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HomeMy WebLinkAbout10.A.1. Consider Public Hearing for Property Tax Abatement for Rosemount, Inc. -Res. No. 7274 General Business 10. A. 1. SHAKOPEE TO: Mayor and City Council FROM: Mark McNeill, City Administrator DATE: 01/22/2013 SUBJECT: Consider Public Hearing for Property Tax Abatement for Rosemount, Inc. - Res. No. 7274 (13) Action Sought To call for a Public Hearing to consider the possible abatement of new property taxes for an economic development prospect that is considering Shakopee as a location. Background For the past several weeks, staff from the City and other jurisdictions have been in negotiations with Emerson Process Management, which is considering the acquisition and development of the former ADC 2 Building site. The location is at 6021 Broadband Boulevard in Shakopee. Emerson Process Management (Rosemount, Inc.) is a Fortune 500 Company with world headquarters in St. Louis, Missouri. They have identified the ADC 2 site as a possible location for a new engineering and manufacturing plant. The site is located east of Valley Park Drive, and is a parcel totaling approximately 60 acres in size. ADC started the construction of a 508,000 square foot building in 2000. The structure was approximately 75% complete when, due to a sudden change in the telecommunications market, ADC chose to cease construction. The building was enclosed, but has been vacant ever since. Emerson anticipates that, should the ADC 2 site be ultimately chosen, they would occupy the building later this year. Over the next five years, it is expected the facility would generate 500 well - paying jobs in Shakopee. However, the company indicates that it needs assistance in order to help this proposal to become a reality on the ADC 2 site. Emerson has requested a total of $6 million in economic development assistance. The State of Minnesota, Scott County, and City of Shakopee have all been considering the amounts and sources of assistance which could be extended. The total amount of that assistance is still being considered. On January 14th, the Board of the Shakopee School District called for a Public Hearing to consider the possibility of abatement of its share of property taxes. However, it was later discovered that this property is not within the Shakopee School District boundaries, and so no school participation will be possible. The City Council is asked to consider property tax abatement as part of an assistance package. Tax abatement is where, in exchange for the creation of jobs and /or tax base, the increased property taxes which are paid on the new value commercial, industrial, or multifamily development projects are then refunded every six months to the tax payer, for a set period of time. While there can be some variations, generally the amount of tax abated is based on the difference between the base value of the property and the improved value when the project is complete. When development takes place on vacant land, the total added value of the construction is considered for abatement. In the case of the ADC 2 building, however, the abatement would be on the difference in value of the original incomplete building, and the value of the building after the anticipated improvements are made. It would be on building structure improvements only, and would not include other improvements such as grading, parking lots, equipment, furniture, or the like. Scott County has provided an estimate of $12.15 million as the additional value upon which this abatement would be based. The City's financial consultant, Springsted, Inc., has run an estimate based on the amount of abatement which would be generated by the three local taxing jurisdictions over a period of nine years. Note that nine years is the standard term of abatement for both the City and the County, although, by State law, abatement can go as long as twenty years. Recommendation In order for the Public Hearing to take place, a resolution will need to be approved by the City Council. In order to meet the schedules of both Scott County, and Rosemount, Inc., a special meeting would need to take place on Tuesday, February 12th. I recommend that the special meeting be called, and that the resolution be adopted, calling for a Public Hearing at that February 12th special meeting. Budget Impact As shown in the attachment, an abatement of the City's portion of the property taxes over nine years would generate $590,496. This figure reflects the total dollar amount of increment that it is projected would be generated using the expected property market value increase for analysis purposes. This is for new value of the completed (improved) building only. Jurisdictions do have the option to abate existing taxes. However, that is not being requested or recommended in this case. There are other possible incentives from the City which could be considered by the Council. Those will be presented at the City Council meeting. It should be noted that an economic impact analysis performed by GreaterMSP, a regional development agency, estimates that between 15% and 30% of the 500 new employees will likely choose to live in Shakopee. Requested Action If the council concurs, it should take the following actions: 1. Call for a special meeting to be held Tuesday, February 12, 2013, at 7 P.M.; and 2. Adopt the following resolution: Resolution No. 7274 Resolution Calling a Public Hearing on a Property Tax Abatement for Certain Property in the CITY OF SHAKOPEE, MINNESOTA, and Granting Certain Business Subsidies to ROSEMOUNT INC., OR ANY OF ITS AFFILIATES Attachments: Res. No. 7274 Preliminary Financing Projections Current Site Map CITY OF SHAKOPEE, MINNESOTA RESOLUTION NO. 7274 RESOLUTION CALLING A PUBLIC HEARING ON A PROPERTY TAX ABATEMENT FOR CERTAIN PROPERTY IN THE CITY OF SHAKOPEE, MINNESOTA, AND GRANTING CERTAIN BUSINESS SUBSIDIES TO ROSEMOUNT INC., OR ANY OF ITS AFFILIATES WHEREAS, Rosemount Inc., a Minnesota corporation, or any of its affiliates (the "Developer "), has proposed to acquire, construct, and equip improvements (the "Minimum Improvements ") to real property (the "Property") located in the City of Shakopee, Minnesota (the "City"); and WHEREAS, the City has contemplated granting a property tax abatement in order to facilitate the Minimum Improvements, all pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815 (the "Abatement Act "); and WHEREAS, the City Council of the City has determined to consider granting a tax abatement of all or a portion of the City's share of property taxes generated by improvements on the Property in the maximum amount of $590,496 and to hold a public hearing thereon in accordance with the Abatement Act; and WHEREAS, the Abatement provided to the Developer by the City to help fmance the Minimum Improvements constitutes a business subsidy under Minnesota Statutes, Sections 116J.993 to 116J.995 (the "Business Subsidy Act "); and WHEREAS, before the City may grant an abatement or provide financial assistance that constitutes a business subsidy under the Business Subsidy Act, the City must conduct a duly noticed public hearing; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Shakopee, Minnesota that: 1. The Finance Director /City Clerk is authorized and directed to publish a notice for publication in the official newspaper of the City setting a public hearing before the City Council on Tuesday, February 12, 2013, at or after 7:00 p.m. at City Hall on the proposed Abatement. The notice, attached as EXHIBIT A, shall be published in the newspaper at least 10 but not more than 30 days prior to the public hearing, and shall be in substantially the form attached hereto. 2. The Finance Director /City Clerk is authorized and directed to take all other actions necessary to bring the proposed abatement and business subsidy before the City Council at the time of the public hearing. Approved by the City Council of the City of Shakopee, Minnesota this 22n day of January, 2013. Mayor ATTEST: Finance Director /City Clerk 417588v1 JAESH155 -290 EXHIBIT A NOTICE OF PUBLIC HEARING TAX ABATEMENT AND BUSINESS SUBSIDY • Notice is hereby given that the City Council of the City of Shakopee, Minnesota (the "City") will meet at or after 7:00 p.m. on Tuesday, February 12, 2013, at the City Council Chambers of City Hall, located at 129 South Holmes Street South in the City, to conduct a public hearing on the granting of a property tax abatement under Minnesota Statutes, Sections 469.1812 through 469.1815 (the "Abatement Act ") for certain property located in the City (the "Property") to be acquired and developed by Rosemount Inc., a Minnesota corporation, or any of its affiliates (the "Developer "). The proposed abatement constitutes a business subsidy under Minnesota Statutes, Sections 116J.993 to 116J.995 (the "Business Subsidy Act "). The Property consists of approximately 60 acres located on the easterly portion of the former ADC building site, which has a street address of 6021 Broadband Boulevard. Following the public hearing, the City Council will consider a resolution (i) granting an abatement of all or a portion of the City's share of property taxes on the Property for a period of up to nine years. The City estimates that the total amount of the abatements will be approximately $590,496. Following the public hearing, the City Council will consider granting the abatement as a business subsidy which will reimburse the Developer for a portion of the costs of acquiring, constructing and improving the Property and the buildings located on the Property. A summary of the terms of the proposed business subsidy is available for inspection at City Hall during regular business hours. Any person with a residence in the City or who is the owner of taxable property in the City may file a written complaint with the City if the City fails to comply with the Business Subsidy Act. No action may be filed against the City for the failure to comply unless a written complaint is filed. Any person wishing to express an opinion on the matters to be considered at the public hearing will be heard orally or in writing. Dated: , 2013 BY ORDER OF THE CITY COUNCIL OF THE CITY OF SHAKOPEE, MINNESOTA /s/ Mark McNeill City Administrator City of Shakopee, Minnesota 417588v1 JAE SH155 -290 A-1 Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul, MN 55101 -2887 Springsted Tel: 651-223-3000 Fax: 651 - 223 -3002 www.springsted.com DRAFT MEMORANDUM TO: Mark McNeill, City Administrator Julie Linnihan, Finance Director Michael Leek, Community Development Director FROM: Mikaela Huot, Vice President/Consultant Paul Steinman, Vice President /Client Representative DATE: January 15, 2013 SUBJECT: Preliminary Financing Projections for proposed ADC Building Project The City has requested that Springsted provide preliminary tax abatement revenue projections for the proposed renovation of an existing commercial facility within the City of Shakopee. It is our understanding that following renovation the project would immediately occupy approximately 300,000 square feet of an available 500,000 square feet facility (former ADC building that is currently vacant) with plans to occupy the remaining space at a future date. Following initial discussions, the City has asked for an updated scenario that includes revenue projections for City participation for 9 years (2015- 2023). Separate County and School District participation of tax abatement would be subject to any policy discussions and approval by the respective boards. Additional assumptions and terms of the proposed abatement project are outlined further below. Tax Abatement Assumptions Springsted made certain assumptions to calculate the estimated amount of tax abatement revenues generated by the proposed project and include the following: • Current land and building value (payable 2012): $8.85M o Parcel ID: 27- 903 -004 -0 o Parcel ID: 27- 910 -002 -0 o Parcel ID: 27- 055 -009 -1 • Incremental value increase due to improvements: $12.15M o Estimated by County assessor City of Shakopee, Minnesota Proposed Tax Abatement Project January 15, 2013 Page 2 • Total estimated market value of $21M upon completion (Phase 1) • Estimated term o Scenario 1: 9 years with City participation • Abatement of incremental new value only • Construction is complete in 2013 o 100% assessed in January of 2014 for taxes payable in 2015 • Proposed 2013 tax rates remain constant through abatement term • 2013 class rates remain constant through abatement term • Fiscal Disparities proposed 2013 contribution rate of 39.0329% o Fiscal disparities contribution from incremental value growth of abatement area • 4% Discount rate • Annual market value inflator o Years 1 -3: 0% o Years 4 -6: 1% o Years 7 +: 2% Tax Abatement Revenue Estimates City Term 9 Years Estimated Total Revenues $590,496 Thank you for the opportunity to be of assistance to the City of Shakopee. Please let us know how we can best assist you as this project moves forward and should you have any questions please feel free to contact us. City of Shakopee, Minnesota Proposed Tax Abatement Project January 15, 2013 Page 3 Tax Abatement Revenue Projections Projected Tax Abatement Report City of Shakopee, Minnesota Proposed Tax Abatement Project - Emerson City Only Abatement Participation of Incremental Bldg Value of $12.15M with 9 year term, FD Cont properties within and incremental MV Inflator Less: Non- Less: Retained Times: City County School District Annual Total Total Abated Fiscal Captured Tax Annual Abatement Abatement Abatement Total Period Market Net Tax Net Tax Disp. @ * Net Tax Capacity Incremental Revenues Revenues Revenues Tax Ending Value Capacity Capacity 39.0329% Capacity Rate ** Local Taxes 42.05% 40.64% 26.13% Abatement (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) 12/31/12 8,850,000 176,250 176,250 0 0 114.516% 0 0 0 0 0 12/31/13 8,850,000 176,250 176,250 0 0 114.516% 0 0 0 0 0 12/31/14 8,850,000 176,250 176,250 0 0 114.516% 0 0 0 0 0 12/31/15 21,000,000 419,250 176,250 94,850 148,150 114.516% 169,655 62,301 0 0 62,301 12/31/16 21,000,000 419,250 176,250 94,850 148,150 114.516% 169,655 62,301 0 0 62,301 12/31/17 21,000,000 419,250 176,250 94,850 148,150 114.516% 169,655 62,301 0 0 62,301 12/31/18 21,210,000 423,450 176,250 96,489 150,711 114.516% 172,588 63,378 0 0 63,378 12/31/19 21,422,100 427,692 176,250 98,145 153,297 114.516% 175,549 64,466 0 0 64,466 12/31/20 21,636,321 431,976 176,250 99,817 155,909 114.516% 178,540 65,564 0 0 65,564 12/31/21 22,069,047 440,631 176,250 103,196 161,185 114.516% 184,583 67,783 0 0 67,783 12/31/22 22,510,428 449,459 176,250 106,641 166,568 114.516% 190,746 70,046 0 0 70,046 12/31/23 22,960,637 458,463 176,250 110,156 172,057 114.516% 197,033 72,355 0 0 72,355 $1,608,004 $590,496 $0 $0 $590,496 * Fiscal disparities contribution from incremental building growth ** Estimated proposed payable 2013 tax rate based on information provided by County Current Site Information n. d v - 4 > 'we __� 'ga.P 4 .# r` a —. f a Y y , y In 1111 I y #., Mee,, , i1M1lM 1 l 1 i 1 ., 11111IlAII1IIn1t11141111 III II 111101 - : 9 ., - '''''' ' I ,'..1: ■ -- . _ r • • - _ SX CI1i111II.1 { Scott county, FIN z l lime ‘•\1 1 1 a 1 I Iii I, l v 1 k J ] . oiii(-4„7,„:4, . ,,,,;,.....ts,,,,...... . i I s � R - •..,4_ & i; t 1, E S t y l 1 1 PREMIER BANK © PREP. :ER 24'1K © 6021 BD6 . 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