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Home My WebLink About4.A. Tax Increment Financing (TIF) District No. 17 - Amazon.com dedc, LLC. 0161 General Business 4. A. SHAKOPEE TO: Economic Development Authority FROM: Samantha DiMaggio, Economic Development Coordinator DATE: 05/19/2015 SUBJECT: Tax Increment Financing (TIF) District No. 17 -- Amazon.com.dedc, LLC Background Amazon.com was established in 1995 as a place to buy books. Today, Amazon.com is a publicly traded an e-commerce platform for retailers and more than 2 million third-party sellers offering millions of unique, new, refurbished and used items. The company currently has fulfillment and customer service center locations in 18 states, including neighboring states North Dakota, South Dakota and Wisconsin, and it employs approximately 157,000 people worldwide. Amazon.com is considering leasing a new, build-to-suit building in Shakopee that would be located on 65.93 acres at the northeast corner of Shenandoah Ave. and 4th St. The proposed building would be 850,000 square feet. and would result in an increased tax base and job creation for the City of Shakopee. If granted the requested assistance, Amazon.com and its selected developer would begin construction on the building this spring with anticipated completion by fall of 2016. The proposed TIF district has been reviewed by Springsted, the City's financial consultant, and its analysis is attached for review. This proposal reflects the establishment of an 90% economic development TIF district which over the 9-year term would generate a maximum amount of$5,766,414. The State Auditor will retain $20,760 for administrative costs which leaves the tax increment available for distribution $5,745,654. The recommended allocation of these funds are as follows; •$3,379,250 to Scott County for infrastruction improvements to County Rd. 83 and County Rd. 101. •$473,280 to the City of Shakopee for administrative costs and TIF pooling which will be used to fund out of district infrastructure improvements which the City plans to use on 4th Avenue. •$650,000 to the City of Shakopee for is for in district infrastructure improvements which the City plans to use for infrastructure improvements to 4th Avenue. It is recommended that the remaining balance of the TIF, $1,243,124, be awarded to Amazon.com.dedc, LLC to assist in the financing of infrastructure and construction of the facility. Action Sought Following the Public Hearing, if the EDA concurs, it should by motion approve the following Resolution: Resolution No. 15-7, Resolution Approving Tax Increment Financing Plan for Tax Increment Financing (Economic Development) District No. 17 and a Modified Redevelopment Plan for the Minnesota River Valley Housing and Redevelopment Project No. 1. Attachments: TIF Map Economic Impact Application TIF Plan Shakopee, Minnesota Shakopee Economic Development Authority Modification to Redevelopment Plan for Minnesota River Valley Housing and Redevelopment Project No. 1 And Tax Increment Financing Plan for Tax Increment Financing (Economic Development) District No. 17 (Hwy 101 and Shenandoah Drive Development Project) Draft Dated: May 19, 2015 Public Hearing Scheduled: May 19, 2015 Prepared by: SPRINGSTED INCORPORATED 380 Jackson Street, Suite 300 St. Paul, MN 55101-2887 (651) 223-3000 WWW SPRINGSTED.COM TABLE OF CONTENTS Section I - BACKGROUND Pages) A Introduction 1 B Definitions 1 Section II—MODIFICATION TO REDEVELOPMENT PLAN FOR MINNESOTA RIVER VALLEY HOUSING AND REDEVELOPMENT PROJECT NO. 1 Section III—TAX INCREMENT FINANCING PLAN FOR TIF DISTRICT NO. 16 Pages) A. Statutory Authorization 2 B. Statement of Need and Public Purpose 2 C. Statement of Objectives 2 D. Designation of Tax Increment Financing District as an Economic Development District 2 E. Duration of the TIF District 3 F. Property to be Included in the TIF District 3 G. Property to be Acquired in the TIF District 3 H. Specific Development Expected to Occur Within the TIF District 3 I. Findings and Need for Tax Increment Financing 4 J. Estimated Public Costs 6 K. Estimated Sources of Revenue 6 L. Estimated Amount of Bonded Indebtedness 7 M. Original Net Tax Capacity 7 N. Original Tax Capacity Rate 7 O. Projected Retained Captured Net Tax Capacity and Projected Tax Increment 8 P. Use of Tax Increment 8 Q. Excess Tax Increment 9 R. Tax Increment Pooling and the Five Year Rule 10 S. Limitation on Administrative Expenses 10 T. Limitation on Property Not Subject to Improvements-Four Year Rule 11 U. Estimated Impact on Other Taxing Jurisdictions 11 V. Prior Planned Improvements 12 W. Development Agreements 12 X. Assessment Agreements 12 Y. Modifications of the Tax Increment Financing Plan 12 Z. Administration of the Tax Increment Financing Plan 13 AA. Financial Reporting and Disclosure Requirements 13 Map of the Tax Increment Financing District . . EXHIBIT I Assumptions Report EXHIBIT II Projected Tax Increment Report EXHIBIT III Estimated Impact on Other Taxing Jurisdictions Report EXHIBIT IV Market Value Analysis Report EXHIBIT V City of Shakopee and Shakopee Economic Development Authority, Minnesota I.-BACKGROUND Section A Introduction The City created the Minnesota River Valley Housing and Redevelopment Project No. 1 on January 2, 1979 (originally designated as Valley Industrial Park Redevelopment Project No. 1)and transferred that project to the Economic Development Authority for the City of Shakopee(the"Authority") upon creation of the Authority in 1995. The Authority and City have now determined a need to create Tax Increment Financing District No. 17, an economic development district,within the Project. Section B Definitions The terms defined in this section have the meanings given herein, unless the context in which they are used indicates a different meaning: "Authority" means the Shakopee Economic Development Authority. "City" means the City of Shakopee, Minnesota;also referred to as a"Municipality". "City Council" means the City Council of the City;also referred to as the"Governing Body". "County" means Scott County, Minnesota. "Protect" means the Minnesota River Valley Housing and Redevelopment Project No. 1. "Project Area" means the property within the Project, as described in the Project Plan and as shown in Exhibit I attached. "Project Plan" means the Redevelopment Plan for the Project,as modified from time to time. "School District" means Independent School District No.720, Minnesota. "State" means the State of Minnesota. "TIF Act"means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive. "TIF District"means Tax Increment Financing(Economic Development) District No. 17. "TIF Plan"means the tax increment financing plan for the TIF District(this document). II. - MODIFICATION TO REDEVELOPMENT PLAN FOR MINNESOTA RIVER VALLEY HOUSING AND REDEVELOPMENT PROJECT NO. 1 The City and the Authority intend, through this document, to modify the Project Plan for the Project. Section 1.6 (regarding parcels to be acquired within the Project), Section 1.7 (regarding estimated public improvement costs within the Project) and Section 1.8 (regarding public improvements and facilities within the Project) of the existing Project Plan are deemed modified to incorporate the terms of the TIF Plan following in Section III of this document. The boundaries and general objectives of the Project remain unchanged. SPRINGSTED Page 1 City of Shakopee and Shakopee Economic Development Authority, Minnesota III.-TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO.16 Section A Statutory Authorization The Authority, with approval of the City Council, is authorized to establish TIF District No. 17 and this TIF Plan pursuant to the Act and the TIF Act. Section B Statement of Need and Public Purpose The Authority has determined that conditions exist within the Project Area which have prevented further development of land by private enterprise. It has been found that the Project Area is potentially more useful and valuable for contributing to the public health,safety and welfare than has been realized under existing development. The development of these parcels is not attainable in the foreseeable future without the intervention of the Authority in the private development process. The Authority has prepared the Project Plan, which provides for the elimination of these conditions,thereby making the land useful and valuable for contributing to the public health,safety and welfare. Section C Statement of Objectives The objectives outlined in Section 1.4 of the Project Plan,as amended, are incorporated herein by reference. Section D Designation of Tax Increment Financing District as an Economic Development District Economic development districts are a type of tax increment financing district which consist of any project, or portions of a project,which the City finds to be in the public interest because: (1) it will discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; (2) it will result in increased employment in the state;or (3) it will result in preservation and enhancement of the tax base of the state. The TIF District qualifies as an economic development district in that the proposed development described in this TIF Plan (see Section I) meets the criteria listed above in (2) and (3). Without establishment of the TIF District, the proposed development would not occur within the City. The proposed development will also result in increased employment and enhancement of the tax base in both the City and the State. Tax increments from an economic development district must be used to provide improvements, loans, subsidies, grants, interest rate subsidies, or other assistance in which at least 85%of the square footage of the facilities to be constructed are used for any of the following purposes: (1) manufacturing or production of tangible personal property, including processing, resulting in the change of the condition of the property; (2) warehousing,storage and distribution of tangible personal property,excluding retail sales; (3) research and development related to the activities listed in(1)or(2)above; (4) telemarketing if that activity is the exclusive use of the property; SPRINGSTED Page 2 City of Shakopee and Shakopee Economic Development Authority, Minnesota (5) tourism facilities(see M.S. Section 469.174, Subd. 22); or (6) space necessary for and related to the activities listed in(1)through(5)above. In addition to the uses specified above, tax increments may also be used to provide assistance for up to 15,000 square feet of any separately owned commercial facility located within a"small city"(see M.S. Section 469.176, Subd. 4c), or to pay for excessive site preparation and public improvement costs in a district containing bedrock soils conditions in 80%or more of its acreage(see M.S. Section 469.176, Subd.4c). Tax increments from the TIF District will be used to provide financial assistance to the proposed development (see Section I), in which over 85%of the square footage of the facilities to be constructed will be used for manufacturing, warehousing,or research or other purposes as listed in(1), (2), &(3)above. Section E Duration of the TIF District Economic development districts may remain in existence 8 years from the date of receipt by the Authority of the first tax increment. The Authority anticipates that the TIF District will remain in existence for a period of 9 total years (projected to be through the year 2025). Modifications of this plan(see Section AA)shall not extend these limitations. All tax increments from taxes payable in the year the TIF District is decertified shall be paid to the Authority. Section F Property to be Included in the TIF District The TIF District is an approximately 62.9 acre area of land located within the Project Area. A map showing the location of the TIF District is shown in Exhibit I. The boundaries and area encompassed by the TIF District are described below: Parcel ID Number* Legal Description 279050210 Lot 1 Block 1 Shenandoah East First Addition 279050120 *These parcels are in the process of being replotted. The legal description shown is reflective of the parcel following the replotting, the Parcel ID Number has not yet been determined The area encompassed by the TIF District shall also include all adjacent streets and street/utility right-of-ways in their entirety located upon or adjacent to the property described above. Section G Property to be Acquired in the TIF District The Authority may acquire and sell any or all of the property located within the TIF District; however, the Authority does not anticipate acquiring any such property at this time,other than for road right of way or utility purposes. Section H Specific Development Expected to Occur Within the TIF District The proposed development is expected to consist of an approximately 820,000 square foot order fulfillment warehouse facility. The proposed project is anticipated to include approximately 750,000 square feet of warehouse processing space, and approximately 70,000 square feet of office space, which is necessary and related to the eligible activity in the building. At least 85%of the facility will be used for warehousing and distribution,with less than 15%available for office space. The development will result in increased employment within the City, in compliance SPRINGSTED Page 3 City of Shakopee and Shakopee Economic Development Authority, Minnesota with statutory requirements. It is anticipated tax increment will be used to finance a portion of the TIF eligible costs related to the development of the site including, but not limited to, improvements to adjacent roadways and utilities serving the development property. In addition, the Authority anticipates using available tax increment for related administrative expenses, pooling for TIF-eligible improvements outside of the boundaries of the district but within the Project Area for eligible purposes set forth in Minn. Stat. section 469.176 subd. 4c., and any other eligible expenditures associated with the development of the site. Construction of the facility is projected to occur from June of 2015 through August of 2016. The project is expected to be fully constructed in 2016, and be 100%assessed and on the tax rolls as of January 2, 2017 for taxes payable in 2018. The facility is anticipated to be approximately 40% constructed in 2015, and is anticipated to generate the receipt of first increment in 2017. At the time this document was prepared there were no signed construction contracts with regards to the above described development. Section I Findings and Need for Tax Increment Financing In establishing the TIF District,the Authority makes the following findings: (1) The TIF District qualifies as an economic development district; See Sections E and H of this document for the reasons and facts supporting this finding. (2) The proposed development, in the opinion of the Authority, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future, and the increased market value of the site that could reasonably be expected to occur without the use of tax increment would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan. Factual basis: Proposed development not expected to occur.. The proposed development is expected to consist of an 820,000 square foot order fulfillment warehouse facility. The proposed project is anticipated to include approximately 750,000 square feet of warehouse processing space, and 70,000 square feet of office space, which is necessary and related to the eligible activity in the building. At least 85% of the facility will be used for warehousing and distribution, with less than 15%available for office space. The City has determined that the development of this site is not feasible without improvement to public infrastructure and streets adjacent to the facility. The proposed developer of the site has submitted information to the city demonstrating that the development of the site is not financially feasible without the assistance provided in this TIF Plan, due to the cost of the public infrastructure and street improvements necessary to facilitate the project. The Authority has determined that the proposed development would not occur but for the financial assistance provided in this TIF Plan because of the increased costs related to public infrastructure and street improvements necessary for the construction of the proposed new facility. Due to the high costs of investment for the proposed development, including site improvements and infrastructure costs incurred by the developer in conjunction with development of the project, in addition to the public infrastructure costs,the developer has stated that the project as proposed would not occur without the financial assistance provided by the City,as it would not be economically feasible without financial assistance. The Authority finds the use of tax increment necessary to finance a portion of the identified public infrastructure and street improvement costs to facilitate development of the site and developer investment. The Authority anticipates providing financial assistance through the funding of the necessary public infrastructure and street improvement cost, SPRINGSTED Page 4 City of Shakopee and Shakopee Economic Development Authority, Minnesota which the Authority anticipates financing through a mix of pay-as-you-go revenues, interfund loans, and potential bond issuance. No higher market value expected: The proposed development, in the opinion of the Authority,would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future, and the increased market value of the site that could reasonably be expected to occur without the use of tax increment would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan; The proposed development is expected to consist of an 820,000 square foot order fulfillment warehouse facility. The increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permitted by the TIF Plan. Without improvements the Authority has no reason to expect that significant development would occur without assistance similar to that provided in this plan. For the same reasons that the desired development described above is not feasible without tax increment assistance, the Authority believes that no alternative development is likely to occur without similar assistance. Almost any other development of the site would require the same improvements to public infrastructure and streets. Therefore, the Authority concludes as follows: The proposed development, in the opinion of the Authority, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. To summarize the basis for the Authority's findings regarding alternative market value, in accordance with Minnesota Statutes, Section 469.175, Subd.3(d),the Authority makes the following determinations: a. The Authority's estimate of the amount by which the market value of the site will increase without the use of tax increment financing is $0 (for the reasons described above), except some unknown amount of appreciation. b. If the proposed development to be assisted with tax increment occurs in the District, the total increase in market value would be approximately $56,325,633, including the value of the building (See Exhibit V). c. The present value of gross tax increments from the District for the maximum duration of the district permitted by the TIF Plan is estimated to be$4,451,115(See Exhibit V). d. Even if some development other than the proposed development were to occur, the Authority finds that no alternative would occur that would produce a market value increase greater than $51,874,518 (the amount in clause b less the amount in clause c) without tax increment assistance. (3) The TIF Plan would afford maximum opportunity, consistent with the sound needs of the Authority as a whole,for development of the Project Area by private enterprise. Factual basis: The proposed development is the construction an approximately 820,000 square foot warehouse fulfillment center to be constructed in the Project Area that is expected to create approximately 1,000 new jobs in the City and the State, plus create substantial new tax base for the City and the State. The development clearly meets the Authority's economic development goals in terms of land use, job retention, and wage levels. (4) The TIF Plan conforms to general plans for development of the City as a whole. SPRINGSTED Page 5 City of Shakopee and Shakopee Economic Development Authority, Minnesota Factual basis: The City Planning Commission has determined that the development proposed in the TIF Plan conforms to the City comprehensive plan. Section J Estimated Public Costs The estimated public costs of the TIF District are listed below. Such costs are eligible for reimbursement from tax increments of the TIF District. Scott County retainage for road costs $3,379,250 Public infrastructure and street improvement costs 2,319,076 Administrative expenses 47,328 Total $5,745,654 The Authority anticipates using tax increment to the extent available to fund public infrastructure/street improvement costs, eligible pooling expenses, and related administrative expenses, and other TIF-eligible expenditures. The Authority reserves the right to administratively adjust the amount of any of the items listed above or to incorporate additional eligible items, so long as the total estimated public cost($5,745,654) is not increased. The Authority also reserves the right to fund any of the identified costs with any other legally available revenues, but anticipates that such costs will be primarily financed with tax increments. Section K Estimated Sources of Revenue Tax increment revenue(Net of OSA Reduction) $5,745,654 Interest on invested funds 0 Bond proceeds 0 Loan proceeds 0 Real estate sales 0 Special assessments 0 Rent/lease revenue 0 Grants 0 Total $5,745,654 The Authority anticipates providing financial assistance for public infrastructure and street improvement costs, and other TIF eligible expenses to the proposed development on through a potential mix of pay-as-you-go revenues and bond proceeds. As tax increments are collected from the TIF District in future years, a portion of these taxes will be used by the Authority to either reimburse the Authority for public costs incurred on a pay-as-you-go basis, or to fund debt-service on bonds issued to fund project costs(see Section K). The Authority reserves the right to finance any or all public costs of the TIF District using pay-as-you-go assistance, internal funding, general obligation or revenue debt (referred to together as "TIF Bonds"), or any other financing mechanism authorized by law. The Authority also reserves the right to use other sources of revenue legally applicable to the Project Area to pay for such costs including, but not limited to, special assessments, utility revenues, federal or state funds,and investment income. SPRINGSTED Page 6 City of Shakopee and Shakopee Economic Development Authority, Minnesota Section L Estimated Amount of Bonded Indebtedness The Authority reserves the right to issue bonds in any form, including without limitation any interfund loan with interest not to exceed the maximum permitted under Section 469.178, subd. 7 of the TIF Act. Such bonds shall be issued in an amount not to exceed$5,745,654(total estimated public cost). Section M Original Net Tax Capacity The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts certified between July 1 and December 31, inclusive,this value is based on the current assessment year. The Authority intends to file the request for certification prior to July 1, 2015. Therefore, the original net tax capacity will be the net tax capacity as of January 2,2014. The Estimated Market Value of all property within the TIF District as of January 2, 2014,for taxes payable in 2015, is $7,357,500 and the estimated tax capacity is $145,650, which is estimated to be the original net tax capacity of the TIF District. Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as a result of: (1) changes in the tax-exempt status of property; (2) reductions or enlargements of the geographic area of the TIF District; (3) changes due to stipulation agreements or abatements;or (4) changes in property classification rates. Section N Original Tax Capacity Rate The County Auditor shall also certify the original tax capacity rate of the TIF District. This rate shall be the sum of all local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the original net tax capacity. In future years,the amount of tax increment generated by the TIF District will be calculated using the lesser of(a)the sum of the current local tax rates at that time or(b)the original tax capacity rate of the TIF District. As noted in Section N, the Authority intends to file the TIF District for certification prior to July 1, 2015; therefore, the Original Local Tax Rate will be the rate that applies for taxes payable in 2015. For purposes of estimating the tax increment generated by the TIF District, the sum of the local tax rates for taxes levied in 2014 and payable in 2015, is 115.246%as shown below. SPRINGSTED Page 7 City of Shakopee and Shakopee Economic Development Authority, Minnesota Final 2014/2015 Taxing Jurisdiction Local Tax Rate City of Shakopee 37.861% Scott County 36.638% ISD#720 35.578% Other 5.169% Total 115.246% Section 0 Projected Retained Captured Net Tax Capacity and Projected Tax Increment The Authority anticipates that the facility will begin construction in 2015 and will be partially completed by December 31, 2015, and 100% completed by December 31, 2016, creating a partial tax capacity for TIF District No. 17 of $439,250 as of January 2, 2016, and a completed total tax capacity of $1,108,050 as of January 2, 2017. The captured tax capacity as of January 2, 2016 for taxes payable 2017 estimated to be$170,044 and the first year of tax increment is estimated to be $195,970. The first full year of captured tax capacity is projected for taxes payable 2018, with captured tax capacity of $557,393, and the first full year of tax increment estimated to be $642,375. A complete schedule of estimated tax increment from the TIF District is shown in Exhibit III. The estimates shown in this TIF plan assume that commercial class rates remain at 1.5% of the estimated market value up to $150,000 and 2.0% of the estimated market value over$150,000, and assume 2% annual increases in market values. Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax capacity of the TIF District. For communities affected by the fiscal disparity provisions of Minnesota Statutes, Chapter 473F and Chapter 276A, the original net tax capacity of the TIF District shall be determined before the application of fiscal disparity. In subsequent years, the current net tax capacity shall either(a)be determined before the application of fiscal disparity or (b)exclude the product of any fiscal disparity increase in the TIF District (since the original net tax capacity was certified)times the appropriate fiscal disparity ratio. The method the Authority elects shall remain the same for the life of the TIF District, except that a single change may be made at any time from method (a)to method (b) above. »The Authority elects method (b),or M.S. Section 469.177, Subdivision 3(a). The County Auditor shall certify to the Authority the amount of captured net tax capacity each year. The Authority may choose to retain any or all of this amount. It is the Authority's intention to retain 90% of the captured net tax capacity of the TIF District. Such amount shall be known as the retained captured net tax capacity of the TIF District. Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the anticipated life of the TIF District. Section P Use of Tax Increment Each year the County Treasurer shall deduct 0.36%of the annual tax increment generated by the TIF District and pay such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of financial reporting and auditing of tax increment financing information throughout the state. Exhibit III shows the projected deduction for this purpose over the anticipated life of the TIF District. SPRINGSTED Page 8 City of Shakopee and Shakopee Economic Development Authority, Minnesota The City has determined that it will use 100%of the remaining tax increment generated by the TIF District for any of the following purposes: (1) pay for the estimated public costs of the TIF District (see Section K) and County administrative costs associated with the TIF District(see Section T); (2) pay principal and interest on one or more pay—go—notes, tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; (3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; (4) pay all or a portion of the county road costs as may be required by the County Board under M.S. Section 469.175, Subdivision 1a;or (5) return excess tax increments to the County Auditor for redistribution to the City, County and School District. Tax increments from property located in one county must be expended for the direct and primary benefit of a project located within that county, unless the county board involved waives this requirement. Tax increments shall not be used to circumvent levy limitations applicable to the City. Tax increment shall not be used to finance the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for conducting the business of a municipality,county, school district,or any other local unit of government or the State or federal government. Further, tax increments may not be used to finance: a commons area used as a public park; facilities used for social or recreational purposes (whether public or private); or publicly-owned facilities used for conference purposes;provided that tax increment may be used for a privately owned conference facility, and for parking structures whether public or privately owned and whether or not they are ancillary to one of the otherwise prohibited uses described above. If there exists any type of agreement or arrangement providing for the developer,or other beneficiary of assistance,to repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject to all of the restrictions imposed on the use of tax increments. Assistance includes sale of property at less than the cost of acquisition or fair market value, grants, ground or other leases at less then fair market rent, interest rate subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the developer or beneficiary. Section Q Excess Tax Increment In any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated public costs authorized by the TIF Plan,the Authority shall use the excess tax increments to: (1) prepay any outstanding tax increment bonds; (2) discharge the pledge of tax increments thereof; (3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds;or (4) return excess tax increments to the County Auditor for redistribution to the City, County and School District. The County Auditor must report to the Commissioner of Education the amount of any excess tax increment redistributed to the School District within 30 days of such redistribution. SPRINGSTED Page 9 City of Shakopee and Shakopee Economic Development Authority, Minnesota Section R Tax Increment Pooling and the Five Year Rule At least 80%of the tax increments from the TIF District must be expended on activities within the district or to pay for bonds used to finance the estimated public costs of the TIF District (see Section E for additional restrictions). No more than 20%of the tax increments may be spent on costs outside of the TIF District but within the boundaries of the Project Area,except to pay debt service on credit enhanced bonds. All administrative expenses are considered to have been spent outside of the TIF District. Tax increments are considered to have been spent within the TIF District if such amounts are: (1) actually paid to a third party for activities performed within the TIF District within five years after certification of the district; (2) used to pay bonds that were issued and sold to a third party,the proceeds of which are reasonably expected on the date of issuance to be spent within the later of the five-year period or a reasonable temporary period or are deposited in a reasonably required reserve or replacement fund. (3) used to make payments or reimbursements to a third party under binding contracts for activities performed within the TIF District, which were entered into within five years after certification of the district;or (4) used to reimburse a party for payment of eligible costs(including interest) incurred within five years from certification of the district. Beginning with the sixth year following certification of the TIF District, at least 80%of the tax increments must be used to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District must be decertified. The Authority does expect that allowable pooling expenditures will be made outside of the TIF District but within the Project Area (along with allowable administrative expenses), and such expenditures are expressly authorized in this TIF Plan. Section S Limitation on Administrative Expenses Administrative expenses are defined as all costs of the Authority other than: (1) amounts paid for the purchase of land; (2) amounts paid for materials and services, including architectural and engineering services directly connected with the physical development of the real property in the project; (3) relocation benefits paid to, or services provided for, persons residing or businesses located in the project; (4) amounts used to pay principal or interest on,fund a reserve for, or sell at a discount bonds issued pursuant to section 469.178;or (5) amounts used to pay other financial obligations to the extent those obligations were used to finance costs described in clause(1)to(3). Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax increments may be used to pay administrative expenses of the TIF District up to the lesser of(a) 10% of the total estimated public costs authorized by the TIF Plan or(b) 10%of the total tax increment expenditures for the project. SPRINGSTED Page 10 City of Shakopee and Shakopee Economic Development Authority, Minnesota Section T Limitation on Property Not Subject to Improvements-Four Year Rule If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualified improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial reconstruction or rebuilding of an existing street. The Authority must submit to the County Auditor, by February 1 of the fifth year,evidence that the required activity has taken place for each parcel in the TIF District. If a parcel is excluded from the TIF District and the Authority or owner of the parcel subsequently commences any of the above activities, the Authority shall certify to the County Auditor that such activity has commenced and the parcel shall once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF District. Section U Estimated Impact on Other Taxing Jurisdictions Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The Authority believes that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have occurred without the establishment of the TIF District and the provision of public assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the development therein becomes part of the general tax base. The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota Statutes, Section 469.175, Subdivision 2,are listed below. 1. The total amount of tax increment that will be generated over the life of the district(before OSA reduction) is estimated to be$5,766,414. 2. To the extent the manufacturing and warehouse facility in the proposed TIF District generates any public cost impacts on city-provided services such as police and fire protection, public infrastructure, and borrowing costs attributable to the district, such costs will be levied upon the taxable net tax capacity of the City, excluding that portion captured by the District. The City may undertake road improvements related to the project, these are likely to be financed from existing fund balances, but may include the issuance of bonds as a funding mechanism. 3. The amount of tax increments over the life of the district that would be attributable to school district levies, assuming the school district's share of the total local tax rate for all taxing jurisdictions remained the same, is estimated to be$1,780,164. 4. The amount of tax increments over the life of the district that would be attributable to county levies, assuming the county's share of the total local tax rate for all taxing jurisdictions remained the same is estimated to be$1,833,197. 5. At the time of this drafting no additional information has been requested by the school district that would enable it to determine additional costs that will accrue to it due to the development proposed for the district. The County has informed the Authority that it intends to capture$3,379,250 of tax increment revenue to fund County road improvements necessary to accommodate the proposed project. SPRINGSTED Page 11 City of Shakopee and Shakopee Economic Development Authority, Minnesota Section V Prior Planned Improvements The Authority shall accompany its request for certification to the County Auditor (or notice of district enlargement), with a listing of all properties within the TIF District for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the TIF District by the net tax capacity of each improvement for which a building permit was issued. There have been no building permits issued in the last 18 months in conjunction with any of the properties within the TIF District. Section W Development Agreements If within a project containing an economic development district, more than 10%of the acreage of the property to be acquired by the Authority is purchased with tax increment bonds proceeds (to which tax increment from the property is pledged), then prior to such acquisition, the Authority must enter into an agreement for the development of the property. Such agreement must provide recourse for the Authority should the development not be completed. The Authority anticipates entering into an agreement for development, but does not anticipate acquiring any property located within the TIF District other than for road or utility purposes. Section X Assessment Agreements The Authority may, upon entering into a development agreement, also enter into an assessment agreement with any person, which establishes a minimum market value of the land and improvements for each year during the life of the TIF District. The assessment agreement shall be presented to the County or City Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land, and so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate, shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the office of the County Recorder of each county where the property is located. Any modification or premature termination of this agreement must first be approved by the City, County and School District. The Authority does not anticipate entering into an assessment agreement. Section Y Modifications of the Tax Increment Financing Plan Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the amount of bonded indebtedness to be incurred; increase in the amount of capitalized interest; increase in that portion of the captured net tax capacity to be retained by the City; increase in the total estimated capital and administrative costs;or designation of additional property to be acquired by the Authority shall be approved only after satisfying all the necessary requirements for approval of the original TIF Plan. This paragraph does not apply if: (1) the only modification is elimination of parcels from the TIF District;and (2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of those parcels in the TIF District's original net tax capacity, or the City agrees that the TIF District's original net tax capacity will be reduced by no more than the current net tax capacity of the parcels eliminated. SPRINGSTED Page 12 City of Shakopee and Shakopee Economic Development Authority, Minnesota The Authority must notify the County Auditor of any modification that reduces or enlarges the geographic area of the TIF District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of certification. Section Z Administration of the Tax Increment Financing Plan Upon adoption of the TIF Plan, the Authority shall submit a copy of such plan to the Minnesota Department of Revenue. The Authority shall also request that the County Auditor certify the original net tax capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this process, the City shall submit copies of the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned improvements. The Authority shall also send the County Assessor any assessment agreement establishing the minimum market value of land and improvements in the TIF District, and shall request that the County Assessor review and certify this assessment agreement as reasonable. The County shall distribute to the Authority the amount of tax increment as it becomes available. The amount of tax increment in any year represents the applicable property taxes generated by the retained captured net tax capacity of the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other development, inflation of property values,or changes in property classification rates or formulas. In administering and implementing the TIF Plan,the following actions should occur on an annual basis: (1) prior to July 1, the Authority shall notify the County Assessor of any new development that has occurred in the TIF District during the past year to insure that the new value will be recorded in a timely manner. (2) if the County Auditor receives the request for certification of a new TIF District,or for modification of an existing TIF District, before July 1,the request shall be recognized in determining local tax rates for the current and subsequent levy years. Requests received on or after July 1 shall be used to determine local tax rates in subsequent years. (3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF District. The amount certified shall reflect any changes that occur as a result of the following: (a) the value of property that changes from tax-exempt to taxable shall be added to the original net tax capacity of the TIF District. The reverse shall also apply; (b) the original net tax capacity may be modified by any approved enlargement or reduction of the TIF District; (c) if laws governing the classification of real property cause changes to the percentage of estimated market value to be applied for property tax purposes,then the resulting increase or decrease in net tax capacity shall be applied proportionately to the original net tax capacity and the retained captured net tax capacity of the TIF District. The County Auditor shall notify the Authority of all changes made to the original net tax capacity of the TIF District. Section AA Filing TIF Plan, Financial Reporting and Disclosure Requirements The Authority will file the TIF Plan, and any subsequent amendments thereto,with the Commissioner of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes, Section 469.175,subdivision 4A. The Authority will comply with all reporting requirements for the TIF District under Minnesota Statutes, Section 469.175,subdivisions 5 and 6. SPRINGSTED Page 13 Nr cm 03 a_ , 1 ,.., .••••• Alfa'111 eeli..e4".''."..i: 1 i fit ._ ..z >< .,..„,,...„... , - i AryitMliglifiVii*Inatinit'i too"ibLts'"Z. i 7 i w _ r a-iilleolirstrikui err-, i -0 el 0,- --1,)111. ,,, - k 7 ., "• -„,..r.gaiiiiitz4201.4,0 1 , 7 i fm41 .11 - •• - ...•14.,-..*. . id • et: -,.; ler .‘"*- ' -et - -..'2 ,,--7 lari. :111 4.4 _ A' 1 il " 1',,,,t„. 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't il--1.illf'7-71: .i....H a - -4 '-,•,.. a 7..' c ..! a) 11,4-7:61 tt, -— ----t ."6., c., t .111 , 1'1 *4 r ':•" ..• - ,l,, W4 - , , if Ar. c1.0 c 775, g., ,f .:..., ;1 E-i x ..,,.. l,p...-..‘ - cn 41...,---....,,L:-_ 1:,•i 4-8 , tn. 0, :t., ...:!.,..t 144-7,.":,.11:'"', 1 , t, .= .,_, ;;-.. 4.- ..9 "V fl 0 C., '•-',:li, ,,;.:41,,,r ,, 14.4 cl, .4 ,..t ci., _L._-,1 *, ..4, - = ::, [J., .._., al 1= .t.,, g Z : (f) T 4 e _ ro' PI X Exhibit II Assumptions Report City of Shakopee, Minnesota Tax Increment Financing (Economic Development) District No.17 Hwy 101 and Shenandoah Drive Development Project $55M EMV and 2% MV Inflator Type of Tax Increment Financing District Economic Development Maximum Duration of TIF District 8 years from 1st increment Projected Certification Request Date 06/30/15 Decertification Date 12/31/25 (9 Years of Increment) 2014/2015 Base Estimated Market Value $7,357,500 Original Net Tax Capacity $145,650 Assessment/Collection Year 2015/2016 2016/2017 2017/2018 2018/2019 Base Estimated Market Value $7,357,500 $7,357,500 $7,357,500 $7,357,500 Estimated Increase in Value-New Construction 0 14,642,500 48,082,500 49,191,300 Total Estimated Market Value 7,357,500 22,000,000 55,440,000 56,548,800 Total Net Tax Capacity $145,650 $439,250 $1,108,050 $1,130,226 City of Shakopee 37.862% Scott County 36.638% ISD#720 35.578% Other 5.169% Local Tax Capacity Rate 115.246% 2014/2015 Fiscal Disparities Contribution From TIF District 35.6479% Administrative Retainage Percent(maximum = 10%) 2.00% Project PV Date& Rate-Gross 06/30/15 4.00% PV Amount $4,495,452 Notes Calculation assumes no changes to future tax rates and class rates. Includes 2% market value inflator. Construction schedule assumes construction commences in 2015 with 40%of the project complete by December 31,2015 for assess 2016 and taxes payable 2017. The project will be 100%completed in 2016,for assess 2017 and taxes payable 2018. Market value estimates provided by the Scott County Assessor's office. TIF projections are based on 90%of the incremental growth retained as the captured net tax capacity. SPRINGSTED CD 0 0 0 O O O In r M 01 (0 m °) Tr Tr vno 7 N C 0M N CO V a) CO Z > 7, CO O r rM 6 0) X O O O O O O O M M (ND N OD N n" as W • a) M M CO CA M N C C O M - n N m O N J ID< a N CC O 0 0 0 0 0 0 N- M r r Tr O CA O 0 ✓ mo0v_ .. m aa) m co ri rn o a F-. 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(f) v O 1 O) O a) +_ 01 ❑ N X ~ U ti OL •C ?i -0 a) - C O C O a) Ll - (a N : Cp , (`� t? 0 -C 13 .0 a) +-' 0 'X C > O F- Z CO co � a) U p CO 0 C (a •C L N -C _ a) :.c O N C a) p L 0 tto. .0 II C d y LA C N "> X =, C C O .5 .., U o v > C C CO a) C v C 0_ V) C C as a ? Ca a) O U v ai _CO a) N O A x C d LL . O N a p W O. O. ++ N C .X `O a) a) U E . d7:3 (4 CO V) Q * C CO V1 C F- 'C 0 >, 17) 0 r). (0 p Y --cu c V Ca .1- C . o V N v U I- I- ❑ N CA CO 3 aas >, O L »r 0 N- v a LLI 0 F- I 0 c) 0 0 F- v C/) Exhibit V Market Value Analysis Report City of Shakopee, Minnesota Tax Increment Financing (Economic Development) District No. 17 Hwy 101 and Shenandoah Drive Development Project $55M EMV and 2% MV Inflator Assumptions Present Value Date r 06/30/15 P.V. Rate- Gross T.I. 4.00% Increase in EMV With TIF District r $56,325,633 Less: P.V of Gross Tax Increment 4,451,115 Subtotal $51,874,518 Less: Increase in ENV Without TIF 0 Difference $51,874,518 Annual Present Gross Tax Value @ Year Increment 4.00% 1 . 2017 ' 195,970 179,398 2 2018 . 642,375 565,435 3 2019 r 657,176 556,215 4 2020 r 672,274 547,109 5 2021 r 687,673 538,116 6 2022 ' 703,381 529,239 7 2023 ' 719,403 520,475 8 2024 ' 735,746 511,826 9 2025 r 752,416 503,291 $5,766,434 $4,451,115 SPRINGSTED Page 18