1i Tax Increment Financing Policy
CITY OF
CHANHASSEN
590 City Cmter Drive, PO Box 141
Chanhassm, Minnesota 55317
Phone 612.937.1900
Gmeral Fax 612.931.5139
Engineering Fllx 612.9T'.9152
Public Safety Fax 612934.2524
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MEMORANDUM
TO:
Don Ashworth, City Manager
Todd Gerhardt, Assistant City Manage~6 .
FROM:
DATE: October 21, 1998
SUBJ: Approval of Tax Increment Financing Policy
Attached for your review is the most recent draft of the proposed Tax
Increment Financing Policy. Based on our last meeting, staff received the
following changes from EDA members:
1) Adding a purpose statement under the heading of general policy to clearly
state why Chanhassen uses TIF.
2) Deleting item #5 under project selection criteria because it was a
redundant statement of item # 1.
3) Changing HotellMovie Theater to read Entertainment District to make
clear which district was being addressed.
4) Adding a blank "but-for" analysis worksheet for developers to complete as
a part of the TIF process.
5) Adding an area for certification for the "but-for" analysis worksheet.
6) Adding item #8 under application procedures to make clear developers
must follow all city development review processes.
(Changes are hi-lighted and/or struck-out within the text of the proposed
policy.)
RECOMMENDATION
Staff recommends approval of the Tax Increment Financing Policy as
attached.
ATTACHMENT
1. City of Chanhassen Tax Increment Financing Policy
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CITY OF CHANHASSEN
TAX INCREMENT FINANCING POLICY
OCTOBER 1998
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(10/21/98)
CITY OF CHANHASSEN
TAX INCREMENT FINANCING POLICY
Policy and Criteria Regarding Review of
TIF Usage Application
GENERAL POLICY
The City Council of the City ofChanhassen has the power, should it deem necessary, to use Tax Increment
Financing (TIF) based on Minnesota Statutes. The fundamental purpose ofTIF in Chanhassen is to
encourage desirable and affordable housing, senior housing, and assisted living that would not otherwise
occur "but for" the assistance provided through TIF. This policy shall be used as a guide in processing and
reviewing applications requesting TIF assistance.
PROJECT SELECTION CRITERIA
TIF can benefit the community by providing a broad range of housing opportunities such as affordable
housing, senior housing and assisted living. The Council reserves the right to approve or reject tax increment
financing on an individual basis.
Highest Priority Shall Be Given to Proiects Which Include:
I. Compatibility of the proposed project with the City's overall development plans and objectives.
2. Broad range of housing opportunities such as affordable housing, senior housing and assisted living.
3. Minimal impact on City service needs.
4. High quality of the facility to be built.
5. Development whiCH will meet a &pecifie eOFlllRHnity need as determined by the City Council.
PROJECT REOUlREMENTS
I. Applicant at all times should retain and be assisted by qualified financial consultants and/or
underwriters, and legal counsel.
2. Construction of the project shall not be commenced until the City has given preliminary approval to the
application for financing.
3. The City reserves the right to deny any application for financing at any stage of the proceedings prior to
adoption of the final approval authorizing issuance of the bonds.
4. The City reserves the right to select a third party administrator to assist in the management of the
process.
5. The City will only consider a "pay as you go" plan for high quality industrial developments in existing
TIF districts(National Weather, 2-2; Hennepin County, 3-1; Gateway, 6-1; and Hotel/Mo'lie Theater
Entertainment District, 4).
6. Development must be of the highest quality with high quality building materials and landscaping as
agreed between the City and the Developer.
7. Developer must pay all costs of establishing the district unless the City agrees to allow costs to come
out of the district.
8. Local requirements may be more stringent than State statute as applies to TIF.
9. Project meets "but for" analysis and statutory qualifications (Exhibit A).
ACTIVITES TO BE CONSIDERED FOR FINANCING
I. Land write down
2. Costs of streets and utilities
3. Demolition and relocation costs
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4. City costs such as trunk utility costs, street costs, and MSA reimbursement
5. Extraordinary landscaping and lighting
6. Soil corrections
APPLICA nON PROCESS
1. The application process must be completed in accordance with TIF application procedures (Exhibit B).
2. Applicant shall make an application for TIF usage on forms available from the City.
3. The application will include (if appropriate):
A. Statement of Public Purposes
B. Description of Project
C. Plans and Drawings of Project
D. Description of Company
E. Legal Opinions
F. Investment Bank Letter of Feasibility
G. Market Analysis
H. Pro Forma Analysis
1. Financial Statements
J. Zoning and Planning Analysis
K. Application Fee
L. Demonstration of past successful general development capability as well as specific capability in the
type and size of development proposed.
M. Other Documentation Requested by the City
3. The City's tax increment financing program will be administered by the City ofChanhassen Economic
Development Authority (EDA). The applicant shall submit a completed application and a $2,000 non-
refundable application fee. The application fee shall be paid to the Chanhassen EDA at the time a final
TIF application is submitted.
At the time a final TIF application is submitted, the applicant shall also deliver to the City a deposit in
the amount of $10,000. The purpose of this deposit is to reimburse the City for costs and expenses
incurred in connection with preparation of the development agreement and the carrying out of all
actions necessary in the fulfillment or the City's obligations. Any part of the deposit not
needed for those purposes shall be promptly returned to the Redeveloper not later than the date of
issuance of the Certificate of Completion, or within 15 days following the termination of the
Development Agreement for failure to close. It is understood the deposit is not a limitation on the
Redeveloper's obligation to reimburse the City for such costs; and the Redeveloper shall pay the City
for any such costs in excess of the deposit within 30 days following a written request to do so.
4. City staffwill review the data and make preliminary recommendations to the City Council as to
compliance of the application and proposed project with City objectives and criteria/Strategic Plan.
5. Formal evaluation of the application will include, in addition to items subject to preliminary review,
review of applicable credit analysis, credit enhancement and legal compliance. Formal recommendation
will then be made to the City Council.
6. After evaluation of the formal recommendation, the City Council will consider final approval of the
establishment of the TIF District and hold the appropriate hearings.
7. All applications and supporting materials and documents shall become the property of the City.
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CITY OF CHANHASSEN
APPLICA nON FOR TAX INCREMENT FINANCING
Business Name:
Project Cost Breakdown:
Address:
$
Location of Proposed Development:
$
$
Type(Partnership, etc.):
$
Telephone:
Total: $
Nature of Business:
Date:
HISTORY OF APPLICANT
I. Have you ever filed bankruptcy? Yes_ N 0_
If yes, provide details on separate sheet.
2. Have you ever defaulted on any loan commitment? Yes_ No_
If yes, provide details on separate sheet.
3. Have you ever applied for conventional financing for the project? Yes_ No_
I f yes, provide details on separate sheet. If no, why not?
4. List financial references: Name/Address/Contact
a.
b.
c.
5. Other information pertinent to your application:
6. Name of Counsel:
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INFORMATION CONCERNING APPLICANT'S PROPOSED PROJECT FOR EXISTING
INDUSTRIAL DEVELOPMENT LOCATED IN TIF DISTRICTS(National Weather, 2-2: Hennepin
County, 3-1: Gatewav,6-1: and Betell-Me'lie Theater Entertainment District, 4).
1. Is the proposed project a new facility or rehabilitation and/or expansion of existing facility?
2. Industrial/Commercial:
3. What is the present employment of your firm?
4. What will the employment be at completion of project?
5. Estimated Project Cost?
6. What is the principal business or product of the company?
7. Potential other use of proposed development?
8. Will this development attract other related industries? Yes_ No_
How'!
9. What are the proposed financing arrangements?
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INFORMATION CONCERNING APPLICANT'S PROPOSED HOUSING PROJECT
I. Is the proposed housing project a new facility or rehabilitation and/or expansion of existing facility?
2 Housing Type(single family, multi-family, apartments, condominiums, etc.):
3. Number of units:
4. Number of bedrooms in each unit:
5. Sale price of the units:
or
6. Rental price of the units:
7. Estimated total project cost and breakdown of overall development costs?
8. Who are you principally marketing your product to?
9. How long do you think it will take to sell or rent your product?
II. Do you have linkages/contacts with Chanhassen businesses? Please explain(Reason: To see if you are
meeting the local business needs.)
12. What are the proposed financing arrangements?
13. How are you proposing to meet alternate transportation needs?
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EXHIBIT A
SAMPLE "BUT-FOR" ANALYSIS
WITH NO TAX INCREMENT WITH TAX INCREMENT
Sources and Uses Sources and Uses
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,000
Tax Increment 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Sitework 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Rc!ocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
Soft Costs 350,000 350,000
Taxes 35,000 35,000
Finance Fees 850,000 850,000
Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
12,000,000 I
12,000,000 I
TOTAL USES
Income Statement Income Statement
Sq.Ft. Per Sq. Ft. Sq.Ft. Per Sq. Ft
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.00 212,000 25,000 $8.00 212,000
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00% Interest 9.00%
9,600,000 8,667,000
Net Income
Total Return on E
185,854
7.74%
288,061
12.00%
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"BUT-FOR" ANALYSIS WORKSHEET
WITH NO TAX INCREMENT WITH TAX INCREMENT
Sources and Uses Sources and Uses
SOURCES SOURCES
Mortgage
Equity
Tax Increment
TOTAL SOURCES
USES USES
Land
Sitework
Soil Correction
Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufacturing
Subtotal Construction Costs
Soft Costs
Taxes
Finance Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
TOTAL USES
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft
Rent-Space I
Rent-Space 2
Rent-Space 3
Other
I Mortg,g'
I Net Income
Total Return on EqUIty
I hereby certify the above financial information is true and accurate.
Signature
Title
Date
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EXHIBIT B
CITY OF CHANHASSEN
APPLICATION PROCEDURES FOR TIF ASSISTANCE
1. Applicant shall meet with City staff to discuss the scope of the project, public assistance being
requested, time schedule and other information as may be necessary.
2. Following an initial meeting, applicant shall complete a TIF application. The completed application
shall be submitted to the Executive Director of the Economic Development Authority.
3. The application shall be reviewed by City staff on a preliminary basis as to the feasibility of the project.
City staff shall prepare a report on the project.
4. The application shall be placed on an EDA agenda for concept review. The applicant may make a
presentation of the project at that time. City staff will present its preliminary findings.
5. The following items must accompany the application:
a. $2,000 application fee
b. Completed "but-for" worksheet
c. $10,000 application deposit
d. Statement of Public Purpose
e. Description of Project
f. Plans and Drawing of Project
g. Company Background Material
h. Letter of Feasibility
1. Market Analysis
J. Pro Forma Analysis
k. Financial Statements
1. Zoning and Comprehensive Plan Analysis
m. Other Pertinent Information
6. Following the necessary analysis of the application by City staff, a report shall be prepared and
presented to the EDA for formal action. If the application is approved, City staff will be directed to
undertake the following steps:
a. Prepare a redevelopment agreement between the EDA and the Developer;
b. Prepare or modify the redevelopment plan and TIF plan if required.
7. If zoning amendments or Planning Commission action is required as part of the project, the appropriate
actions shall be taken prior to final consideration of the redevelopment agreement.
8. Applicant must follow all city development review processes (e.g. site plan, platting, rezoning, PUD,
etc.) before fmal TIF application may be approved.
If you have any questions concerning the Tax Increment Financing application process, please contact:
City of Chanhassen
EDA Executive Director
690 City Center Drive
PO Box 147
Chanhassen, MN 55317
(612)937-1900 ext. 110
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