consider property tax reform measures, although many legislators have publicly stated that the governor will need to assume a leadership role in this proposition. The MLC will be actively involved in the legislative process to reform property taxes. If you would like a copy of the complete MTA property tax study, please call Jennifer Peterson at 228 -9757. METROPOLITAN COUNCIL PRESENTS GROWTH OPTIONS REPORT TO THE MLC OPERATING COMMITTEE John Carey delivered a presentation on the Metropolitan Council's study of Growth Options MLC Operating Committee on June 18. The Metropolitan Council has been meeting with various community leaders this summer in order to set a plan for future metropolitan growth. The growth options report released earlier this year was summarized in the February 5 MLC Update. Carey's discussion was an overview of the challenges a rapidly expanding metropolitan area can present for community leaders and planners. He explained in detail the demands placed upon the transportation system by urban sprawl outside the metropolitan area boundaries. Carey explained to the Operating Committee that the Metropolitan Council will be holding several outreach meetings during June. The Council plans to recommend a growth options plan later this summer, and present this recommendation to the 1997 Legislature. 1996 LOCAL AND LEGISLATIVE ELECTIONS UPDATE At the end of the legislative session, we reported to you all 201 legislators are up for re- election in 1996, but that many had announced they were leaving office. Since the April MLC Update the number of retiring legislators has grown from 16 to 23. The legislators listed below have announced they will not be seeking re- election for their current seats. Of the 23, only Steve Kelley (DFL- Hopkins) is retiring from the House to run for an open Senate seat in this fall's election. SENATORS: Kevin Chandler (DFL -White Bear Lake) Gene Merriam (DFL -Coon Rapids) Harold "Skip" Finn (DFL -Cass Lake) Ted Mondale (DFL -St. Louis Park) Terry Johnston (R -Prior Lake) Phil Riveness (DFL - Bloomington) Carl Kroening (DFL- Minneapolis) REPRESENTATIVES: Jeff Bertram (DFL - Paynesville) Chuck Brown (DFL- Appleton) Roger Cooper (DFL -Bird Island) Marvin Dauner (DFL - Hawley) Jim Girard (R -Lynd) Bob Johnson (DFL - Bemidji) Steve Kelley (DFL - Hopkins) Virgil Johnson (R- Caledonia) Teresa Lynch (R- Andover) Tony Onnen (R- Cokato) Howard Orenstein (DFL -St. Paul) Don Ostrom (DFL -St. Peter) Walter Perlt (DFL - Woodbury) Jim Rice (DFL - Minneapolis) John Sarna (DFL - Minneapolis) Gary Worke (R- Waseca) There will also be a number of local elections taking place this year within our MLC communities. Bloomington, Lakeville, Maplewood, Minnetonka and Roseville have no council or mayoral races in 1996. In the remaining 7 MLC communities, the seats held by the following councilmembers and mayors are on the ballot this fall: Apple Valley Eagan Eden Prairie Gary Humphrey Tom Goodwin Edina Mayor Fred Richards Peggy Kelly Jane Paulus Woodbury Nancy Remakel Lee Slagter Shawn Hunter Sandy Masin Plymouth Mayor Joy Tierney David Anderson Nicholas Granath Chuck Lymangood Ross Thorfinnson Patricia Pidcock Shoreview Mayor James Chalmers Jim Olson Ben Withhart JJPjjp:7474 1.W5js CAMPBELL, KNUTSON , SCOTT is FUCHS , P . A Nov 1 , 96 11:06 No . 001 P.02/031 AGREEMENT BETWEEN THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR '1'N E CITY OF CHANHASSEN AND INDEPENDENT SCHOOL DISTRICT NO. 112 RELATING TO TIF REVENUE SHARING AGREEMENT made this day of , 1996, between the HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF CHANHASSEN (hereinafter "HRA ") and INDEPENDENT SCHOOL DISTRICT NO. 112 (hereinafter "School District "). RECITAL • The School District and HRA have previously discussed the disposition of Tax Increment Financing (hereinafter "TIF ") funds arising out of additional tax levies relating to the issuance of the School District's General Obligation School Building Bonds, Series 19930 in the amount of $15,300,000.00 and bearing a date of original issue of July 1, 1993, and the School District's General Obligation School Building Bonds, Series 19941 in the amount of $31,980,000.00 and bcarina a date of original issue of May 1, 1994; and • Certain TIF funds have in the past been transferred by the BRA to the School District; and • The parties desire by this Agreement to formalize the sharing of TIF funds generated as a result of current and future School District referenda and resulting levies; and • The parties recognize that this Agreement is based upon present state law and that the HRA must retain the ability to modify or terminate this TIl~ revenue transfer in the event of changes in state law; and • The Chanhassen City Council has approved this Agreement. CA11PBELL, KNUTSON, SCOTT & FUCHS, P.A NOW, THEREFORE, the parties agree as follows: Nov 1 , 96 11:07 No . 001 P.0 1. Commencing with payable 1995 taxes and terminating with payable 2000 taxes, the HRA will transfer to the School District TIF revenues as calculated according to Exhibit "A" hereto which is incorporated herein by reference. 2. The HRA will not transfer any TIF revenues to the School District unless and until the HRA actually receives the TIF revenues. 3. The PIRA shall have the right to terminate this Agreement if changes occur in state law which directly or indirectly effect the amount. of TIF revenues received by the HRA. Dated; , 1996. HOUSING AND REDEVEI. PIVENT AUTHORITY IN ANT) FOR THE CITY OF CHANHASSEN By: Tts Chair And _ Its Executive Director Approved by the Chanhassen City Council , 1996, Donald J. Chmiel, Mayor Dated: , 1996. Don Ashworth, City Manager /Clerk INDEPENDENT SCHOOL DISTRICT NO. 112 By: Its: Its: !. ?7CZ