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1 TIF #1 Plan ModificationCITY OF CHANHASSEN 7700 Nlarke! Bot~ievard PO Box 147 Ohanhassen MN 55317 Phone: 9522271100 Fax: 952227 1110 Buildin~ inspections P~rone: 9522271180 Fax: 952 2271190 Engineering Phor~e 952 2271160 Fax: 952.227 1170 Finance Pl~or'e 9522271140 Fax: 952.2271110 Park & Recreation Pt~or, e: 9522271120 Fax~ 9522271110 Recreation Oenter 2310 Coulter Boulevard Phone~ 952.2271400 Fax~ 9522271404 Natural Resources Phone: 9522271130 Fax: 9522271110 Public Wo~ks 1591 Park Road Phone~ 9522271300 Fax: 9522271310 Senior Center Phone: 9522271125 Fax: 952227 1110 Web Site w~,~,,,v ci cha~hassen mn us MEMORANDUM TO: Kate Aanenson, Community Development Director FROM: Justin Miller, Assistant to the City Manager "5 DATE: October 1, 2003 RE: Downtown TIF District #1 Plan Modification BACKGROUND The City of Chanhassen is in the process of modifying the tax increment financing plan for the downtown tax increment financing district (TIF District #1). According to state statute, any modification to TIF plans must be reviewed by the Planning Commission to ensure that it complies with the City's comprehensive plan. The downtown TIF district was established in 1977 to help facilitate the development of downtown Chanhassen. As much success as this plan has brought, several factors have led to this district running into a deficit situation. The main factor contributing to this is "rate compression", or the shrinking difference in tax rates between residential and commercial/industrial properties. Basically, when the State legislature changed the tax rates during the 2001 session, commercial and industrial properties experienced significant tax relief. Since the downtown TIF district mostly contains commercial and industrial properties, this resulted in less tax revenues being produced by the TIF district. However, the City had issued debt well before this rate compression, and was planning on higher tax receipts to pay for the debt service. After seeing the unintended consequences that were created with this legislation, the state legislature did provide several tools to help cities offset their deficit problems. One such tool was to allow cities to extend the life of TIF districts past their statutory decertification date if the district was in a deficit situation. Currently, the downtown TIF district is scheduled to be decertified November 1, 2003. If the district is extended, the City could recoup roughly $4,000,000, which will be applied to the district's deficit. According to an analysis performed by staff and our financial advisors Ehlers, Inc., the deficit situation could be rectified if the district is extended the maximum allowable time, which is through 2004. The planning commission's role in this process is to determine if the modification is in compliance with the City's comprehensive plan. This modification is not extending district boundaries, allowing for new buildings, or calling for any development or redevelopment. In essence, it is a purely financial decision and does not impact the comprehensive plan. RECOMMENDATION Staff recommends that the Planning Commission adopt a resolution stating that the proposed modification to the Chanhassen downtown TIF district is consistent with the City of Chanhassen comprehensive plan. The City of Chanhassen o A growing community with dean lakes quality schools a charming dowdo~'n thriving businesses, winding trails, and beautiful parks A great place to hve '~or~< and play CITY OF CHANHASSEN CARVER AND HENNEPIN COUNTIES, MINNESOTA DATE: October 7, 2003 RESOLUTION NO: 2003-01 MOTION BY: SECONDED BY: RESOLUTION FINDING MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING DISTRICT (a pre-79 district) LOCTED WITHIN THE DOWNTOWN CHANHASSEN REDEVELOPMENT PROJECT AREA 1S IN CONFORMANCE WITH THE CITY OF CHAHASSEN COMPREHENSIVE PLAN WHEREAS, the City of Chanhassen desires to modify the tax increment financing plan for the downtown tax increment district and has submitted the modification to the Chanhassen Planning Commission for comment; and WHEREAS, the Planning Commission has made a thorough review of the proposed modification to extend the duration limits of the district and has compared it with the plans for redevelopment of the City as a whole. NOW, THEREFORE, BE IT RESOLVED by the Planning Commission of the City of Chanhassen, Minnesota as follows: The proposed modification to extend the duration limit of the downtown tax increment financing district is found to be consistent with the comprehensive plan for development of Chanhassen as a whole. It is recommended that the City Council of the City of Chanhassen hold a public hearing as required by law and adopt the proposed modification. Passed and adopted by the Planning Commission of the City of Chanhassen this 7th day of October, 2003. ATTEST: Chairperson Vice-Chair YES NO ABSENT SCHEDULE OF EVENTS CHANHASSEN ECONOMIC DEVELOPMENT AUTHORITY AND THE CITY OF CHANHASSEN CARVER AND HENNEPIN COUNTIES, MINNESOTA FOR THE MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING DISTRICT (a pre-79 district) LOCATED WITHIN THE DOWNTOWN CHANHASSEN REDEVELOPMENT PROJECT AREA As of September 26, 2003 September 8, 2003 City Council calls for public hearing on the Modification to the Tax Increment Financing Plan for the Downtown Chanhassen Tax Increment Financing District. September l0,2003 Project information and maps sent to Ehlers & Associates for drafting documentation. September 26, 2003 Fiscal/economic implications received by School Board Clerk and Carver County Auditor (at least 30 days prior to public hearing). [Ehlers & Associatesfaxed and mailed on September 26, 2003] October 7, 2003 Planning Commission reviews the TIF Plan Modification to determine if it is in compliance xvith City's comprehensive plan. October 13, 2003 EDA considers the T1F Plan Modification. October 16, 2003 Date of publication of hearing notice and map (at least 10 days but not more than 30 days prior to hearing). [Chanhassen Villager publication deadline Thurs&9', October 9, 2003] October 27, 2003 City Council holds public hearing at 7:00 P.M. on the Modification to the Tax Increment Financing Plan for the Downtown Chanhassen Tax Increment Financing District and passes resolution approving the TIF Plan Modification. [Ehlers & Associates will mail final Council packet information to the City by October 16, 2oo3] October 27, 2003 Ehlers & Associates notifies Carver County of TIF Plan Modification December 26, 2003 Ehlers & Associates files the TIF Plan Modification with Carver County and the MN Department of Revenue. **Because the City staff believes that the proposed Modification will not require unplanned county road improvements, the TIF Plan Modification was not forwarded to the County Board 45 days prior to the public hearing. The County Board, by law, has 45 days to review the plan to determine if any county roads will be impacted by the development. Please be aware that the County Board could claim that tax increment should be used for county roads, even after the public hearing. DISTRIBUTION LIST CHANHASSEN ECONOMIC DEVELOPMENT AUTHORITY AND THE CITY OF CHANHASSEN CARVER AND HENNEPIN COUNTIES, MINNESOTA FOR THE MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING DISTRICT (a pre-79 district) LOCATED WITHIN THE DOWNTOWN CHANHASSEN REDEVELOPMENT PROJECT AREA CITY: Todd Gerhardt teerhardtOci.chanhassen.mn.us 952-227-1119 Phone Bruce DeJong bdejong@ci.chanhassen.mn.us 952-227-1149 Phone Justin Miller jmiller@ci.chanhassen.mn.us 952-227-1118 Phone City of Chanhassen 7700 Market Boulevard P.O. Box 147 Chanhassen, MN 55317-0147 952-227-1100 Phone 952-227-1110 Fax (Word format) DEVELOPMENT COUNSEL: Ron Batty Kennedy & Graven, Chartered 470 Pillsbury Center 200 South Sixth Street Minneapolis, MN 55402 rbatty@kennedv-araven.com 612-337-9262 Phone 612-337-9310 Fax DEVELOPMENT ADVISOR: Mark Ruff mark@ehlers-inc.com 651-697-8505 Phone Susan Landrum salOehlers-inc.com 651-697-8531 Phone Ehlers & Associates, Inc. 3060 Centre Pointe Drive Roseville, MN 55113-1105 651-697-8555 Fax OEHLERS September 26, 2003 EHLERS & ASSOCIATES INC BY FAX AND BY REGULAR MAIL Mark Lundgren, Auditor Carver County 600 East 4~h Street Chaska, MN 55318-2158 Michele Helgen, School Board Vice Chair/Clerk Chaska School District No. 112 11 Peavey Road Chaska, MN 55318-1394 Re: City of Chanhassen and the Chanhassen Economic Development Authority's Proposed Modification of the Tax Increment Financing Plan for the Downtown Chanhassen Tax Increment Financing District The City of Chanhassen ("City") and the Chanhassen Economic Development Authority ("EDA") are considering a proposal to adopt a Modification to the Tax Increment Financing Plan (the "TIF Plan Modification") for the Downtown Chanhassen Tax Increment Financing District (the "District") to extend the duration of the District one year. The District is located within the Downtown Chanhassen Redevelopment Project Area and is indicated on the attached map. As required by State Law, we hereby for~vard a draft of the Modification to the Tax Increment Financing Plan for the Downtown Chanhassen Tax Financing District. Please note that the TIF Plan Modification is in draft form for distribution to the County and the School District. The TIF Plan Modification contains the estimated fiscal and economic implications of the extended District. The City may make changes to this draft document prior to the public hearing, however the authorized costs will not increase. The City Council has scheduled a public hearing on this matter, pursuant to the Minnesota Tax Increment Financing Act, on October 27, 2003 at approximately 7:00 P.M. We invite you to attend the public hearing on the TIF Plan Modification. Please direct any comments or questions that you may have to Todd Gerhardt (City Manager) at 952-227-1100 or to me at 651-697-8505. Thank you for your consideration in reviex~ing the enclosed materials. Sincerely, EHLERS & ASSOCIATES, INC. Mark Ruff Financial Advisor Acting/hr and on behalf of the City of Chanhassen, Minnesota Enclosure cc: Bruce DeJong, City of Chanhassen Todd Gerhardt, City of Chanhassen LEADERS IN PUBLIC FINANCE Justin Miller, City of Chanhassen Ron Batty, Kennedy & Graven, Chartered Equal Opportumty Employer Charter Member of the Nahonal Ass;clatlorl of !ndependerlt PLibhc Ftrlance Advisors 3060 Centre Po~nte Drive, Roseville, MN 55113-1105 65!..697.8500 fax 651.697,8555 www.ehlersdnc.com MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING DISTRICT located within THE DOWNTOWN CHANHASSEN REDEVELOPMENT PROJECT AREA CHANHASSEN ECONOMIC DEVELOPMENT AUTHORITY CITY OF CHANHASSEN CARVER COUNTY STATE OF MINNESOTA Public Hearing for Modification: October 27, 2003 Modification Adopted: EHLERS & ASSOCIATES INC Prepared by: EHLERS & ASSOCIATES, INC. 3060 Centre Pointe Drive, Roseville, Minnesota 55113-1105 651-697-8500 fax: 651-697-8555 www.ehlers-inc.com TABLE OF CONTENTS (for reference purposes only) MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING D/STRICT ............................. 1 Foreword ................................................................. Estimated Impact on Other Taxing Jurisdictions ................................... APPENDIX A MAP OF THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING DISTRICT . . A APPENDIX B ESTIMATED CASH FLOW FOR THE DISTRICT ................................. B MODIFICA T/ON TO THE TAX INCREMENT FINANCING PLAN FOR THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING DISTRICT Foreword The following text represents a Modification to the Tax Increment Financing Plan for the Downtown Chanhassen Tax Increment Financing District (the "TIF District"). (AS MODIFIED ON OCTOBER 27, 2003) The Minnesota Legislature in 2003 granted cities the ability to extend the term of a tax increment financing district to pay for deficits in TIF district balances. Pursuant to Minnesota Statutes, Section 469.1794, a city may extend a district up to a maximum of four years to pay for qualifying obligations. The actual allowable duration extension is based upon a formula which measures the amount of class rate compression resulting from property tax changes that affected the income of the district. The other factor in the formula is the remaining term of the TIF district. The basis for the calculations are described below: A~rage o~ 2001 TC Tax Less Tax Ye~s Estimal~d Rm~d 2(]O1 2002 2003 21302-2003 Average 2002- I~o~m Remaining IVlaxJrn~n .3or> TC Tax TC Tax TCTax Total Tax 2003 Tax Pe~ In District Extansion Extension pre-79 5,684,367 3,709,324 4,240,948 7,950,272 3,975,136 1,709,231 :?0. OW/o 1.83 0.55(22:'627 1 The TIF District is a pre-1979 tax increment financing district. As a pre-1979 district, the existing term of the district is the final payment of debt originally sold prior to 1990. The final debt payment for the City is set to be November 1, 2003. This modification will increase the term of the TIF District to November I, 2004. This modification does not contemplate any increased budgetary authority because the purpose is to recapture tax increments which were lost due to class rate compression. Exhibit B lists the cash flow for the TIF district which demonstrates the expected deficit for the District prior to November 1,2003. The fiscal implications are listed on the fbllowing page: City of Chanhassen Modification to the Tax Increment Financing Plan for the Downtown Chanhassen Tax Increment Financing District 1 Estimated Impact on Other Taxing Jurisdictions IMPACT ON TAX BASE Carver County Chanhassen Chaska ISD No. 112 2002/2003 Estimated Captured Total Net Tax Capacity (CTC) Percent of CTC Tax Capacity Upon Completion to Entity Total 52,212,584 2,985,658 5.7183% 17,427,196 2,985,658 17.1322% 28,125,179 2,985,658 10.6156% IMPACT ON TAX RATES 2002/2003 Percent Potential Extension Rates of Total CTC Taxes Carver County 0.556420 40.20% 2,985,658 1,661,280 City of Chanhassen 0.390390 28.21% 2,985,658 1,165,571 Chaska ISD No. 112 0.384360 27.77% 2,985,658 1,147,568 Other (Met Council, Riley Pg 0.052790 3.81% 2.985.658 157,613 WS#2, Transit & Mosquito Districts) Total 1.383960 100.00% 4,132,032 The tax rate used for calculations is the 2002/Pay 2003 rate. The total net capacity for the entities listed above are based on Pay 2003 figures. City of Chanhassen Modification to the Tax Increment Financing Plan for the Downtown Chanhassen Tax Increment Financing District 2 APPENDIX A MAP OF THE DOWNTOWN CHANHASSEN TAX INCREMENT FINANCING DISTRICT APPENDIX A Downtown Chanhassen Tax Increment Financing District Downtown Chanhassen Redevelopment Project Area City of Chanhassen Carver County, Minnesota L. _ .~ ~-'~ -'~ _: ~ .~.-~ ~-~. :~ ~'-- '~ .... ' '~" ~'~ ~ "~ ~:~'-~.-;-~ ' · -. ~ '-- ~- .>.:: ~: -~' ' :'.. ~.~ ::~: <:f~-~ "~ ..: "t . ":~:-~ / ' <-'.~ . . ............ ..~..~,~..~. ::.~: -..,~: ..... . . , , :..: . ' :~. :" '~.: t:-.:~':~_z'." .::~..:/-7' ~ : / ' . :" . '.: f' i ~: .' "~ :-.:.' :--:' :-~-':" t:. ~ · :. :5.:.'t .~ - . "~<,~¥.:. ~.~:~.~-~:.~- ~ ~F.::'.~:-: ...... ~ ~' ~ · ..-..../:~ - .~- '~;;:~- ).-~::..~:?.'.'~::-----.:::.:"::...'::r..'-,:.-.:. ~ -' ....,.::::~ - . ¢>~::-- ,~...--'~-:2::t'.':~ ~f:'?:":'-:.':9~:'--?,"--.' 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DOWNTOWN Downtown Chanhassen Tax R[DEVELOPME N r Increment Finao¢ing Distinct PLAN Downtow~ Chanhassen Redevelopment Project Area APPENDIX B ESTIMATED CASH FLOW FOR THE DISTRICT APPENDIX B For Discussion Purposes Only City of Chanhassen, MN Tax Increment District No. 1 Statement of Revenues and Expenses Calendar Year New Estimate as of 9~24~03 Revenues: Tax Increment Delinquent Taxes County Agreement Special Assessments Interest Sale of Property - W 79th St. HRA Note Other Intergovernmental Total Revenue 2001 2002 2003 2004 5,713,380 3,421,074 4,132,031 2,066,016 7,082 217 124,246 109,718 12,815 30,865 5,720,679 3,698,718 4,132,031 2,066,016 Expenditures: Current: Personal Services Materials/Supplies Interfund Interest Expenditure Contractual Services Capital Outlay Debt Service Principal Interest Paying Agent Fees Payment to Defeasance Escrow Special Assessment Payments Interfund Loan Repayment Other 189,316 3,616 3,730,0O0 296,676 364 51,815 16,380 77,182 3,472 1,665,000 87,521 374 40,234 1,485,000 27,165 374 19,437 Non-Qualified Debt (from Totals page) Pdncipal Interest Total tnterfund Interest Expense Total Expenditures Revenues over (under) expenditures Operating transfers to Debt Service Fund Bond Proceeds Total other funding sources Increase (decrease) in Fund Balance Fund Balance (deficit) at start of year Fund Balance (deficit) at end of year 35,000 35,000 35,000 2,745,000 65,874 123,063 121,383 60,834 100,874 158,063 156,383 2,805,834 6,323 14,757 113,478 4,489,915 2,196,232 1,840,062 5,744,583 1,230,764 1,502,486 2,291,969 (3,678,568) (948,170) (669,410) 2,708,253 1,760,083 (669,410) 2,990,847 833,076 2,291,969 (3,678,568) (6,555,028) (3,564,181) (2,731,105) (3,564,181) (2,731,105) (439,136) (3,678,568) Excess TIF Proceeds + -28% City Share + -37% County Share (2,391,069) Prepared by Bruce DeJong 9/26/2003