CC Report 10-10-05 Abatement District
CITY OF
CHANHASSEN
7700 Market Boulevard
PO Box 147
Chanhassen, MN 55317
Administration
Phone: 952,227.1100
Fax: 952,2271110
Building Inspections
Phone: 952,227,1180
Fax: 952.227.1190
Engineering
Phone 952,2271160
Fax: 952,227,1170
Finance
Phone 952,227.1140
Fax: 952,227.1110
Park & Recreation
Phone 952,2271120
Fax 952.227,1110
Recreation Center
2310 Coulter Boulevard
Phone 952.227.1400
Fax: 952,2271404
Planning &
Natural Resources
Phone: 952,227.1130
Fax: 952,227,1110
Public Works
1591 Park Road
Phone: 952,227,1300
Fax: 952,2271310
Senior Center
Phone: 952,227,1125
Fax 952,227.1110
Web Site
www.ci.chanhassen.mn.us
_fL
MEMORANDUM
TO:
Todd Gerhardt, City Manager
Justin Miller, Assistant City Manager~ ~?
v'" ""
October 3,2005
FROM:
DATE:
RE:
Chanhassen West Business Park Abatement District
BACKGROUND
In 1997, the State of Minnesota made available to local governments an economic
development tool known as tax abatement. Similar to Tax Increment Financing
(TIP), property taxes from a property or set of properties can be used for
economic development purposes, such as infrastructure improvements, developer
incentives, or special assessment payments, just to name a few. The main
difference between TIP and tax abatement is that each taxing jurisdiction (cities,
counties, and school districts) can decide whether they would like to participate in
the project.
In the coming years, Lyman Boulevard from Audubon Road to Highway 41 will
need to be upgraded. Funding for this project has yet to be identified, but staff
believes that an abatement district incorporating the recently approved
Chanhassen West Business Park may provide substantial funding for this project
while limiting the burden on current taxpayers.
How It Works
An abatement district would be identified, in this case it would be the 40 acre
parcel recently approved by the City of Chanhassen as the Chanhassen West
Business Park. A public hearing would need to be held at each level of
government proposed to participate in the program. If all three jurisdictions
participate, the district can last up to 15 years. If any jurisdiction does not
participate, the abatement district can last up to 2Q years.
The district can be set up in a variety of ways. The entire amount of taxes can be
abated, or a dedicated portion (such as the new taxes collected, or increment) can
be dedicated. In any case, the property owner pays their taxes as they normally
would, but the use of the money would be designated for a specific purpose.
Unlike TIP, money can be collected up front and remain in an account for a
period of time without necessarily having to be expended. This way, collection
could begin immediately, but the project could wait until enough money was in
the account to construct the project. Also, abatement bonds could be issued,
which would allow for immediate construction, while pledging the future taxes
from the abatement district towards debt service on the project.
The City 01 Chanhassen . A growing community with clean lakes, quality schools, a charming downtown, thriving businesses, winding trails, and beautiful parks, A great place to live, work, and play,
Chanhassen West Business Park Analysis
Staff and Ehlers and Associates have completed a preliminary analysis of the
potential abatement prospects on the Chanhassen West Business Park. After the
business park is fully developed, our calculations are as follows:
Lot 1
Lot 2
'Lot
'Lot4,
Lot5:
,Lot6
Lot 7
ot8
Fiscal
Building .' ! Disparities
Square 'Market' Market Local Tax: Tax
f'ootage Value/sf: Value ea 3c::ity,C::ilPac::ity c::ityf'()rtl()n 'C::O!:llltyf'Or!l()llllOlCh()()If'()rtl()1l
50,265 0.00 , $2,513,2!50 , 12: $ 9,903 $.J3,9~3L$21,840lJ6,488
46,9Ej2 $ 50.00' $ 2,349.100' $ 36,986' $ 9,246 $ 13,000, $ 20, $ 15,395
nEj~~f50.CJ() 0: $?I,?19 j~,4~Cl$ ...:(;~:34Ii:11 ........ ~,040
40.526 $ 50.00 $ 2.026,300' . $ 31,821$ 7,955 $ 11,184: $ 17 13,245
......41,Ell39 $!5().QO $ 2,()EI4,<I!50, : $ 32.751 $ 8,188$ 1 . $ 13,632
77,754 ,$ 50.00 $ 3,887.700;+$61603 f 15,401 $ 21,652 $ 25,642
2:3,J24 :,$5().O() 1,1!5El,20(): 20&;$J7 ,475 $6,~~Jl7,450
25,914 ; $ 50.00 , $ 1,295,700,2%ti2 5,033 $. 7,076 $ 8,379
334,1~3 j .:.... .. .......................................;1.....'., .... ; $ 92270 , $ 109,272
'Me1J{il11ul11,t>,nn.llal.,t>,rr,~~lliAv~ila~i~Qllc~.AII..Pr~E$~i~s...ar~..[);veI9E€t<:L ! $
..................".........n..___n_......................
PJIaxilTlu.ITI.AbatelTl~llt YlithJ"lscal..Di!iparitl~s
28.118% : 44.107% l' 33.299%
" .._____ ......__mnm_______""".."""... ..... _"[ .""."".",........
Engineering staff, in consultation with Carver County, have estimated the cost of
upgrading Lyman Boulevard in 2007. Below is a potential scenario that would
allow for this upgrade:
.Us..
: lv1.ainLin.e...lrnprovem.~n.t... fro.m.. Powers to 'fH 4.1
,Lyman Blvd.lil,udubonRoad Intersection
(3alpinBlvdlntersection................. ....
'f.H.4.1.ln.t.~.rs.e.ction ..Improvem..e.n.ts
18' Watermain along Lyman from Galpin to Audu
,12XI2'E30..x..Culve~. c;rossingLyman .B.lvd, for Traii
'Street Lig~ting .., ... ... .... .
'Storm Sewer from Powers to TH 41
; 1 0' TraiionNorthSideo{ L.yman{,om Pow"rs to'
:Chanhassen City Limits. Includes some retaining wall
costs .... . $ 500,000
Subtotal. $~;:l9!3;OciiL
:$
H: $
1 $
. 3,339.000
OOO,@
500,000
0,000
0;000
O,QOO
$ 400,000
:6 ... '1:509,oOQ
Assume 20Q7'c;onstrlJciionC()st"'ith40j.,Iri~ation . $ 9 084:358
FIlial Co., 9;08(358 ...
.t..... 431p~
$ 1 .300.000
$ 9;09(000
Under this scenario, taxes on these properties would be directed towards
upgrading Lyman Boulevard for twelve years (the maximum would be 15 or 20
years). Some of the improvements are water and storm water related, therefore
using these enterprise funds is justified. The master road agreement from 1994
also spells out the funding levels of Chaska and Carver County.
Staff believes that tax abatement would work in this situation for several reasons,
First of all, upgrading Lyman Boulevard will benefit each of the taxing
jurisdictions involved. Lyman is a county road, and it will need upgrading due to
the construction of a secondary school in the vicinity, Additionally, since this is a
relatively undeveloped 40 acre parcel, capturing the growth in taxes paid will be
easier for city, county and school district budgets to absorb since it is not already
being used for operating expenses.
RECOMMENDA TION
If the city council wishes to investigate this further, the next steps would be to
formally introduce to issue to Carver County and School District 112 and ask
Ehlers and Associates to begin preparing financial projections for the project.