HomeMy WebLinkAbout3.A. Public Hearing for Property Tax Abatement for Compass Datacenters LLC-Res. No. 7293 & 7289 General Business 3• A•
SHAKOPEE
TO: Mayor and City Council
Mark McNeill, City Administrator
FROM: Mark McNeill, City Administrator
DATE: 04/09/2013
SUBJECT: Public Hearing for Property Tax Abatement for Compass Datacenters, LLC - Res. No. 7293 and Res.
No. 7289 (B)
Action Sought
After holding a public hearing, the Council will be asked to approve a resolution authorizing a property tax
abatement for Compass Datacenters, LLC. This will facilitate the development of a parcel in the Dean Lakes
commercial area.
Background:
The City has received an application for business subsidy from Compass Datacenters, for assistance in locating a
development on an 11.3 acre parcel of land in the Dean Lakes commercial area.
Compass proposes to construct 109,250 square feet of building space in five modules over a three year period of
time, with 40% of the square footage to be constructed in the first year, 40% in the second year, and the remaining
20% by the following January. Compass anticipates completion of Phase 1 -- first two modules —by the end of
2013.
The complex would employ a minimum of 40 people upon completion, with as many as 65 jobs being created.
Compass is aware that the minimum wage to be paid is $14.50 per hour (exclusive of benefits), and has agreed to
adjust their lower end jobs to accommodate that. The overall average wage to be paid will be $68,500, and is
reflected in the Agreement.
The Scott County Assessor's Office has assigned a value of $11.65 million to the project. As such, Springsted Inc.,
the City's financial analyst, has provided the attached memorandum, which indicates what the City's maximum
abatement would be.
Originally, Compass had requested 50% abatement on taxes to be paid on the entire $67 million investment that it
is to make. However, that figure includes significant amounts of equipment, for which Minnesota does not tax as
property.
Compass had therefore requested a total of $2.1 million in financial assistance, including fee waivers for Dean
Lakes infrastructure assessments, storm water trunk charges, and consideration by SPUC on rates and installation
fees. Subsequent negotiations between Compass and staff have led to a recommendation that up to 50 SAC credits
(with a cash value of $121,750) be granted, with any unused SAC credits returned to the City. If approved by
Council, a separate public hearing will be needed for those business subsidies. There is a recommendation to call
for the public hearing elsewhere in this memo.
The incentives and request for abatement were reviewed by the EDAC in March. While the EDAC was supportive
of Compass and its move here, it did not feel that it warranted 100% tax abatement. For that reason, Springsted's
analysis provides for a nine year abatement, with a 50% City property tax abatement. That would generate
$251,555 from the City's portion of those taxes over the nine years. That is slightly less than the number which had
been reviewed with the Council when the public hearing was set. At the time, Scott County had identified a $13
million valuation, but that included land value, which is not subject to abatement.
Recommendation:
As this is a public hearing, public testimony should be taken.
In view of the jobs to be created, I recommend approval of the 50% abatement.
Relationship to Visioning:
This supports Goal B, "Positively manage the challenges and opportunities presented by growth, development, and
change ".
Action Required:
The Council is asked to take two actions:
1. Adopt Resolution 7293, A Resolution Calling a Public Hearing on Granting Business Subsidy to Compass
Datacenters, LLC, or any of its affiliates.
2. Adopt Resolution No. 7289, A Resolution for Granting a Property Tax Abatement for Certain Property in the
City of Shakopee.
,
Attachments: Compass Springsted
Compass Abatement Reso
Compass Abatement reso
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul, MN 55101 -2887
Springsted Tel: 651-223-3000
Fax: 651 - 223 -3002
www.springsted.com
MEMORANDUM
TO: Mark McNeill, City Administrator
Julie Linnihan, Finance Director
FROM: Mikaela Huot, Vice President/Consultant
Paul Steinman, Vice President /Client Representative
Tom Denaway, Analyst
DATE: April 5, 2013
SUBJECT: Preliminary Tax Abatement Financing Projections for proposed development project by
Compass Datacenters, LLC based on 50% Tax Abatement Participation
The City has requested that Springsted provide preliminary tax abatement revenue projections for the proposed
construction of a new data center within the City of Shakopee. Development assumptions include the construction of
a 109,250 square foot data center building, for which a tax abatement project would be created to capture taxes
generated from the new building through an annual abatement levy. The anticipated build -out of the facility is
projected to occur over a 3 -year period starting in 2013 with completion in 2015. Therefore taxes paid in full on the
proposed project are not expected until taxes payable 2017 with partial payments made in 2015 and 2016, based on
phased -in valuations of the project.
The City of Shakopee has traditionally provided up to 9 years of tax abatement assistance similar to the terms of an
economic development district for proposed new projects. However, in certain cases in which a particular company
that has located within the Dean Lakes business park has provided greater employment opportunities with highe r
wages, the City of Shakopee has considered providing up to 15 years of tax abatement assistance.
The estimated market value of the proposed projected is expected to be approximately $11.65M for the new building,
based on preliminary value information provided by Scott County. For the proposed project we are illustrating the
potential revenue generated by both the City and Scott County. Participation by each taxing entity is subject to
policy review and approval. Additional assumptions and terms of the proposed abatement are outlined further below.
Public Sector Advisors
City of Shakopee, Minnesota
Proposed Data Center Project: 50% Tax Abatement Participation
April 5, 2013
Page 2
The developer's application for financial assistance from the City includes fee waivers of trunk storm water charge,
infrastructure assessment, SAC credits, 50% property tax abatement for 10 years and SPUC installation fee waiver.
The purpose of this memo is to provide financial projections for proposed tax abatement assistance based on 50% of
the annual tax abatement revenues for 9 years, with City and County participation.
Tax Abatement Assumptions
Springsted made certain assumptions to calculate the estimated amount of tax abatement revenues generated by the
proposed project. Those assumptions include the following :
Tax Abatement
A city may grant a tax abatement, by contract or otherwise, of the taxes imposed by the city on a parcel of property,
which may include personal property and machinery, or defer the payments of the taxes and abate the interest and
penalty that otherwise would apply, if:
• it expects the benefits to the city of the proposed abatement agreement to at least equal the costs to the city
of the proposed agreement or intends the abatement to phase in a property tax increase, as provided in
clause (2)(vii); and
• it finds that doing so is in the public interest because it will:
o increase or preserve tax base;
o provide employment opportunities in the political subdivision;
o provide or help acquire or construct public facilities;
o help redevelop or renew blighted areas;
o help provide access to services for residents of the political subdivision;
o finance or provide public infrastructure;
o phase in a property tax increase on the parcel resulting from an increase of 50 percent or more in
one year on the estimated market value of the parcel, other than increase attributable to
improvement of the parcel; or
o stabilize the tax base through equalization of property tax revenues for a specified period of time
with respect to a taxpayer whose real and personal property is subject to valuation under
Minnesota Rules, chapter 8100.
Public Sector Advisors
City of Shakopee, Minnesota
Proposed Data Center Project: 50% Tax Abatement Participation
April 5, 2013
Page 3
For our preliminary tax abatement scenarios we used the following assumptions:
• Abate new building value only
• Revenue projections were prepared based on preliminary value information
o EMV with incremental market value of $11.65M ($106.37 psf)
• Estimated market value information provided by Scott County
• Existing land value would not be abated
• Proposed abatement term
o 9 years
• Both scenarios illustrate potential City and County participation
• Abatement participation
o 50% participation City and County
• 3 -Year construction schedule on 5 phase project
o Phases 1 and 2 in 2013
• 40% assessed in January of 2014 for taxes payable in 2015
o Phases 3 and 4 constructed in 2014
• 80% assessed in January of 2015 for taxes payable in 2016
o Phase 5 constructed in 2015
• 100% assessed in January of 2016 for taxes payable in 2017
• Payable 2013 tax rates remain constant through abatement term
o City: 41.996%
o County: 40.674%
o School: 39.715%
o Other: 5.701
o Total: 128.086%
• 2013 class rates remain constant through abatement term
• Fiscal Disparities contribution rate
o 2013 contribution rate of 39.1355%
o Contribution made from new tax abatement project
• Phased in annual market value inflator assumed
o 0% years 1 -3
o 1% years 4 -6
o 2% years 7 -9
• Present value date of May 1, 2013
• Present value (discount rate) of 4%
Public Sector Advisors
City of Shakopee, Minnesota
Proposed Data Center Project: 50% Tax Abatement Participation
April 5, 2013
Page 4
Tax Abatement Revenue Estimates
Proposed Scenario
Estimated Incremental New Building Market Value $11,650,000
Estimated Percentage of Annual Abatement Revenues 50%
2017 Annual Abatement Revenue: $29,682
City share upon completion in 2015
2017 Annual Abatement Revenue: $28,748
County share upon completion in 2015
2017 Total Annual Abatement Revenue upon completion in $58,430
2015
Estimated Total City Abatement Revenue over 9 years $251,555
Estimated Total County Abatement Revenue over 9 years $243,634
Estimated Total Tax Abatement Revenue over 9 years $495,188
Estimated Present Value of Revenues (Combined City and
County) $386,399
(4% discount rate)
Thank you for the opportunity to be of assistance to the City of Shakopee. Please let us know how we can best
assist you as this project moves forward and should you have any questions please feel free to contact us.
Public Sector Advisors
City of Shakopee, Minnesota
Proposed Data Center Project
April 5, 2013
Page 5
Tax Abatement Revenue Projections with Estimated Building Market Value of $11.65M with 9 -Year Term and 50% Annual Abatement
Revenues Available for Project
Projected Tax Abatement Report
City of Shakopee, Minnesota
Proposed Data Center Tax Abatement Project - Scenario la
City and County Participation with Incremental Bldg Value of $11.65M
9 year term, FD Cont properties within and Incremental MV Inflator - 50% of value abated
Less:
Non- Less: Retained Times: City County School District PV Total
Annual Total Total Abated Fiscal Captured Tax Annual Abatement Abatement Abatement Total Abatement
Period Market Net Tax Net Tax Disp. @ " Net Tax Capacity Total Revenues "" Revenues "" Revenues Tax Revenues
Ending Value Capacity Capacity' 39.1355% Capacity Rate "' Tax 4200% 40.67% 39.72% Abatement 05 /01/13
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 400%
12/31/13 0 0 0 0 0 128.086% 0 0 0 0 0 0
12/31/14 0 0 0 0 0 128.086% 0 0 0 0 0 0
12/31/15 4,660,000 92,450 0 36,181 56,269 128086% 72,073 11,815 11,443 0 23,259 21,504
12/31/16 9,320,000 185,650 0 72,655 112,995 128. 086% 144,730 23,727 22,980 0 46,706 41,522
12/31/17 11,650,000 232,250 0 90,892 141,358 128.086% 181,059 29,682 28,748 0 58,430 49,946
12/31/18 11,766,500 234,580 0 91,804 142,776 128. 086% 182,876 29,980 29,036 0 59,016 48,507
12/31/19 11,884,165 236,933 0 92,725 144,208 128.086% 184,710 30,281 29,327 0 59,608 47,109
12/31/20 12,003,007 239,310 0 93,655 145,655 128.086% 186,563 30,585 29,622 0 60,206 45,752
12/31/21 12,243,067 244,111 0 95,534 148,577 128. 086% 190,306 31,198 30,216 0 61,414 44,875
12/31/22 12,487,928 249,009 0 97,451 151,558 128.086% 194,124 31,824 30,822 0 62,646 44,014
12/31/23 12,737,687 254,004 0 99,406 154,598 128.086% 198,018 32,463 31,440 0 63,903 43,170
$1,534,459 $251,555 $243,634 $0 $495,188 $386,399
• Base value assumed to be $0 until PID(s) available. Total value includes newestimated land bulking of $11.651.
** Fiscal disparities contribution from incremental building gromth
"' Final payable 2013 tax rate based on information provided by County (taxing code 2204)
"" Estimated W% of annual revenues abated for project. Remaining 5054 mould be available for general tax rills a other purposes
Public Sector Advisors
CITY OF SHAKOPEE, MINNESOTA
RESOLUTION NO. 7293
RESOLUTION CALLING A PUBLIC HEARING ON GRANTING
BUSINESS SUBSIDY TO COMPASS DATACENTERS, LLC, OR
ANY OF ITS AFFILIATES
WHEREAS, Compass Datacenters, LLC, a Delaware limited liability company, or any of its
affiliates (the "Developer "), has proposed to acquire, construct, and equip an approximately 109,000 square
foot data center building (the "Minimum Improvements ") on real property (the "Property") located in the
City of Shakopee, Minnesota (the "City "); and
WHEREAS, in order to make the Minimum Improvements financially feasible, it is also proposed
that the City provide the Developer with up to 50 SAC credits for the Minimum Improvements which are
valued at an amount of $121,750 (the "City Development Assistance "); and
WHEREAS, the City Development Assistance proposed to be provided to the Developer by the City
to help finance the Minimum Improvements constitutes a business subsidy under Minnesota Statutes,
Sections 116J.993 to 116J.995 (the "Business Subsidy Act "); and
WHEREAS, before the City may grant an abatement or provide financial assistance that
constitutes a business subsidy under the Business Subsidy Act, the City must conduct a duly noticed
public hearing; and
WHEREAS, the City Council of the City has determined to consider granting the City Development
Assistance and to hold a public hearing thereon in accordance with the Business Subsidy Act; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Shakopee, Minnesota
that:
1. The Finance Director /City Clerk is authorized and directed to publish a notice for
publication in the official newspaper of the City setting a public hearing before the City Council on Tuesday,
May 7, 2013, at or after 7:00 p.m. at City Hall on the proposed City Development Assistance. The notice,
attached as EXHIBIT A, shall be published in the newspaper at least 10 days prior to the public hearing, and
shall be in substantially the form attached hereto.
2. The Finance Director /City Clerk is authorized and directed to take all other actions
necessary to bring the proposed abatement and business subsidy before the City Council at the time of the
public hearing.
420436v1 JAE SH155-23
Approved by the City Council of the City of Shakopee, Minnesota this 9th day of April, 2013.
Mayor
ATTEST:
Finance Director /City Clerk
420436v1 JAE SH155 -23 2
EXHIBIT A
NOTICE OF PUBLIC HEARING
Notice is hereby given that the City Council of the City of Shakopee, Minnesota (the "City") will meet at
or after 7:00 p.m. on Tuesday, May 7, 2013, at the City Council Chambers of City Hall, located at 129
South Holmes Street South in the City, to conduct a public hearing on the granting of financial assistance
to Compass Datacenters, LLC, a Delaware limited liability company, or any of its affiliates (the
"Developer "). The proposed financial assistance constitutes a business subsidy under Minnesota Statutes,
Sections 116J.993 to 116J.995 (the "Business Subsidy Act ").
The Developer plans on purchasing property located at the intersection of Coneflower Lane and Dean
Lakes Boulevard in the City and construct a data processing center on the property.
Following the public hearing, the City Council will consider providing the Developer up to 50 SAC credits
which are valued at an amount of $121,750. The financial assistance to be considered is a business
subsidy which is proposed to help make the construction of the data processing center economically
feasible. A summary of the terms of the proposed business subsidy is available for inspection at City Hall
during regular business hours.
Any person with a residence in the City or who is the owner of taxable property in the City may file a written
complaint with the City if the City fails to comply with the Business Subsidy Act. No action may be filed
against the City for the failure to comply unless a written complaint is filed. Any person wishing to express
an opinion on the matters to be considered at the public hearing will be heard orally or in writing.
Dated: April 11, 2013
BY ORDER OF THE CITY COUNCIL OF
THE CITY OF SHAKOPEE, MINNESOTA
/s/ Mark McNeill
City Administrator
City of Shakopee, Minnesota
421638v1 JAE SH155 -297 A_1
CITY OF SHAKOPEE, MINNESOTA
RESOLUTION NO. 7289
RESOLUTION GRANTING A PROPERTY TAX ABATEMENT
FOR CERTAIN PROPERTY IN THE CITY OF SHAKOPEE
BE IT RESOLVED by the City Council (the "City Council ") of the City of Shakopee, Minnesota
(the "City ") as follows:
Section 1. Recitals.
1.01. Compass Datacenters, LLC, a Delaware limited liability company, or any of its affiliates
(the "Developer "), has proposed to acquire, construct, and equip an approximately 109,000 square foot data
center building (the "Minimum Improvements ") on real property (the "Property") located in the City.
1.02. Pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815 (the "Abatement
Act "), the City has determined a need to grant a property tax abatement on the Property (the
"Abatement ") to the Developer in order to finance a portion of the costs of the acquisition, construction,
and equipping of the Minimum Improvements.
1.03. Scott County, Minnesota (the "County ") will also be asked to conduct a duly noticed
public hearing on property tax abatements proposed to be provided by the County and consider granting
the Developer a property tax abatement on the Property.
1.04. The Abatement provided to the Developer by the City to help finance the Minimum
Improvements constitutes a business subsidy under Minnesota Statutes, Sections 116J.993 to 116J.995
(the "Business Subsidy Act ").
1.05. This City Council has reviewed information concerning the above - referenced Minimum
Improvements.
1.06. On the date hereof, the City Council conducted a duly noticed public hearing on the
Abatement proposed to be granted by the City and the business subsidy to be provided to the Developer.
The views of all interested persons were heard and considered at the public hearing.
1.07. The City intends to enter into a Contract for Private Development (the "Contract for
Private Development ") with the Developer, which shall set forth the terms of the Abatement and other
financial assistance proposed to be provided by the City to the Developer.
Section 2. Findings.
2.01. The recitals set forth above are incorporated into this Resolution.
2.02. It is hereby found and determined that the benefits to the City from the Abatement will be
at least equal to the costs to the City of the Abatement, because (a) the City believes that the development
to be facilitated is not reasonably likely to occur absent the Abatement, (b) the development to be
facilitated by the Abatement will likely encourage additional development within the area, and (c) the
long -term taxes collected from the Property after termination of the Abatement will exceed the amount of
the Abatement returned to the Developer.
421192v2 JAE SH155 -297
2.03. It is hereby found and determined that the Abatement is in the public interest because
such action will increase the City's tax base and provide additional employment opportunities in the City.
2.04. It is further specifically found and determined that the Abatement is expected to result in
the following public benefits:
(a) Creation of an estimated $13,000,000 increase in market value for property tax purposes,
which will be available to all taxing jurisdictions after expiration of the Abatement (commencing
in 2024); and
(b) Provision of an estimated 40 to 65 new jobs in the City.
Section 3. Actions Ratified; Abatement Approved
3.01. The City Council hereby ratifies all actions of the City's staff and consultants in
arranging for approval of this Resolution in accordance with the Abatement Act and the Business Subsidy
Act.
3.02. Subject to the provisions of the Abatement Act, the Abatement is hereby approved and
adopted subject to the following terms and conditions:
(a) The term "Abatement" means the real property taxes generated in any tax- payable year
by extending the City's total tax rate for that year against the tax capacity of the Minimum
Improvements constructed on the Property, excluding the tax capacity of the land (as established
each year during the Abatement) and excluding the portion of the tax capacity attributable to the
areawide tax under Minnesota Statues, Chapter 473F, all as of January 2 in the prior year.
(b) The Abatement will be paid by the City to the Developer on the dates and in accordance
with all the terms and conditions of the Contract for Private Development.
(c) In accordance with Section 469.1813, subdivision 8 of the Abatement Act, in no year
shall the Abatement, together with all other abatements approved by the City under the
Abatement Act and paid in that year exceed the greater of 10% of the net tax capacity of the City
for that year or $200,000 (the "Abatement Cap "). The City may grant other abatements permitted
under the Abatement Act after the date of this Resolution, provided that to the extent the total
abatements in any year exceed the Abatement Cap, the allocation of Abatement Cap to such other
abatements is subordinate to the Abatement granted pursuant to this Resolution.
(d) The Abatement will have a maximum term of nine years and shall be collected in the
years 2015 through 2023.
(e) In no event shall the total payments of Abatement to the Developer exceed $281,659 or
continue to be paid for more than nine years.
(f) The Abatement is subject to modification in accordance with the Abatement Act, subject
to the terms of the Contract for Private Development.
(g) In accordance with Section 469.1815 of the Abatement Act, the City will add to its levy
in each year during the term of the Abatement the total estimated amount of current year
Abatement granted under this Resolution.
421192v2 JAE SH155 -297 2
(h) The City makes no warranties or representations regarding the amount or availability of
the Abatement.
(i) The Abatement shall be provided to the Developer pursuant to the terms and conditions
of the Contract for Private Development, as approved by the City Council.
Section 4. Restrictions on Abatement. The Abatement granted pursuant to this Resolution
shall not commence until the following conditions are satisfied:
(a) The City and Developer mutually agree on the terms and conditions of a Contract for Private
Development.
(b) If the County approves an abatement for the Property and joins as a party to the Contract for
Private Development, the City, the Developer, and the County mutually agree on the terms and
conditions of a Contract for Private Development.
(c) The Developer purchases the Property and locates a portion of its operations to the City.
Section 5. County Participation. The Mayor and City Administrator are authorized to work
with the County if it chooses to abate a portion of their portion of the property taxes for the benefit of the
Developer, including but not limited to drafting the Contract for Private Development and administering the
payment of the County's abatement dollars.
Section 6. Effective Date. This Resolution is effective upon execution in full of the
Contract for Private Development.
Approved by the City Council of the City of Shakopee, Minnesota th 9 day of April, 2013.
Mayor
ATTEST:
Finance Director /City Clerk
421192v2 JAE SH155 -297 3
EXHIBIT A TO ABATEMENT RESOLUTION
PROPERTY
The Property consists of 11.3 acres at the intersection of Dean Lakes Boulevard and Coneflower Lane, in
the City of Shakopee, Scott County, Minnesota
421192v2 JAE SH155 -297 A_1