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Home My WebLink About15.F.3. Set Public Hearing on Property tax Abatement rl f~.F. 3, CITY OF SHAKOPEE Memorandum TO: Mayor and City Council Mark McNeill, City Administrator / EDA Executive Director FROM: Paul Snook, Economic Development coordinat~ SUBJECT: Recommendation to City Council from Economic Development Advisory Committee to Approve Resolution No. $9 '78 , Calling a Public Hearing regarding Tax Abatement and Business Subsidy in connection with the Dean Lakes Project MEETING DATE: November 18, 2003 Introduction The City Council is asked to call for a public hearing for December 9, 2003 regarding property tax abatement for property located in the southeast quadrant of the County Road 83 and Highway 169 intersection, consisting of Outlots A, I and J of the preliminary plat known as Dean Lakes (referred to as the "Commercial Property"). The Commercial Property is part of a larger development known as the Dean's Lake Project. Background At its August 21, 2003 meeting, the Economic Development Advisory Committee made recommendation to the City Council to: (1) Set a public hearing for business subsidies and property tax abatement for the proposed Dean's Lake Project; (2) Approve the amended Application for Business Subsidies submitted by Ryan Companies US Inc.; and (3) Enter a Master Development Agreement with Ryan Companies for property tax abatement for said project. Ryan Companies submitted an Application for Business Subsidies in January 2003 requesting tax abatement for the Dean's Lake Project. The ED Advisory Committee made recommendation to the EDA / City Council to receive the application and initiate negotiation of a Master Development Agreement with Ryan which would specify the terms under which tax abatement would be used to assist in financing the project. The EDA / City Council received the application, and since February, City staff has been in discussion / negotiation with Ryan on abatement terms and land use of the project. At the August 5th meeting, Ryan asked EDA / City Council for authorization to amend the original Application for Business Subsidies, which includes changes in the mix of land use, elimination of the request for property tax abatement on residential development and propose it only on commercial development, in which the City will retain part of the City's share of property taxes on the Commercial Property, and use those revenues to help pay special assessments for public infrastructure serving the Dean's Lake Project. The EDA I City Council granted the request to amend. The amended application was Ryan - Set Pub Hear 11-18-03.doc 1 presented to the ED Advisory Committee for consideration (see Exhibit A, Amended Application and related letter), and the committee in turn developed its recommendation as outlined in this memo (See Exhibit B, Minutes from August 21 ED Advisory Committee meeting). Exhibit C is the Summary of Proposed Terms for a Master Development Agreement Between City of Shakopee and Ryan Companies. This document shows the major points of the Master Development Agreement that would be considered at the public hearing. Exhibit D is the financial analysis undertaken by Springsted Financial Advisors for the City. If the public hearing is called, a draft copy of the Master Development Agreement ( which includes a Business Subsidy Agreement) and related financial analysis will be on file at City Hall on and after November 19, 2003. Exhibit E is the Resolution Calling a Public Hearing regarding Tax Abatement and Business Subsidy in connection with the Dean Lakes Project, and related Notice that would be published in the Shakopee Vallev News. Action Requested Approve Resolution No. S918 , calling a Public Hearing for December 9,2003 regarding Property Tax Abatement and Business Subsidy in connection with the Dean Lakes Project Ryan - Set Pub Hear 11-18-03.doc 2 RYAN COMPANIES US, INC. IYAN 50 South Tenth Street, Suite 300 Minneapolis, MN 55403-2012 WWW.RYANCOMPANlES.COM 612-492-4000 tel BUILDING LASTING RELATIONSHIPS 612-492-3000 fax October 14, 2003 A Mr. Paul Snook Economic Development Director City of Shakopee 129 Holmes Street South Shakopee, MN 55379 Dear Paul: On January 24, 2003 Ryan Companies submitted an application requesting a business subsidy for the Dean's Lake Master Plan Mixed Use Development. At the present time, we are amending our request for assistance based upon the ongoing discussions and negotiations that have occurred with City officials. Key elements of our revised proposal and amended request for assistance are as follows: 1. Proposed land use mix: . 90 acres Business Park . 44 acres CommerciallRetail . 42 acres Residential (295 units) . 84 acres Natural Open Space . 14 acres Right of Way 2. Eliminate the tax abatement request on residential development. 3. Request the use of tax abatement on the 44 acre CommerciallRetail (approximately 278,000 SF) development. The term of the abatement will be 15 years for each parcel of the Commercial Property, beginning with the first year after a parcel is fully developed. The abatement in any year will never exceed the lesser of 25% of the statutory abatement capacity for the city as a whole (which is 10% of the City's annual tax levy); or the installment of Existing Assessments and New ~YAH 8UILDING LASTING RELATIONSHIPS Assessments against the Business Park Property due in that year, The City will use those abatement dollars solely to pay for the Existing Assessments and the New Assessments against the Business Park Property. 4, Obtain a waiver of park dedication fees for residential development if the development meets the criteria for such City Subdivision Ordinance. The developer makes this request because we are dedicating approximately 15 acres of park land (within the 84 acres of open space) and making recreational improvements such as swimming pools, tot lots and an extensive regional trail system. 5. Obtain a storm water fee credit based upon approval by the City Engineer of detailed plans that demonstrate the ability to adequately manage storm water drainage within the development. Estimated value = $1,236,000. . ".-. 6., Acknowledgement that future development projects to be undertaken by commercial/industrial users will be eligible for utilization of Tax Increment Financing (TIF) or other business subsidies. Requests by these applicant companies are to be treated in the same manner as projects that may occur anywhere else in the community. The ability of Ryan Companies to proceed under this revised application for assistance will require mutual cooperation from Scott County on the tax abatement request. Thank you for your time and consideration. We look forward to working with you towards implementing this development. c: Pat Ryan Dave Sellergren Roger Gruenette Mark McNeill Cindy Geis January 24, 2003 Mr. Paul Snook Economic Development Director City of Shakopee 129 Holmes Street South Shakopee, MN 55379 Dear Paul: Enclosed for your review is an application requesting tax abatement assistance in support of the Dean's Lake Master Plan Mixed Use Development. As you are aware Ryan Companies has been working in conjunction with the City staff and members of the EDA/ City Council/Planning Commission for almost two years in order to accurately and thoroughly identify project costs and design characteristics that will allow implementation of the "Conservation Development Approach" for the designated property. As part of this process the City has enlisted Springs ted, Inc. to undertake a fiscal analysis regarding the use of tax abatement to fund extraordinary infrastructure costs that are essential to the development of this project. Based upon the recotn1nendations that have emanated from this analysis, Ryan Companies is respectfully submitting an application for formal consideration of assistance to the EDAjCity Council. Ryan believes that with City support the proposed $243 tnillion project will yield substantial long-term benefits to the COtn1nunity and its' residents. Ryan understands that approval of this request by the City is an essential milestone to realize the vision of this quality development opportunity. If the City Council and EDA approve the request, Ryan will proceed to solicit approval from the Scott County Board to participate in a like manner. I believe that to this point the process has resulted in the formulation of an excellent development concept and look forward to receiving a favorable response from the City and County so that the project may become a reality. Please contact me with any questions regarding the application or other submittals enclosed herein. Thank you for all of your assistance in this regard. Sincerely, Kent M. Carlson Vice President of Development CITY OF SHAKOPEE Application for Business Subsidies S COlV1MUNlTY PRIDE SINCE 1857 129 Holmes Street South Shakopee, MN 55379 Phone (952) 445-3650 Fax (952) 445-6718 Section I: General Information ** With this application, please submit a formal letter requesting the assistance. 1. Business Name: Ryan Companies US, Inc. 2. Address: 50 South Tenth Street, Suite 300 Minneapolis, MN 55403 3. Contact Person: Kent Carlson 4. Telephone: (612) 492-4229 5. Fax: (612) 492-3229 6. E-Mail: kent.carlson@rvancompanies.com 7. Brief Description of the Business 1 Company: Ryan Companies has 50+ years experience in designing, constructing, developing and managing commercial. industrial. institutional and residential projects. 8. Parent Corporation, if any: NI A 9. Consultant information, if applicable: Name: Roger Guenette - Advance Resources for Development, Inc. Address: P.O. Box 3027. Mankato. MN 56002 Telephone: (507) 387-7117 Fax: (507) 387-6115 E-Mail: guenette@hickorytech.net Name: David Sellergren - Fredrikson & Byron Address: 4000 Pillsbury Center; 200 South Sixth Street; Minneapolis, MN 55402 Telephone: (612) 492-7136 Fax: (612) 492-7077 E-Mail: dsellergren@fredlaw.com 10. Type of Subsidy Requested: o Tax Increment Financing [8] Tax Abatement 11. Amount of Subsidy Requested: $923,606 present value 12. Public Purposes of the Subsidy: To fund extraordinary costs of infrastructure relating to regional transportation improvements (County Road 83/16 intersection) and internal infrastructure in support of Dean's Lake Master Plan Mixed Use Development. 13. Location of Proposed Project: NE quadrant County Road 83 and US Highway 169 14. Legal Description of Project Location: See attached Exhibit A 15. Property Identification Number(s): 27-042001-0; 27-909010-0; 27-909011-0; 27-909008-0; 27-909009-0; 27-910008-0 16. Present Ownership of the Site: Valley Green Business Park L.P. 17. Name / Description of the proposed project (Attach site plan, if available): Dean's Lake Master Plan Mixed Use Development (site plan attached) 18. Size of the Property 272 acres 19. Estimated Total Building Square Footage Commercial Industrial Space approx. 1.200,000 sq. ft. 700 units of residential 20. Estimated size of the Proposed Facility: Manufacturing / Assembly / Processing sq. ft. Office sq. ft. Research Laboratory sq. ft. Warehousing sq. ft. Other (Please Specify ) sq. ft. TOTAL Approx. 1,200,000 sq. ft. The breakdown of square feet to be developed per the categories identified above is unknown at the present time. 21. Estimated Project Costs: Land Acquisition $ 11 ,500,000 Site Development (grading, landscaping, etc.) $ 16,830,356 Building Cost $ 200,460,790 Street/Road Improvements (include your costs only) $ 3,800,000 Utility Improvements (include your costs only) $ 3,352,734 Capital (machinery and equipment) $ Unlrnown Professional Services (archit., engin.,legal, fiscal) $ 955.000 Fees and Permits (same as total from below) $ 4,701,510 Other (Marketing, Signage, Conservation restoration and $ 1,635,1 10 Pedestrian Trail) TOTAL $ 243,235,500 22. Estimated Fee and Permit Costs: City Permits and Fees $ 4,701,510 (Grading and Building Permits, Park Dedication Fees, etc.) Metropolitan Council Fees $ (SAC and WAC Charges) Other fee or permit costs $ (Please Specify ) TOTAL $ 4,701.510 23. Indicate the proposed start date for construction and estimated date of completion: The infrastructure construction of County Roads 16&83 has begun. The internal infrastructure construction will begin in Spring, 2003. The residential development will begin in Spring 2003 and be completed in 3 years. The Cll construction will begin in summer/fall 2003 and be completed in 7-10 years. 24. Proposed Financing Source(s): Equity $ 28,000,000 Bank Loan/Taxable Revenue Bonds $ 204,466,127 (Check one): o Tax Increment Financing, OR ~ Tax Abatement (City) $ 923,606 Industrial Development Revenue Bonds $ Other Local Government Assistance $ 3,064,608 (Please specify County Tax Abatement ) 429 Improvement Bonds $ 2,981,159 County Road 16/83 Assessment Bonds $ 3,800.000 TOTAL $ 243.235.500 25. If tax increment financing is requested, please submit a list of eligible project costs (Refer to Section V of the Business Subsidy Policy): N/A 26. The City reserves the right to request tax returns and/or other financial statements from the applicant for the years of operation. 27. The City reserves the right to request three bank references from the applicant. Section II: Employment, Wage and Benefit Information A. EMPLOYMENT 1. Does this project involve the relocation of jobs within the State of Minnesota? DYes 129 No a. If so, provide a statement of why the project cannot be completed at its current location I facility: N/A b. Number of full time equivalent (FTE) permanent employee positions at current Minnesota location I facility to be relocated to Shakopee: N/A 2. If the project is an expansion of an existing Shakopee facility, what is the current number of FTE permanent employee positions? N/A 3. Estimated Number of FTE permanent employee positions to be created (within 2 years of issuance of Certificate of Occupancy) as a result of the project 886 iobs proi ected within two years and 4,430 iobs proiected within 10 years. 4. TOTAL number of current and estimated new FTE permanent employee positions (No.2 + No.3 from above) 886 B. WAGES 1. What will be the minimum hourly wage (exclusive of benefits) of the FTE permanent employee positions created by the project? $ 35,000/year estimated average wages/salaries 2. The hourly wage of each new permanent FTE employee position, with separate bands of wages, is as follows: Because this project request for assistance is to fund infrastructure in support of a master plan mixed use development it is not possible at the present time to identify and detail specific employment positions and related wageslbenefits. Total Number of Wage Levels Per Hour FTE Permanent Employee Positions Less Than $12.00 $12.00 - 16.99 $17.00 - 21.99 $22.00 - 26.99 $27.00 - 31.99 $32.00 and Over C. HEALTH INSURANCE BENEFITS The value of health insurance benefits provided by the employer for the above referenced jobs, separated by bands of wages, is as follows: Wage Levels Per Hour Value of Health msurance Benefits Less Than $12.00 $12.00 -16.99 $17.00 - 21.99 $22.00 - 26.99 $27.00 - 31.99 $32.00 and Over EXHIBIT A LEGAL DESCRIPTION Parcell: The Southeast Quarter of the Southeast Quarter of Section 9, Township 115, Range 22, Scott County, Minnesota Parcel 2: Lot A, Registered Land Survey No.6, Scott County, Minnesota, EXCEPT Parcel 74, Minnesota Department of Transportation Right of Way Plat No.70-11 as the same are on file and of record in the Office of the Registrar of Titles in and for Scott County, Minnesota Parcel 3: The Northeast Quarter of the Southeast Quarter of Section 9, Township 115, Range 22, Scott County, Minnesota; EXCEPT that part shown as Parcel 74 on Minnesota Department of Transportation Right of way Plat No. 70-12 on file and of record in the Office of the Registrar of Titles in and for Scott County, Minnesota Parcel 4: The Southwest Quarter of the Southeast Quarter of Section 9, Township 115, Range 22, Scott County, Minnesota; EXCEPT THE FOLLOWING: Commencing at a point 32 rods north of the Southwest comer of the Southeast Quarter, thence running East 13 rods, thence North 10 rods, thence in a Northwesterly direction about 13.700 rods to a point 46 rods north of said Southwest comer of the Southeast Quarter, thence South 14 rods to the place of beginning; EXCEPT that part shown as Parcel 74 on Minnesota Department of Transportation Right of Way Plat No. 70-11 on file and of record in the Office of the Registrar of . Titles in and for Scott County, Minnesota ParcelS: Government Lots 1 and 2, and the West 601.13 feet of Government Lot 3, Section 10, Township 115, Range 22, Scott County, Minnesota, including the accretions and relictions thereto; EXCEPT that part of Government Lots 1 and 2 shown as Parcel 74 on Minnesota Department of Transportation Right of Way Plat No. 70-12 and that part of Government Lot 3 shown as Parcel 74 on Minnesota Department of Transportation Right of Way Plat No. 70-13, all in Section 10, Township 115, Range 22, on file and of record in the Office of the Registrar of Titles in and for Scott County, Minnesota Parcel 6: That part of the Southwest Quarter of the Southeast Quarter of Section 9, Township 115, Range 22, Scott County, Minnesota described as follows: Commencing at a point 32 Rods north of the Southwest comer of the Southeast Quarter, thence running east 13 Rods, thence North 10 Rods, thence in a Northwesterly direction about 13.7 Rods to a point 46 Rods North of said Southwest comer of the Southeast Quarter, thence South 14 Rods to the place of beginning. CITY OF SHAKOPEE, MINNESOTA B OFFICIAL PROCEEDINGS OF THE ECONOMIC DEVELOPMENT ADVISORY COMMITEE REGULAR SESSION August 21, 2003 Members present: John Mauritz, Brian Langdon, Committee Chair Jeff Jansen, Marshall Walker, Brae Felber Members Absent: None Staff Present: Paul Snook, Economic Development Coordinator Others Present: Kent Carlson / Ryan Companies; Roger Guenette / Advance Resources for Development . Call to Order Meeting called to order at 5:35 p.m., August 21,2003 by Committee Chair Jansen. . Approval of Ag:enda Langdon moved to approve the agenda, seconded by Mauritz, motion carried. . Rvan Companies. US Inc. revised Application for Business Subsidies for Valley Green Corporate Center Snook opened the discussion with reviewing the background of the proposal and explained the revised application. The Economic Development Advisory Committee is asked to make recommendation to the Economic Development Authority and City Council to approve the amended Application for Business Subsidies submitted by Ryan Companies US Inc., set public hearings for business subsidies and tax abatement for the proposed Valley Green Corporate Center Development, and enter a Master Development Agreement with Ryan Companies US Inc and Scott County for tax abatement, fee waivers and fee credits. Ryan Companies submitted an Application for Business Subsidies in January of2003 requesting tax abatement for the development of the proposed Valley Green Corporate Center (VGCC) project located at the southeast quadrant of the CR 83 and U.S. Hwy 169. The ED Advisory Committee made recommendation to the EDA / City Council to receive an Application for Business Subsidies from Ryan Companies, and initiate negotiation of a Master Development Agreement with Ryan which would specifY the terms under which tax abatement would be used in financing the proposed Valley Green Corporate Center. The EDA / City Council received the application, and since February, City staff has been in discussion I negotiation with Ryan on abatement terms and the related land use of the project. At the August 5th meeting, Ryan asked for authorization from the EDA / City to amend the original Application for Business Subsidies. The EDA / City Council granted the authorization, and now the amended application is before the Economic Development Advisory Committee for consideration. In the original application, Ryan proposed a mixed-use "conservation" development consisting of 79 acres of commercial, 78 acres of residential, 65 acres of natural open space and abundant setback from Dean's Lake among other conservation features. Ryan proposed abatement on the residential part of the project to fund the CR 83/16 improvements / assessments, commercial improvements and conservation enhancements. After ongoing discussions with City staff, Ryan is amending its application to include 90 acres of Business Park, 44 acres of Commercial, 84 acres of natural open space, and 42 acres of residential. Ryan proposes to amend the application to use tax abatement on the commercial part of the project (rather than the previously proposed abatement on residential). The amended application largely consists of a 46% reduction in acreage proposed for residential, and proposes to place the abatement on commercial rather than residential property. Tax abatement would be limited to the 44-acre (approximately 140,000 SF) Commercial and Retail part of the development. The availability of the tax abatement would be limited to $1,068,240 or 18 years whichever occurs first. The abatement proceeds would be utilized to pay down a portion of the assessment against all commercial and business park property relating to the County Roads 83 and 16 improvements. Tax increment financing would be considered on qualified commercial developments. Each company / commercial development owner would apply for TIP individually (Ryan Companies would not apply for TIP). The City's abatement cap will be applied to the commercial part of the project. Under state law, a city's abatement capacity is 5% of its annual levy. The maximum abatement for this project is proposed to be no more than the City's statutory cap minus the CertainTeed abatement, and then 50% percent of that result. The other 50% of the City's abatement capacity would not be used for Valley Green Corporate Center projects but would be reserved for projects in other areas of town, should they occur. The abatement would be structured as "pay-as-you-go" (eligible expenses are paid for as they are incurred). In addition to the tax abatement, Ryan Cos proposes a waiver of park dedication fees and a storm water fee credit. These items will not be considered by the ED Advisory Committee but will be considered by the Parks and Recreation Advisory Board and Environmental Advisory Committee. As in the application in January, the basis for requesting tax abatement is due in part to the cost of the County Roads 16 & 83 improvements. Walker asked what the difference is between commercial and business park types of development. Carlson answered that commercial refers to the commercial support (retail/service) that would tale place at the northwest area of the proposed development, while business park refers to the large footprint / build-to-suit development that would take place on the north edge of the development alon g highway 169. Walker asked why there is a public hearing on business subsidies. Snook responded that State law, under the Minnesota Business Subsidy Act, requires a public hearing, and that a public hearing is also required when use of tax abatement is proposed. Felber asked why the acreage by category has changed since the original proposal last January. Langdon also asked why there has been a change in residential acreage. Carlson replied that the community and Planning Commission desired to have a reduction in the acreage dedicated to residential development. Langdon added that the area next to dean's lake seems to be an attractive area for upper scale single family residential development. Walker asked why, in the revised proposal, is build to suit / business park development proposed to be next to residential. Carlson answered that commercial development characterized by retail and service activity (c-stores, restaurants, etc.) with lights and traffic activity are more disruptive to residential areas that build to suit / business park development, which ceases to to be active generally after a typical 8am to 5pm business day. Mauritz asked how many attached residential units there would be. Carlson replied that the final number of units has not yet been determined and that Ryan Cos is currently working gon that. Langdon added that the area, and Shakopee in general does not need more attached residential development. Guenette explained the tax abatement estimate, which includes $35,000 per year for the first four years; phased abatement terms would be 15 years each with total time of abatement being 18 years. Mauritz inquired as to the tax abatement capacity with 5% growth in the projection. Guenette answered that the abatement law has changed a city's abatement cap from 5% of its annual levy to 10%. The maximum abatement for this project is proposed to be no more than the City's statutory cap, minus the CertainTeed expansion project, and then 50% of that result. Mauritz asked what the figures in the bottom row of the projection mean. Guenette said that represents present value or what the total is in today's economy; present value at 8% discount rate. Walker mentioned that he agreed 8% is a good estimate. Mauritz asked how abatement is generated. Guenette answered that it is essentially the same as tax increment where a base value on the property is established and an estimate is arrived at based on the improvements, and the difference between the two figures is the abatement amount. Carlson added that the abatement is proposed to be dedicated to the 83/16 improvements, which historically have been funded by the County. Guenette added that Ryan prefers as short ofterm abatement as possible. Carlson explained the waiver of park dedication fees and storm trunk fees. The park fee waiver will be requested on residential only because park benefits will be community wide. Mauritz moved to make recommendation to the Economic Development Authority and City Council to approve the amended Application for Business Subsidies submitted by Ryan Companies US Inc., set public hearings for business subsidies and tax abatement for the proposed Valley Green Corporate Center Development, and enter a Master Development Agreement with Ryan Companies US Inc and Scott County for tax abatement, fee waivers and fee credits. Motion seconded by Walker. Motion carried unanimously. Jansen reiterated that the ED Advisory Committee through its action is providing recommendation to the Economic Development Authority and City Council in order to move the public process forward to the ultimate decision makers. . Other Business There was no other business. . Adiourn Felber moved to adjourn; seconded by Langdon; motion carried. Meeting adjourned at 7:16 p.m. C SUMMARY OF PROPOSED TERMS FOR MASTER DEVELOPMENT AGREEMENT BETWEEN CITY OF SHAKOPEE AND RYAN COMPANIES US, INC. November 12, 2003 . Background: The City has previously levied assessments for County Road 83/16 improvements against the entire property (referred to as "Existing Assessments"). When the property is platted, the assessments will be allocated to the various areas, including the proposed Business Park (generally located along the north side ofthe property). In addition, the plat will require assessments for new internal infrastructure (referred to a ''New Assessments"). In order to assist in bringing the cost of property in the Business Park down to market rates, the City will use property tax abatement to help pay for the Existing Assessments and New Assessments on the Business Park property only. . Abatement for infrastructure. At the time of approving the Master Development Agreement, the City will approve an "abatement" of the City share of taxes from the Commercial Property (i.e., the part of the plat to be developed along County Road 83). The City will use those abatement dollars solely to pay for the Existing Assessments and the New Assessments against the Business Park Property. . Abatement Terms. The term of the abatement will be 15 years for each parcel of the Commercial Property, beginning with the first year after a parcel is fully developed. The abatement in any year will never exceed the lesser of 25% of the statutory abatement capacity for the city as a whole (which is 10% of the City's annual tax levy); or the installment of Existing Assessments and New Assessments against the Business Park Property due in that year. . Business Park Development. The City will consider entering into individual agreements with Individual Developers of parcels in the Business Park, contingent on the proposed developments meeting specified criteria. The minimum criteria for each development are: 1. The proposed use must be office, manufacturing, or warehouse/distribution. 2. The value of the improvements must be at least $25/sq. ft. for manufacturing, warehouse, or distribution; and $45/sq. ft. for office buildings. 3. Each development must meet specified job and wage criteria. Generally, number of jobs is tied to size of the facility, and wages must be at least the level in the City's business subsidy policy. The City's recently-adopted policy requires 275% of federal minimum wage. The current federal minimum is $5.15, so the required minimum is now $14.l6/hour. An Individual Developer may agree to accept all special assessments and repay any past abatement assistance for that parcel, in which case no City approval or individual development agreement is required. SJB-238718vl SH235-12 . Schedule for Development. The first Individual Improvement must create at least 20,000 square feet, and must be commenced by December 31, 2008. The Business Park must be at least 75% developed by December 31, 2022. . Business Subsidies to Individual Developers. Generally, the abatement for infrastructure will be treated as a subsidy that benefits the Individual Developer who buys a parcel in the Business Park (unless that developer waives all subsidy assistance, as described above). If the Individual Developer fails to meet the job and wage goals, it must repay the abatement assistance paid by the City regarding that parcel to date. . Business Subsidies to Ryan. If Ryan as master developer fails to commence the minimum required improvements or complete the 75% build out, all according to the schedule described above, the abatements allocated to the undeveloped parcels will be treated as a subsidy that benefits Ryan. At the time of default (i.e., failure to commence or complete) Ryan will be required to give a deed to the City for undeveloped land in the Business Park that has a value equal to the abatements previously paid by the City through the date of the default. . TIF or Additional Abatement Assistance. The developer of each Individual Improvement may ask the City to create a TIP District (or abatement) for that parceL The City will review those requests on a case by case basis. Generally, the developer will need to show how and why the additional assistance is necessary. (This assistance would be generated from the parcel in question, and would be in addition to the abatement from the Commercial Property that was used to buy down assessments.) The developer may also seek abatement assistance from the County, and if the County approves the City will cooperate in implementing the County abatement. 2 85 E. SEVENTH PLACE, SUITE 100 0 SAINT PAUL, MN 55101-2887 651-223-3000 FAX, 651-223-3002 SPRINGSTED ff Adv;sors to the Public Sector MEMORANDUM TO: Mark McNeill, City Administrator Paul Snook, Economic Development Coordinator FROM: Paul T. Steinman, VP Housing & Economic Development DATE: November 12, 2003 SUBJECT: Ryan Proposal - Dean Lakes Corporate Center The purpose of this memo is to outline the tax abatement request made by Ryan Companies to facilitate a mixed use development on approximately 178 developable acres at the intersection of County roads 83/16. Ryan is requesting abatement assistance, from the City only, for the commercial/retail component in the amount of $1,982,846 (through 2025) to pay current and future assessments on the business park property. Ryan's previous request was that the City and County partner on an abatement that would total approximately $6.6 million, with $1.5 million coming from the City and $5.1 million from the County. But/For Analvsis The but-for test is used to determine whether or not a project will proceed as proposed without the use of public dollars. Springsted conducted an extensive analysis which was presented to the Council in February 2003, confirming that "but-for" the subsidy, the project would not proceed as planned. A method of analysis which was used was simply to compare the price of fully improved land both with and without a subsidy, to the current market rate. The results are as follows: Ryan Development Proposal for Fully Current Market Rate for Fully Improved Land Improved Land Without Subsidy With Subsidy $2.25 to 2.75 $4.24 (Feb. 03) $3.08 (Feb. 03) $4.16 (Current) $3.93 (Current) From the table above we conclude that the subsidy reduces the developer's land cost by .23 per square foot (psf), to $3.93 psf, a point still projected to be significantly higher than current market. The developer has indicated that companies locating in the business park might request additional assistance in the form of TIF in order to further reduce the land price. Each company requesting TIF assistance would have to apply individually according to the City's CORPORATE OFFICE: SAINT PAUL,lvlN . Visit our wcbsite at www.springsted.com IOWA . KANSAS . MINNESOTA . VIRGINIA . WASHINGTON, DC . WISCONSIN City of Shako pee November 12, 2003 Page 2 Business Subsidy Policy, and each proposed TIF application/project would have to stand on its own merits and meet all the statutory tests required (but-for test, etc.) to receive assistance. The amount of the current subsidy request overall is significantly lower than the previous request, while the costs of the project remain generally the same with the exception of the land. Although the land price has been reduced, such reduction does not equal or exceed the difference between the previous and current abatement requests. The table above shows that the previous request reduced the land cost about $1.16 psf ($4.24 minus $3.08) compared to the current request which reduces the land cost .23 psf ($4.16 minus $3.93). Therefore we conclude, given all other assumptions remain static, that the but-for test is still valid. Deal Structure The mixed use project will consist of approximately 44 acres of commercial development, 42 acres of residential development, and 90 acres of business park property. Values for the commercial and residential components are as follows: . 278,000 square feet of commercial/retail at a total value of $21,366,000 to be constructed in 2004 - 2009 . 1,475,000 of build to suit industrial/office at a total value of $88,250,000 to be constructed in 2004 - 2013 . 295 residential units at a total value of $75,250,000 to be constructed in 2004 - 2006 Total value is projected to be approximately $184,866,000. The project is proposed to be structured as follows: . The 278,000 square feet of commercial/retail will generate abatements to be used to benefit only the business park property. Neither the commercial/retail nor the housing components will benefit from the abatement. . The abatement will be generated through individual 15 year terms with the earliest starting in 2006 and ending in 2020 and the last abatement project starting in 2011 and ending in 2025. . The aggregate abatement is estimated to be $1,982,846, (today's value $899,277 at a 7% discount rate) . The abatement will be provided on a pay-as-you-go basis to pay levied assessments against the business park property for County 83/16, and future assessments for the business park property for internal public improvements. 0 Pay-as-you-go provides the subsidy to the developer over time, as taxes are generated on the project. The subsidy is only provided to the extent that taxes are generated in the abatement area. Pay-as-you-go puts the developer at risk for creating the projected taxable value in the abatement area. To address concerns about potentially using all of the City's abatement capacity on a single project (City's capacity = 10% of the City's net levy), the following parameters have been defined: . Annual abatements to Ryan will not exceed the lesser of the outstanding special assessments against the business park property, or 25% of the City's annual abatement capacity after subtracting the amount granted in previous abatements (Certainteed). City of Shakopee November 12, 2003 Page 3 0 The annual abatement is estimated not to exceed 16% of the City's total abatement capacity in any given year. . The analysis assumes the City's levy will grow 3% per year, thereby increasing the City's annual abatement capacity slightly. . The analysis assumes conservative inflationary growth in the project's market value at 3% per year. The following table illustrates that the estimated annual abatements do not cover all the costs of the levied and proposed assessments that are applicable to the business park area. Year Total 51.72% of Total Proposed 51.72% of Proposed Business Taxes Assessment 83/16 is Assessment for Internal Abatement Park Payable 83/16 Applicable Internal Public Improvements Assessments to the Improvements(1) are Applicable Not Paid With Business to the Abatement(2) Park Area Business Park Area 2003 560,186 289,728 0 289,728 2004 541,513 280,071 0 280,071 2005 522,840 270,413 473,000 222,396 0 515,049 2006 504,167 260,755 460,100 216,836 32,367 466,352 2007 485,494 251,098 447,200 211,276 41,043 441,347 2008 466,822 241 ,440 434,300 205,716 79,443 386,617 2009 448,149 231,783 421,400 200,156 87,231 362,499 2010 429,476 222,125 408,500 194,597 89,854 343,547 2011 410,803 212,467 395,600 189,037 116,551 300,520 2012 392,130 202,810 382,700 183,477 120,053 280,689 2013 369,800 177,917 123,661 67,600 2014 356,900 172,357 127,376 57,213 2015 344,000 166,797 131,203 46,714 2016 331,100 161,237 135,145 36,100 2017 318,200 155,677 139,205 25,368 2018 305,300 150,117 143,386 14,515 2019 292,400 144,557 147,694 3,536 2020 279,500 138,998 152,130 (7,573) 2021 266,600 133,438 105,981 31,905 2022 253,700 127,878 97,171 34,042 2023 240,800 122,318 42,192 82,350 2024 227,900 116,758 35,052 82,818 2025 36,109 (3) (36,109) Totals 4,761,580 2,462,690 7,009,000 3,391,540 1,982,846 4,104,898 (1) Internal improvements to be completed and proposed to be assessed include Dean Lakes Boulevard, Dean Lakes Trail, and other infrastructure detailed on the attached map, totaling approximately $4 million. This schedule assumes a 6% rate and term of 20 years - past practice has been to limit such assessment terms to 10 years. (2) TOTAL assessments (entire project) not paid for with abatements is equal to approximately $9,787,734. (3) The last abatement in the amount of $36,109 would not be paid under this scenario, because there would be no outstanding assessment in 2025. City of Shakopee November 12, 2003 Page 4 Impact The measurement of impact is only hypothetical, because if the abatement is not provided, the project will not proceed as planned. We include the following hypothetical illustration if the project did occur without abatement. . Using current tax classifications and rates, what would be the hypothetical impact on a $300,000 owner-occupied residential property if the project occurred without abatement? 0 Answer: Using a $300,000 owner-occupied residential property, there would hypothetically be a slight annual decrease in City taxes if the project occurred without abatement in the range of $4.66 (lowest abatement amount year 2006) to $22 (highest abatement amount year 2020). Conclusion The following summary projections provide an overview through 2025 of the proposed project in relation to the requested tax abatement: 1) Total taxes paid to City/County/School/Special Taxing Districts $51,268,461* City County SD Commercial/Retail $2,498,338 $2,831,612 $1,826,114 Residential $6,736,821 $7,631 ,242 $4,921,410 Business Park $7,829,727 $8,874,191 $5,722,993 *Special taxing districts account for approximately $2,396,013 of the total 2) Total taxes paid to City $17,064,886* City Commercial/Retail $2,498,338 Residential $6,736,821 Business Park $7,829,727 * Total taxes paid to City if all business park projects receive TIF is about $13,141,787 3) Tax abatement requested $ 1,982,846 Given that current abatement request is significantly smaller overall than the previous request, and the land cost was only marginally reduced, it is unlikely the project as currently proposed will occur without the requested abatement subsidy. Attachment: Map detailing internal improvements Page I of I Paul Snook .~ From: Reinarz, Donna [dreinarz@Kennedy-Graven.com] Sent: Tuesday, November 11, 20031:03 PM To: psnook@ci.shakopee.mn.us; mmcneill@ci.shakopee.mn.us Cc: Bubul, Stephen J. Subject: Ryan Abatement The following is a message from Steve Bubul: Attached are a blacklined and clean version of the revised Term Sheet, with changes to reflect changes in the MDA Also attached is the Summary of Term Sheet. I made no changes to that, other than to add a date at the top. I suggest you consider including the summary of term sheet with council packets, but not the full term sheet or the full MDA You could indicate that those documents are on file if council members want more detail before the Nov. 18 meeting. Note: again, I have not sent these to Ryan yet. Steve Bubul 612-337-9228 sbubul@kennedy-graven.com 11113/03 CITY OF SHAKOPEE E RESOLUTION NO. 59'18 RESOLUTION CALLING A PUBLIC HEARING REGARDING TAX ABATEMENT AND BUSINESS SUBSIDY IN CONNECTION WITH THE DEAN LAKES PROJECT WHEREAS, the City of Shakopee ("City") has received a request from Ryan Companies US, Inc. ("Developer") for financial assistance from the City in form of property tax abatement under Minn. Stat. Sections 469.1812 through 469.1815 (the "Act"), in connection with Developer's proposal to develop an area in the City known as the "Dean Lakes Project;" and WHEREAS, under the Act, the City must hold a public regarding prior to approval of any abatement, and under Minnesota Statutes, Sections 1161.993 to 1161.995 (the "Business Subsidy Act") must hold a public hearing before granting and any assistance that constitutes a business subsidy; and WHEREAS, the City Council has determined to hold the required public hearing and consider the terms of abatement requested by Developer, inCluding terms of a business subsidy agreement included as part of a Master Development Agreement between the City and Developer (the "MDA"). NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Shakopee, that: 1. The Council directs staff and consultants to prepare or finalize an abatement resolution and MDA (including a business subsidy agreement) regarding the Dean Lakes Project. 2. The City Clerk is authorized and directed to publish a notice in the City's official newspaper announcing a public hearing before the City Council on Tuesday, December 9,2003 at 7:00 p.m. in the council chambers on the abatement resolution and the related business subsidy agreement. The notice shall be published in the newspaper at least 10 days but not more than 30 days prior to the public hearing, and shall be in substantially the form attached as Exhibit A to this resolution. The notice shall be sufficiently conspicuous in size and placement to distinguish it from the surrounding text. The Clerk shall also make copies of the notice available in City Hall and, if possible, on the City's website. Approved by the City Council of the City of Shakopee this 18th day of November, 2003. Mayor ATTEST: City Clerk SJB-240247vl SH235-12 EXHIBIT A NOTICE OF PUBLIC HEARING Notice is hereby given that the City Council ofthe City of Shakopee, Minnesota will meet at 7:00 p.m. on Tuesday, December 9, 2003 at City Hall, 129 Holmes Street, Shakopee, Minnesota 55379-1376, to conduct a hearing regarding granting of a property tax abatement under Minnesota Statues, Section 469.1812 to 469.1815 for certain property in the City of Shakopee. The property subject to the abatement is located generally in the southeast quadrant of the County Road 83 and Highway 169 intersection, and consists of Outlots A, I and J of the preliminary plat known asDean Lakes, on file in City Hall (referred to as the "Commercial Property"). The Commercial Property is part of a larger development known as the Dean Lakes Project. At the hearing, the City Council will consider an abatement resolution under which the City will retain part of the City's share of property taxes on the Commercial Property, and use those revenues to help pay special assessments for public infrastructure serving the Dean Lakes Project. The abatements would be collected from each parcel of the Commercial Property for a period of 15 years. The amount of abatements collected from the entire Commercial Property will depend on the timing and type of developments, but is expected to total an estimated $2,000,000 through the last collection from the last-developed parcel. The proposed abatement constitutes a "business subsidy" under Minnesota Statutes, Section ll6J.993 to l16J.995 (the "Business Subsidy Act"). The City proposes to enter into a Master Development Agreement with Ryan Companies US, Inc, including a business subsidy agreement as required under the Business Subsidy Act. Information concerning the proposed project, including a draft copy ofthe business subsidy agreement, will be on file at City Hall on and after the date ofthis notice. 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: [date of publication] Isl City Clerk SJB-240247v 1 SH235-12 I \ 02001 RU<-Kuu,i~to. lTD. ~~~~ ~~~ ~ 1m ~ ~ PUBUC IMPROVEMENTS q"l Ji ~ ~ - - - - - - T - - -- - _"WU~ I (~I)! --- _.~ \ ! !,I,! ~ ------ ------ .~.::/. I - - - ~ ~~- :: :: :: :: :: :: ::: - _ ~ __ _ _ _ - == :: ::::: ", - i : i I : --- ~ I" BY-PASS --_ -'-_ _- _-- '- \ ';! I; : ~Ar /01/161 - - _ - - - _ _ - II'J I ) [ 1 j ; \ "_. _- ----" I l_ rtjl: Natural Open I; i ' Ii! Space Business Park I Iii \ I ! ~ _~__ IIIiII 0::::" ':.::1 ~ 0 I I/> "' ~ 15 __ _ II II! l:l 'I g - - - - - - _ _'=-'=-'~-' "'". -.- ..... _._ '_. :-) ~. ./ ,. 8 ~ - . - - _ ,.. 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