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HomeMy WebLinkAboutSeptember 18, 2018 9/18/2018 Tax Increment Financing Past, Present & Future September 18, 2018 City Council Shakopee Community stability • A community's success also requires regularly revitalized community activity, the maintenance and renewal of infrastructure and the provision of public goods, buildings and services like police, schools, hospitals and public recreation areas. qiakopet 1 9/18/2018 Community stability • A community's economic growth is an important government function that requires coordination with the private sector. • When impediments arise, they can often be remediated by a combination of private sector and government activity. • The system operates best when government and private sector actors work in harmony to achieve compatible goals by using their own tools — and TIF can provide a framework for that cooperation. Shakopee Not all TIFs Created Equal • Creature of each individual state — Allowed in 49 States — Some use liberally other constrict their use • Minnesota TIFs now have two basic purposes — Move development forward that otherwise would not occur, the "but for" test — Finance public infrastructure related to development Shakopee 1111111111111111111111111. 1111111111 2 9/18/2018 Tax Increment Financing • Sets aside a portion of future taxes - The increase in taxes generated by a new development • Dedicates those funds to pay costs related to development - Infrastructure, land acquisition and remediation costs • Taxes are still paid - Still also pay voter approved Levies and other local Levies Shakopee TIF as a Tool for Redevelopment • Redevelopment has more costs associated with it than development on clean and unbuilt parcels — Assembling parcels with different owners — Environmental cleanup costs — Demolition expenses — Site prep work • Public/Private partnership in which developers invest in real estate while city assists with property assembly, clean-up and infrastructure costs • Adds value with increases in employment, greater amenities and more housing, recreation, dining and shopping Shakopee 3 9/18/2018 Tax Increment Financing in Minnesota • Have been around since 1960s • Minnesota's first occurred in 1969 • Shakopee first (TIF #1 ) was the KMART Distribution Center pre-1977 • Under the old Statute. was used for economic development, redevelopment, senior affordable housing and infrastructure costs Shakopee 111111111111111111111111.011111111 What Did TIF #1 Help Fund? • Water Tower, well and water main • Upgrade to CR 83 (twice) • Upgrade to HWY 101 Intersections • Upgrade to RR Crossings • Downtown Streetscape • Upper Valley Drainageway • South Bypass • Mini Bypass • Chaska Sewer Interceptor • Community Center • Block 3 &4 Acquisition • Downtown Alley Improvements • Upper Valley/Rahr Sewer • Schleper Stadium Shakopee 4 9/18/2018 Types of Districts / Durations e. Type of District Duration In Statute(Years of Increment) Redevelopment 25 years(26) Housing 25 years (26) Economic Development 8 years(9) Renewal &Renovation 15 years(16) Soils Condition 20 years (21) Other Types: • Pre-1979 districts • Uncodified law districts 4,,.,,,,,,,„„s: Hazardous Substance Subdistricts(HSS) , b. r 4,t ©201 .� a State Auditor Types of Districts — 2016 Reported Data Type of District Number Percent Revenue Percent ($millions) Redevelopment 800 48% $162.2 78% Housing 520 31% $24.9 12% Economic Development 299 18% $14.4 7% Renewal and Renovation 26 2% $5.0 2% Soils Condition 10 1% $0.2 <1% Pre-1979 2 0% $0 0% Uncodified 8 <1% $0.8 <1% Total 1,665 100% $207.6 100% Metro 614 37% $175.7 85% Greater MN 1,051 63% $31.9 15% /^alloy D eto rounding,sums may notequal totals. I.-45) 4001111/1111111111,11°' OMR ©201 H 6friiCe ahthe State Auditor 5 9/18/2018 History of TIF In Minnesota • 1940s TIF language enacted • 1969-1974 Various statutes apply TIF; usage spreads • 1979 TIF Act = uniformity/process; rapid growth • 1988-1990 Reforms and controls • 1990s Change continues,controls loosened • 2001 Tax reform changes landscape • Recent years Modest, infrequent changes • Result: Complex law; rules vary by time of certification 201gFXfi .o e State Auditor Historical TIF Usage TIF Districts and Revenue, 1996-2016 2,300 $350 2,200 _ `, $330• 2,100 – $310 $290 > 2,000 $270 ce • • 01,900 ,' $250 01 1,800 ` $230 1,700 $210 c $190 F 1,600 $170 1,500 $150 Year —ra. reme t Re e e ''� ��Number of Districts y ®201 a State Auditor 6 9/18/2018 Recent Law Changes • Interfund loans • Authorize up to 60 days after transfer/expenditure • Resolution before/after TIF plan approval • Terms may be modified • May structure as draw-down or line-of-credit • Report on annual reporting forms • Economic development districts for Workforce Housing • Assist rental housing under certain conditions/findings • County and school district must approve • MHFA challenge program income limits • Technical changes g Cr 201 a State Auditor Decertifications Outpace New Certifications New Certifications and Decertifications, 2012-2016 160 140 120 - ----------- 100 - 80 60 40 20 0 2012 2013 2014 2015 2016 —New Certifications ---Decertifications 4,,.0.0.,,,,4.., 1•'y� to ©201 ,•.'_i e State Audror 7 9/18/2018 Early Decertification Full Duration vs. Early Decertification, 2012-2016 District Decertifie Lasted Decertified Early Type(Max d Full Averag Duration) Districts Duratio n Years Redevelopment(25 years) 323 49% 51% 11 Housing(25 years) 159 19% 81% 12 Economic Development(8 years) 117 77% 23% 3 Renewal&Renovation(15 years) 13 54% 46% 7 Soils Condition(20 years) 2 0% 100% 17 Measurementdetails available on request ©20169f�c('Ore state Auditor Shakopee TIF • Improvements and expenses in Minnesota can be funded by: — Pay-as-you-go notes "Pay Go" — Revenue Bonds or Notes — General Obligation Bonds — Interfund loans Shakopee 8 9/18/2018 Shakopee TIF • Improvements and expenses in Minnesota can be funded by: • Today, most City of Shakopee TIF Districts are Pay Go — Developer pays its expenses up front — Reimbursed through TIF payments twice a year by a note at state regulated interest rate — Don't always get fully reimbursed — Sometimes pays off early Shakopee Shakopee TIFs • TIF #1 KMART Distribution Center - 1976 — $22,583,300 market value today — $797,002 total annual taxes — $103,312 city taxes • TIF #2 Elderly Housing — Decertified 1997 — $5,080,000 market value today — $57,668 total annual taxes — $14,361 city taxes Shakopee 11111116111111111111111.11 9 • 9/18/2018 Shakopee TIFs • TIF #3 Downtown Streets & Sidewalks - 1982 — Decertified in 2000 • TIF #4 Canterbury — 1984 - Decertified 1994 — $11,000,000 market value today — $406,790 total annual taxes — $52,769 city taxes Shakopee Shakopee TIFs • TIF #6 Shakopee ValleyMotel - 1985 P — Decertified in 1997 • TIF #7 MEBCO — 1998 - Decertified 1994 — $3,150,000 market value today — $57,530 total annual taxes — $14,983 city taxes Shakopee 10 9/18/2018 Shakopee TIFs • TIF #9 FMG - TSUMURA — 2000 — Decertified 2009 — Property was redeveloped under TIF#1 2 • TIF #10 River City Center — 1999 — Will be Decertified 2024 — Redevelopment TIF with Senior Housing — Bonded s �� — $9,650,000 market value today — $128,105 total annual taxes - — $56,635.46 TIF kle ,401.11111111111111111"06;- 110141404. Tir Shakopee TIFs • TIF #11 Seagate — 2000 Decertified 2009 • City/EDA $3,591 ,195 towards land, fill and grading and parking land • 800+ jobs — $22,000,000 market value today — $815,584 annual taxes ,1111,1 r — $105,710 city taxes ► iii•7.1 111a 3 iii leu eigi uw ilii • ,„,,111111111,11 �~ ill t Y 1110604° �u _t 11 9/18/2018 Shakopee TIFs • TIF#12 Challenge Printing — 2005 — Decertified 2014 • Added on to building, renovated huge structure m' — $21,000,000 market value today — $800,720 annual taxes ; , F — $103,794 city taxes • TIF#13 Open Systems — 2007 — Decertified 2015 • $188,000 TIF and corporate HQ — $3,000,000 market value today — $114,016 annual taxes , ; — $14,260 city taxes �1 y lwl 1111114n604k "14 Shakopee TIFs • TIF#14 J&J/SanMar — 2014 — Decertified 2022 — Pay go SANN4.AR — $23,000,000 market value — $852,748 annually in taxes NCI NIT $16,106 city/$15,198 County acing h, I' — $330,386 TIF Received • TIF#15 Trident/All Saints — 2039 decertified — Pay go $1,000,000 towards 20% affordable units — $11,450,00 current market value rt'r r — $4,144 original net tax capacity — $202,578 annually in taxes — $155,500 annual TIF payment — Payoff likely to occur in 2024 111111111111111111111111111Willffil- 12 9/18/2018 Rahr Expansion TIF #16 — 2016 Decertified in 2025 • Pay go • Kept one of our oldest & important industries • Expanded employment • Transformed our West End of city • If Rahr had relocated or reduced operations: — Significant tax impacts increasing tax burden on all residents — $1.88 million towards infrastructure and site work -0I1I Shakopee TIFs • TIF#17 4th Ave & Shenandoah — $60,000,000 market value — $2,227,780 in annual taxes — $35,235 city taxes #a'{ — Interfund loans — $886,612TIF . • No monies go to Amazon Paying the city for the reconstruction of 12th Avenue $2,319,076 (40.7%) Paying the County for County Highway 83 in concrete $3,379,250 (59.3%) Shakopee 13 9/18/2018 Current Canterbury TIF #18 • One of the largest underutilized sites in the city • Major barrier to access as public roads end into the property • Up to $33 million for Public Infrastructure — Roads to connect the community • 12th Avenue needs to be reconstructed even without Canterbury — Pay Go and TIF Bonds — Utilities — Storm Drainage • $350+ million total investment by Canterbury Shakopee Riverfront Bluff TIF #19 • Pay go • Cleaning up a garbage dump • Reimbursing the city for property acquisition • Undergrounding utilities along the river bluff • Expanding SPUC water line capacity Ili • Improving three roads • Streetscape lop *tr BSGAUGHAN ;" m _____ __�_.. shako"r It HA 14 9/18/2018 Old city hall TIF #20 • Removing old foundation walls and asbestos lining • Removing bedrock • Building walls to hold up sidewalks, streets and railway • Reimbursing the city for property demolition • Paying for 70% of new concrete alley • Upgrading utilities ,�„ ,•� ` =!,11 i�l�, • Streetscape on Holmes and Second ;�;.,.!1li .rl.�r `71- :7,,...-,..„7,--,;''' 1��,..iii' a �l� N "1d11Ii n r1 ;o;"a”"1 Shakopee Apartments-129 Holmes St S ....._' O cwcsnvi Southbridge Soils TIF #21 • Paying for the removal of a garbage dump • Pay go \TAI " ././ - % �I ,°-i;z �:, ..a„, .. --714rt !: ` 4r IP° ,,iii)fr /400000" -.. ill 1k,,,,t,t 111 'yo-' --..---'-s- -- I 1 I I I=El! - ,'"' '� 'dl F uff: tet. 11111 'gni,_/` 11111L5,„1, {' 11111111111``s - 11111. •u - 1 h.-,' I ! I Ki 15 9/18/2018 Bottom Line • TIF has created new jobs — Now we need to use ED TIF for higher wage jobs • TIF puts costs on developer who is reimbursed for expenses only if successful economic growth • Reimbursed up to the max amount of TIF in TIF Plan Shakopee Impact of TIF on Taxes? • No direct impact to individual taxpayer — Uses the "new" tax which would not exist w/o the development — Taxing jurisdictions still get tax prior to TIF • Taxes do not go up due to a TIF • TIF Districts still pay other new tax levies • Commercial TIF still pay Fiscal Disparities and State Tax Shakopee 16 9/18/2018 TIF Impact to School District • Large fixed costs and primarily funded through state funding formula based upon # of pupils • Still pay new levies • Still contribute to State Taxes • Increased school population? — Not with these projects • Targeting young professionals and active older adults Shakopee Not all projects should use TIF • New residential development on clean undeveloped land is not eligible (residential subdivisions) • New ED TIF should deliver high wage jobs • City carefully weighs TIF or any other incentive development tool with our financial consultants • Very small part of city growth attached to TIF • TIF Districts have accelerated because of growth in value Shakopee 17 9/18/2018 Questions Shakopee 18