2000 11 16FILE
Agenda
Economic Development A uth ority
Thursday, November 16, 2000, 4:30p. m.
Chanhassen City Council Chambers, 690 City Center Drive
Consider Resolution Initiating the Process for Establishment of a Redevelopment Plan
for the construction of a Maintenance Facility at Lake Ann Park.
Agenda
Chanhassen City Council
Thursday, November 16, 2000
Immediately Following the Economic Development Authority Meeting
Chanhassen City Council Chambers, 690 City Center Drive
Consider Resolution Initiating Process for Approval of the Redevelopment Project Area
and Calling for a Public tIearing.
Discussion Regarding Financial Options for Tax Increment Districts.
CITYOF
CHAN SEN
690 Gty Center Drive, PO §ox 147
Chanhassen, Mi~mesota 55317
Phone 612.937.1900
General Fax' 612.937.5739
Eng inee~qng Fax 612.937.9152
Public Safqy F~x' 612.934.2524
Web www. ci. chanhassen, mn. us
MEMORANDUM
TO: EDA Members
FROM:
Bruce M. DeJong, Finance Director
DATE:
November 8, 2000
SUBJECT: EDA Bonds for Lake Ann Park Maintenance Building.
The attached documents describe the financing plan for the Lake Ann Park
maintenance building and the steps necessary to issue the bonds. This process is
somewhat complicated in that the Economic Development Authority (EDA),
technically a separate governmental entity, is issuing the bonds. The city will
then enter into a lease agreement with the EDA to use the building and will
commit to annually levying an amount equal to 105% of the debt service to pay
for the bonds. The result of this financing process exempts the debt levy from
potential re-imposition of levy limits and ensures that the debt does not apply
toward the city's legal debt limit.
In order for this financing to proceed, the EDA has to pass a "Resolution Initiating
the Process for Establishment of a Redevelopment Plan." The City Council also
has to pass a resolution "Resolution Initiating Process for Approval of
Redevelopment Project Area and Calling a Public Hearing." A map of the
redevelopment area will be reviewed by the Planning Commission for
determination that it meets the guidelines of the comprehensive plan and zoning
map. This should be routine, since the site plan was approved by the Planning
Commission on July l 8 and the Council gave it final approval on July 24. They
will pass a resolution sending their comments back to the City Council. That
meeting will be on Tuesday, November 14.
A notice will be published in the November 16 Chanhassen Villager for a public
hearing regarding the redevelopment area to be held on December 4. The Council
will hold the hearing and approve the redevelopment plan. Then the EDA must
convene. The EDA must pass a resolution adopting the redevelopment plan and
accept the bond bids to complete the process.
attachments
F/se C/tl, of Cha,hassen. A growh~g communth, w/th dealt {akes, aua/in, schools, a chamdng downtown, thriving businesses, and beautifnl ,ark¢. /4 ore, t ~/ace to live. ,~orle. a,d ~l~u
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF
CHANHASSEN, MINNESOTA
RESOLUTION NO.
STATE OF MINNESOTA )
COUNTIES OF CARVER )
AND HENNEPIN )
CITY OF CHANHASSEN )
RESOLUTION INITIATING PROCESS FOR ADOPTION OF REDEVELOPMENT PLAN
BE IT RESOLVED by the Economic Development Authority of the City of Chanhassen,
Carver and Hennepin Counties, Mirmesota (the "Authority") as follows:
1. Recitals.
(a) The Authority is authorized to exercise redevelopment powers under Minnesota
Statutes, Sections 469.090 through 469.1081, among other statutory powers; and
(b) It has been proposed that the Authority establish a Redevelopment Project Area in
connection with constructing and equipping a municipal building for the City of
Chanhassen, Minnesota, and adopt the Redevelopment Plan for the Redevelopment
Project Area (the "Plan"), all pursuant to and in conformity with applicable law.
2. City Council Public Hearing. Under applicable law, it is necessary for the City
Council to hold a public hearing on the Plan. The Authority hereby requests the City Council to
hold the public hearing, following notice thereof to be published not less than 10 and not more
than 30 days prior thereto, and to consider thereafter the Plan for approval at a meeting of the
City Council to be held on December 4, 2000.
Adopted by the Economic Development Authority of the City of Chanhassen, Carver and
Itennepin Counties, Minnesota, this 16th day of November, 2000.
ATTEST:
President
Secretary
1225075.1
EDA Redevelopment Area Map
1 BANEBERRY WAY W
2 CLOVER
3 CONEFLOWER CRV N
4 PRIMROSE PLACE
--~.,~-.-~-~~p ,v ~aL.av' _~
Lake Ann
¢ Uti~La.~n
25-6890040
25-0100900
3.230
McGly.n_n. Dry__
Hwy. 5
Coulter Blvd
25-689005C
TABLE OF CONTENTS
Page
INTRODUCTION AND LEGAL BASIS ........................................................................... 1
A. Intent .............................................................................................................................. 1
B. Statement ............................................................................. : .......................................... 1
C. Redevelopment Area Boundaries .................................................................................. 1
D. Statement of Authority ................................................................................................... 2
E. Findings and Declaration ............................................................................................... 2
II.
REDEVELOPMENT PROGRAM ...................................................................................... 2
A. Redevelopment Plan Objectives .................................................................................... 2
B. Land Use ........................................................................................................................ 3
C. Redevelopment Activities .............................................................................................. 3
D. Financing Plan ............................................................................................................... 4
E. Development Standards .................................................................................................. 4
F. Environment Controls .................................................................................................... 5
G. Administration of Project ............................................................................................... 5
H. Modification of Plan ...................................................................................................... 5
Exhibit A - Redevelopment Area Legal Description and Boundary Map
Exhibit B - Budget
1225075.1
II.
1225075.1
D. Statement of Authority
Minnesota Statutes Section 469.001-469.047 (Housing and Redevelopment Authority
Act) grants municipalities the authority to designate redevelopment areas within the
boundaries of the municipalities. Within these areas, the municipality may adopt a
redevelopment plan and establish a project consistent with the municipality's public
purpose. The project as contemplated by this plan consists of a redevelopment
project as defined in Section 469.001, Subdivision 14. The lease with option to
purchase agreement is authorized under Minnesota Statutes, Section 465.71.
E. Findings and Declaration
The City and the EDA make the following findings:
Certain parcels of land in the project area would not be made available for
redevelopment without some public financial aid.
o
The redevelopment plans for the Redevelopment Area in the City will afford
maximum opportunity consistent with the needs of the locality as a whole, for
the redevelopment of the area by private enterprise.
The Redevelopment Plan conforms to the general plan for development of the
locality as a whole.
REDEVELOPMENT PROGRAM
A. Redevelopment Plan Objectives
The EDA, through implementation of this Redevelopment Plan, seeks to achieve the
following objectives:
To provide for the least costly and most efficient Municipal Building for the
City required to provide adequate City services to the region.
°
To promote and seek the orderly and harmonious development of the
Redevelopment Area.
o
To provide logical and organized land use for the entire Redevelopment Area
consistent with the Comprehensive Land Use Plan and the Zoning Ordinance of
the City.
4. To promote the prompt development of property in the Redevelopment Area
with a minimal adverse impact on the environment.
17
3. Municipal Building and Other Public Improvements.
The EDA proposes to cause to be constructed and equipped the Municipal
Building and, as appropriate, other public infrastructure improvements, within
the Redevelopment Area.
All or a portion of the completed Municipal Building will be sold to the City
under a lease with option to purchase agreement.
D. Financing Plan
1. Project Budget
Attached hereto as Exhibit B is a budget which details estimated development
costs associated with the Municipal Building and any other public
improvements currently contemplated. The items of cost and the costs thereof
shown in the budget are estimated to be necessary based upon information now
available. It is anticipated that the items of cost and the costs thereof shown in
each category in the budget may decrease or increase, but that the total project
cost will not exceed the amount shown above.
2. Source of Funds and Security
The City is entering into the lease with option to purchase agreement with the
EDA pursuant to Minnesota Statutes, Section 465.71. The lease with option to
purchase agreement is payable from general sources including taxes, and its
payment is not limited to a specific fund or specific source of revenues. Sources
of funds for any other public improvements include rates and charges,
assessments and other available funds of the EDA or City.
3. Bond Issue Details
The EDA will issue approximately $930,000 in public project revenue bonds to
finance the Municipal Building. No bonding has currently been structured to
finance costs of any other public improvements to be constructed within the
Redevelopment Area.
1225075.1
19
EXHIBIT A
Redevelopment Area Legal Description and Boundary Map
Legal Description
Property Identification Numbers for the Redevelopment Area
25-0100900
25-0110200
25-6890040
25-6890050
Boundary Map
(See Attached)
1225075.1
A-1
EXHIBIT B
Budget
Construction Costs
Discount Factor
Estimated Capitalized Interest
Estimated Costs of Issuance
Miscellaneous Costs and Rounding
TOTAL
$ 828,000
15,810
63,495
18,000
4,695
$930,000
1225075.1
B-1
CITY OF CHANHASSEN, MINNESOTA
RESOLUTION NO.
STATE OF MINNESOTA )
COUNTIES OF CARVER )
AND HENNEPIN )
CITY OF CHANHASSEN )
RESOLUTION INITIATING PROCESS FOR APPROVAL OF REDEVEEOPMENT PROJECT AREA
BE IT RESOLVED by the City Council (the "Council") of the City of Chanhassen,
Carver and Hennepin Counties, Minnesota (the "City"), as follows:
1. Recitals.
(a)
Pursuant to Minnesota Statutes, Sections 469.090 through 469.1081, the
Economic Development Authority of the City of Chanhassen, Minnesota (the
"Authority") is authorized to exercise development and redevelopment powers;
and
(b)
It has been proposed that the Authority establish a Redevelopment Project Area in
connection with constructing and equipping a municipal building for the City and
adopt the Redevelopment Plan for the Redevelopment Project Area (the "Plan"),
all pursuant to and in conformity with applicable law; and
(c) The Authority has requested the Council hold a public hearing on the Plan, as
required by Minnesota Statutes, Section 469.028, Subdivision 1.
Public Hearing. The Council will hold a public hearing on the Plan at a meeting
of the Council to be held at the Chanhassen City Hall on December 4, 2000,
commencing at 6:30 p.m., Central Time. The staff of the City is hereby
authorized and directed to cause the Notice of Public Hearing, attached hereto, to
be published in the City's official newspaper not more than 30 nor less than 10
days prior to the scheduled public hearing date.
Adopted by the City Council of the City of Chanhassen, Carver and Hennepin Counties,
Minnesota, this 16th day of November, 2000.
ATTEST:
Mayor
City Manager
1225075.1
CITYOF
CHANHASSEN
690 GO, Center Ddve, PO Box 147
Chanhasse,, Minnesota 55317
?hone 612.937.1900
General F~v 612.937. 5739
E, gineering Fax 612. 93 7. 9152
?ublic Sari7 Fax 612.934.2524
Web www. ci. chanhassen, mn. tls
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Mayor
Council Members
Bruce M. DeJong, Finance Director
November 14, 2000
Tax Increment Options Discussion
Tax Increment Financing (TIF) District 1 (the downtown district) has been a
frequent topic for discussion during the past several years. The difficulty is that
the city has debt issued to be repaid through increment (the taxes paid on the
increased value for each parcel since the district was created), but for several
reasons, the increment has been reduced below initial projections. A statutory
deadline of April 1, 2001 limits the city's use of increment from that district to
only expenditures for principal and interest on debt issued prior to April 1, 1990
or refunding debt issued prior to April 1, 1990. All debt issued after April 1, 1990
may not be paid using tax increment after April 1, 2001. That non-qualified debt
totals $7,505,308. The district must be decertified when the last qualified debt
service payment is made in November, 2003.
There is a deficit in TIF District 1 that is estimated to be -$1,719,000 as of
December 31, 2000. The two primary reasons for the shortfall are that the
property did not develop as fast as anticipated and the taxes on commercial and
industrial property have been substantially reduced by the state government.
The city has pursued legislative remedies with varying degrees of success. The
state initiated a grant program (in response to our request for special legislation)
to alleviate some of our problems due to rate compression. We have qualified for
grants of $1,147,000 in 1999 and believe we will be awarded a grant of
approximately $1,089,000 for 2000. The grant program extends until 2001 for
2000 deficits. The difficulty with the grant program is that we had debts coming
due fi'om 1998 through 2001 that we had to refinance in 1998 for liquidity
purposes. We simply did not have enough cash on hand to pay those debts as they
came due. Our prudent refinancing at that time has actually hurt our application
for the grant program. We have followed a' strategy of defeasing debt to
maximize our grant application, essentially putting us back in the same position
we were prior to the refinancing. That allows the state to pick up the portion of
our deficit caused by the class rate reductions.
Tax Increment Options Discussion
November 15, 2000
Page 3
and the advisors believe that is justified for grant purposes and in the city's best
interest. We believe this represents the worst case scenario. The deficit would
have to be cleared by using general tax levies or transfers from healthy funds.
Scenario #2 incorporates the base assumptions of Scenario #1 and adds the
defeasance of an additional $3,180,000 prior to April 1, 2001 to bring
expenditures up to the amount of revenues for the year. That would keep allow us
to maximize our expenditures for the year 2001. We would be giving up county
agreement funds of $2,241,000. This strategy leads to a deficit of approximately
$2,189,000 at decertification.
Scenario #3 looks at what would be required for a defeasance in 2001 if the grant
program were extended one year.
Scenario #4 assumes that we can use tax increment to fund the deficits
accumulated prior to April 1, 2001. Our advisors believe that would be
disallowed under the theory that it renders the April 1 date meaningless. My
personal opinion is that we are not expending money according to a Generally
Accepted Accounting Principles (GAAP) definition of expenditure, which is the
word contained in the statute. I believe that we should try to use this assumption
and let some state authority tell us why we can't before we abandon this course.
Staff and all of the advisors will be present at the meeting on Thursday to explain
this in further detail.
attachments
CITY OF CHANIlASSEN, MINNESOTA
TAX INCREMENT DISTR1CT NO. 1
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
For the Years Ending December 31, 2000 to 2004
Scenario t/2
32246.1
Projected
2000 2001 2002 2003 2004
Revenues:
Tax increment $ 5,657,036 $ 5,650,000
Excess over qualified debt/expenses
Special assessments:
Current and delinquent:
County 4,035
HRA 159,974 177,062
Tolal revenue
Expenditures:
Qualified debt
Non-qualified debt
Defeased debt
Administrative expenses
Special assessment payments
Developer payments
Total expenditures
Revenue over (under) expenditures
Transfers:
Debl service:
Transfers to pay debt service:
Reflmding Bonds of 1994A (333)
Refunding Bonds of ] 994B (334)
bnprovel'aent Bonds of 1996D (344)
Less assessmeul revenue
Total transfers
Increase (decrease) in fund balance
Fund balance (deficit) at start of year
Fund balance (deficit) at end of year
$ 5,650,000 $ 5,650,000 $ 5,650,000
(3,110,220) (4,067,055} (5,650,000)
158,607 40,421 37,813
5,821,045 5,827,062 2,698,387 1,623,366 37,813
562,240 557,980 1,809,270 1,521,945
1,837,154 988,067
3,565,409 3.180,000
138,544
340.722 345,274 158,607 40.421
61.100 61,100 61,100 61,000
37,813
6,505.169 5.132,421 2,028.977 1,623,366 37,813
(684.124) 694,641 669,410
(960,895) (948,170) (669,410)
(44,000)
(719,308)
(1.004,895) (1,667,478) (669.410)
(1,689,019) (972,837)
(3,596,212) (5,285.23l)
(6,258.068) (6,258,068) (6,258,068)
($5,285,231) ($6,258,068) ($6,258,068) ($6,258,068) ($6,258,068)
Possible funds available:
Non-TIF Revenue:
1999 T1F Grant 1,147,751
2000 TIF Grant - estimate 1,089,542
2001 TIF Grant - prelim estimate 1,800.000
Excess TIF from District #3 275,886 182,991
Counly Agreement 0
less amount used for 1996B bonds
Land sale proceeds 0 700,000
Cash balance- fund 333 568,144
Less debt service on non qualified debt (88,067)
Annual total
Cumulative lotal
182,991 182,991 182,991
1.707,196 2,232,401 0
(1,100,000) (1.100,000)
(150,757) (255,757) (3,489,276)
3.081,323 2,594,924 1,739.429 1,059,635 (4,406,285)
3.081,323 5,676,247 7,415.676 8,475,311 4,069,026
Deficit upon decertification (2,189,042)
Assumptions: 1) Defease S3,555,000 of&bt in 2000 (to maximize 2001 T1F grant)
2) Expend only qualified debt from 2001 and beyond (I.e. future tax increment can't fund past deficits)
3) KeeI) district #3 open, however, send back excess TIF to County
(Split excess between Coonty, School & City)
,4ddilimud assuntl~lion.v fi : Scenario #2
1 ) For 2001, all debt maturities of non-qualified debt paid prior to April 1, 2001 is considered qualified debt.
2) Defease an additional amount of $3.18 million (1996D) prior to April 1, 2001 for the total debt payments to equal tax increment in 2001
(No excess TIF or Count:,, agreement after 2000)
11/15/00 8:18 AM
CITY OF CHANItASSEN, MINNESOTA
TAX INCREMENT DISTRICT NO. I
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
For the Years Ending December 31,2000 to 2004
Scenario #4
32246.1
Revenues:
Tax increment
Excess over qualified debt/expenses
Special assessments:
Current and delinquent:
Coonty
HRA
Projected
2000 2001 2002 2003 2004
$ 5,657,036 $ 5,650,000 $ 5,650,000 $ 5,650,000 $ 5,650,000
(395,209) (4,067,055) (5,650,000)
4,035
159,974 177,062 158,607 40,421 37,813
Total revenue
5,821.045 5,827,062 5,413,398 1,623,366 37,813
Expenditures:
Qualified debt
Non-qualified debt
Defeased debt
Administrative expenses
Special assessment payments
Developer payments
Total expenditures
562,240 557,980 1,809,270 1,521,945
1,837,154
3,565,409
138,544
340,722 345,274 158,607 40,421
61,100 61,100 61,100 61,000
37,813
6,505,169 964,354 2,028,977 1,623,366 37,813
(684,124) 4,862,708 3,384,421
Revenue over (nnder) expenditures
Transfers:
Debt service:
Translbrs to pa5' debt service:
Refimding Bonds of 1994A (333)
Refimding Bonds of 1994B (334)
hnprovemcnt Bonds of 1996D (344)
Less assesslnent revenue
Tolal transfers
(960,895) (948,170) (669,410)
(44,000)
(1,521,388) (1,855,510)
(522,410)
(1,004,895) (2,469,558) (2,524,920) (522,410)
Increase (decrease) in fund balance
Fund balance (deficit) at start of year
Fnnd balance (deficit) at end of year
(1,689,019) 2,393,150 859,501 (522,410)
(3,596,212) (5,285,231) (2,892,081) (2,032,580)
(2,554,990)
($5,285,231) ($2,892,081) ($2,032,580) ($2,554,990) ($2,554,990)
Possible fimds available:
Non-TI F Revenoe:
1999 TIF Grant 1,147,751
2000 TI F Grant - estimate 1,089,542
2001 TIF Grant - prelim estimate
Excess TIF from District//3 275,886
Count5' Agreement
less amount used for 1996B bonds
Land sale proceeds 0
Cash balance - fund 333 568,144
Less debt sen, ice on non qnalified debt
Annual total
1,800,000
182,991 182,991
0 216,930
700,000
182,991 182,991
2,232,401 0
(1,100,000) (1,100,000)
(I,076,134) (150,757) (255,757) (3,489,276)
3,081,323 1,606,857 249,163 1,059,635 (4,406,285)
3,081,323 4,688,180 4,937,343 5,996,978 1,590,693
Cunlulalive total
Deficit upon decertification
Assumptions:
1 ) Defease $3,555,000 of debt in 2000 (to maximize 2001 TIF grant)
2) Expend only qualified debt from 2001 and beyond (I.e. future tax increment can't fund past deficits)
3) Keep district #3 open, but send back excess TIF to County
(Split excess between County, Scbool & City)
Additional assmnptions for Scenario #4
I ) Increments received after 2000 can be used to fund deficits existing at December 31, 2000
(964,297)
11/15/00 8:18 AM
CHANHASSEN ECONOMIC
DEVELOPMENT AUTHORITY
REGULAR MEETING
NOVEMBER 16, 2000
Chairman Boyle called the meeting to order at 4:30 p.m.
MEMBERS PRESENT: Gary Boyle, Jim Bohn, Nancy Mancino, Mark Senn and Linda Jansen
MEMBERS ABSENT: Steve Labatt
STAFF PRESENT: Don Ashworth, Scott Botcher, Todd Gerhardt and Bruce DeJong
CONSIDER RESOLUTION INITIATING THE PROCESS FOR ESTABLISHMENT OF
A REDEVELOPMENT PLAN FOR THE CONSTRUCTION OF A MAINTENANCE
FACILITY AT LAKE ANN PARK:
After discussion, Mancino moved, seconded by Jansen, to approve the resolution (2000-4)
initiating the process for establishment of a redevelopment plan for the construction of a
maintenance facility at Lake Ann Park. All voted in favor and the motion carried.
Chairman Boyle adjourned the Economic Development Authority meeting at 5:00 p.m.
Submitted by Don Ashworth
Economic Development Director