1g. School District 112 TIF Payment.7
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MEMORANDUM
CITY OF
CHANHASSEN
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: April 4, 1996
SUBJ: TIF Payment to School District 112
BACKGROUND
During 1991 and into 1992, the school district was preparing to present a $50 million referendum
for new building construction within School District 112. After joint meetings between the City
of Chaska, Chanhassen, and ISD 112, it became apparent that the approximate 15% increase in
property taxes, as a result of the referendum, would generate a $1 million per year "windfall" for
each of the two city's tax increment districts. If each of the two cities contributed the $2 million,
the net property tax increase would drop to 3 %. Oops, the�$2 million just dropped to $400,000.
Following a series of computer reiterations, the balancing number became an approximate 8%
increase which would be producing a total windfall for the two cities of $1 million. Each of the
city councils agreed that a 15% increase in property taxes would not be acceptable and that the
"excess levy dollars" should be returned to the school district with the condition that the school
district present the referendum as a general 8% increase and that that was being accomplished
because of the contribution being made back by each of the two cities. You know the rest of the
story. y .
The first of the payments occurred last year, albeit without a formal contract existing between the
cities and school district. The school district is very interested in developing that contract, but
the complexities of doing such have stalled the brocess. Specifically, the school district has
developed exotic formulas which take into acccturl'previous debt levels vs. current debt vs.
valuation levels which then produce a percent i?Aich would then be applied back to tax capacity.
I have taken a more simplistic approach in terms of measuring the tax level that existed in 1992
and apply any tax increases over the base level against the current value of properties within the
tax increment district. The last work session on developing a formula/contract concluded with
the agreement that both formulas would be in the final contract, but that the amount to be paid
Mayor and City Council
April 4, 1996
Page 2
would be the lesser of the two formulas. The school district also agreed that the contract would '
provide flexibility recognizing that changes in state law, methods of calculating tax capacity, etc.,
could significantly affect the city's ability to make that payment. An additional factor coming
out of the meetings was the fact that the school district's levy, or reduction in levy for our '
contribution, spans a 2 year period of time, i.e. the levy made in the fall of 1994 was for the
school year of July 1995 through June 1996. The approximate $600,000 reduction in the levy
that was made at that time frame, anticipating that those dollars would come from the City of '
Chanhassen, are absolutely mandatory dollars. I agree with the school district in that they did
reduce their levy by $600,000. However, if the amount that was actually generated is a smaller
number, the formula needs to take that into account and reduce payments in future years. '
RECOMMENDATION
Although both the school district and the cities are anxious to complete a formal contract, the fact
is that it is not complete. However, the school district desperately needs these dollars.
Accordingly, I would recommend that the city council authorize me to prepare a check to the
school district in the amount of $600,000 recognizing that a reduction in future payments may
occur if the final formula shows that the school district actually did not create an additional
$600,000 in tax increment revenue. The amount paid last year was $350,000 and represented the
original calculation for levy year 1993 — budget years 1994/95 for School District 112.
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Chaska �.
February 1, 1996
Dr. David Clough
Superintendent
Chaska School District #112
110600 Village Road
Chaska, MN 55318
Dear Dr. Clough:
As the Chaska School District is considering potential budget cuts as a result of the failed
operating referendum, the City of Chaska feels that it is important that the District be aware of
our commitment relative to excess tax increment payments. Although the City and the School
District do not have a formal agreement whereby the cities of Chaska and Chanhassen are
committed to making payments to the District from its Tax Increment District, the City of
Chaska has been and remains committed to making these payments. The following is a summary.
of the payments that the City has made to the District over the past three years and the estimated
amounts:
RECEIVED
FEB 0 21996
CITY OF C�ANH ?ASSEN
MtY Of ChaSk Min nesota One City Hall Plaza 55318 -1962 Phone 612 448 -2851
Operating
Capital
Levies
Levies
Total
1990
$73,686
$73,686
1991
$116,140
$116,140
1992
$151,403
$151,403
1993
$200,000
$200,000
1994
$200,000
$200,000
Paid
$741,229
$741,229
1995
$234,000
$335,186
$569,186
1996
$234,000
$336,627
$570,627
Due the District
$468,000
$671,813
$1,139,813
IL Total
$1,209,229
$671,813
$1,881,042
RECEIVED
FEB 0 21996
CITY OF C�ANH ?ASSEN
MtY Of ChaSk Min nesota One City Hall Plaza 55318 -1962 Phone 612 448 -2851
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These payments are based on the additional tax increment revenues which are generated in the '
City's tax increment funds as a result of the 1988 excess levy and the 1993 building bond levy.
For 1996 the City is committed to remitting to the School District $570,627 in tax increment
revenues which is based on $234,000 from the excess levy and $336,627 from the building ,
referendum.
Our intent in remitting these dollars is that these funds would be used to reduce the overall tax '
levy and minimize budget cuts which reduce the quality of the community's education. Further,
our hope is that over the next 12 months, we will be able to finalize a formal agreement with the
School District and the City of Chanhassen establishing a firm long term commitment relative to '
these dollars.
In reviewing the District's budget projections for the 1996 -97 school year, the projections do not '
anticipate any tax increment payments from the cities of Chaska or Chanhassen. Our hope is
that the District will also be successful in obtaining a similar commitment from Chanhassen, a
combination of which would result in a major reduction in the projected operating deficit for the '
coming year.
If you have any questions concerning the City of Chaska's commitment relevant to these tax
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increment funds, please feel free to contact me at your convenience.
Si
DP :jai
c: Don Ashworth, City of Chanhassen
Administrator
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Total Existing Debt Tif Incr Tif Value Tif Value
Tax Tax Equal Credit New Chan Chaska
Rate Rate Rate 1 yr lag Debt
6.80% 6.80% $0.00
18.52% 5.57% 3.27% 9.68% $4,166,216 $3,965,273
28.66% 5.18% 4.29% 5.81% 13.38% $4,380,953 $4,160,941
25.23% 5.31% 3.64% 7.49% 8.78% $4,380,953 $4,160,941
23.99% 5.40% 3.31% 4.77% 10.50% $4,380,953 $4,160,941
23.19% 5.53% 3.11% 5.54% 9.01% $4,380,953 $4,160,941
23.47% 5.62% 3.18% 4.62% 10.05% $4,380,953 $4,160,941
22.64% 5.11% 2.96% 5.00% 9.57% $4,380,953 $4,160,941
Tif Pymt Tif Pymt
Chan Chaska
$403,355 $383,900
$586,366 $556,918
$384,687 $365,368
$460,114 $437,007
$394,806 $374,978
$440,445 $418,326
$419,313 $398,255
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Tax Mature
New Debt
Exist Debt
Total
Net
Yr
2/01
Principal
Principal
Debt
Tax
in
year
Interest
Interest
Value
93
94
$837,517
837,517
12,324,995
94
95
$1,754,380
$754,609
2,508,989
13,549,852
95
96
$3,581,943
790,099
4,372,042
15,254,099
96
97
$3,129,393
834,496
3,963,889
15,711,722
97
98
$3,008,643
873,390
3,882,033
16,183,074
98
99
$2,943,870
922,375
3,866,245
16,668,566
99
0
$3,064,490
964,519
4,029,009
17,168,623
0
1
$3,100,453
903,153
4,003,606
17,683,681
Total Existing Debt Tif Incr Tif Value Tif Value
Tax Tax Equal Credit New Chan Chaska
Rate Rate Rate 1 yr lag Debt
6.80% 6.80% $0.00
18.52% 5.57% 3.27% 9.68% $4,166,216 $3,965,273
28.66% 5.18% 4.29% 5.81% 13.38% $4,380,953 $4,160,941
25.23% 5.31% 3.64% 7.49% 8.78% $4,380,953 $4,160,941
23.99% 5.40% 3.31% 4.77% 10.50% $4,380,953 $4,160,941
23.19% 5.53% 3.11% 5.54% 9.01% $4,380,953 $4,160,941
23.47% 5.62% 3.18% 4.62% 10.05% $4,380,953 $4,160,941
22.64% 5.11% 2.96% 5.00% 9.57% $4,380,953 $4,160,941
Tif Pymt Tif Pymt
Chan Chaska
$403,355 $383,900
$586,366 $556,918
$384,687 $365,368
$460,114 $437,007
$394,806 $374,978
$440,445 $418,326
$419,313 $398,255
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