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2006-022CITY OF HOPKINS HENNEPIN COUNTY STATE OF MINNESOTA Council Member Thompson introduced the following resolution and moved its adoption: RESOLUTION N0.2006-022 RESOLUTION ADOPTING A MODIFICATION TO THE REDEVELOPMENT PLAN FOR REDEVELOPMENT PROJECT NO. 1, A MODIFICATION TO THE TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 1-3 AND ESTABLISHING TAX INCREMENT FINANCING DISTRICT NO. 1-4 THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN THEREFOR. BE IT RESOLVED by the City Council (the "Council") of the City of Hopkins, Minnesota (the "City"), as follows: Section 1. Recitals 1.01. The Board of Commissioners (the "Board") of the Housing and Redevelopment Authority In and For the City of Hopkins (the "HRA") has heretofore established Redevelopment Project No. 1 and adopted the Redevelopment Plan therefor. It has been proposed by the HRA and the City that the City adopt a Modification to the Redevelopment Plan for Redevelopment Project No. 1 (the "Redevelopment Plan Modification") and a Modification to the Tax Increment Financing Plan for Tax Increment Financing District No. 1-3 (the "TIF Plan Modification") and establish Tax Increment Financing District No. 1-4 (the "District") and adopt a Tax Increment Financing Plan (the "TIF Plan") therefor (the Redevelopment Plan Modification, the TIF Plan Modification and the TIF Plan are referred to collectively herein as the "Plans"); all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.001 to 469.047 and Sections 469.174 to 469.1799, all inclusive, as amended, (the "Act") all as reflected in the Plans, and presented for the Council's consideration. 1.02. The HRA and City have investigated the facts relating to the Plans and have caused the Plans to be prepared. 1.03. The HRA and City have performed all actions required by law to be performed prior to the establishment of the District and the adoption and approval of the proposed Plans, including, but not limited to, notification of Hennepin County and Independent School District No. 270 having taxing jurisdiction over the property to be included in the District, a review of and written comment on the Plans by the City Planning Commission, approval of the Plans by the HRA on April 18, 2006, and the holding of a public hearing upon published notice as required by law. 1.04. Certain written reports including, the TIF application, Report of Inspection Procedures and Results for Determining Qualifications of a Tax Increment Financing District As a Redevelopment District, Hopkins Block 64, Tax Increment Financing District dated June 9, 2005 and updated for purposes of the creation of the District, Block 64 Redevelopment Relocation Plan by Wilson Development Services dated January, 2005, Market Analysis Hopkins Main Street Residential Campus by GPS Financial Group dated March 2005, (the "Reports") relating to the Plans and to the activities contemplated therein have heretofore been prepared by staff and consultants and submitted to the Council and/or made a part of the City files and proceedings on the Plans. The Reports include data, information and/or substantiation constituting or relating to the basis for the other findings and determinations made in this resolution. The Council hereby confirms, ratifies and adopts the Reports, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein. 1.05 The City is not modifying the boundaries of Redevelopment Project No. 1, but made certain specific findings at the time of the creation of Tax Increment Financing District No. 1-3 concerning the conditions within the area of the Project that are within the boundaries of Tax Increment Financing District No. 1-3 and the District, which findings are hereby reaffirmed. Section 2. Findings for the Adoption and Approval of the Modification of Tax Increment Financing District No. 1-3 2.01. The Council hereby finds that parcel numbers 24117 22 42 0029, 24 117 22 42 0030, 24 117 22 42 0031, 24117 22 42 0032, 24 117 22 42 0033, 24 1 17 22 42 0048, 24 117 22 42 0049, 24 117 22 42 0050, 24 117 22 42 0056, 24 117 22 42 0057, 24 1 17 22 42 0167, 24 117 22 42 0169 (the "parcels") should be eliminated from TIF District No. 1-3 and included in TIF District No. 1-4. 2.02. The elimination of the above-referenced parcel constitutes the TIF Plan Modification for TIF District No. 1-3, and staff is directed to maintain a copy of this resolution with the records for TIF District No. 1-3 . 2.03. The Council hereby reaffirms the original findings for TIF District No. 1-3, established as a "redevelopment district". Section 3. Findings for the Adoption of the Redevelopment Plan Modification 3.01. The Council hereby finds that the Modification to the Redevelopment Plan for Redevelopment Project Area No. 1 consists of the Modification to the TIF Plan for TIF District No. 1-3 and the establishment of TIF District No 1-4. 3.02. The Council hereby finds that the modification to the Redevelopment Plan for Redevelopment Project Area No. 1 conforms to the general plan for the development of the City as a whole and represents a continuation of the goals and objectives set forth in the Redevelopment Plan for Redevelopment Project Area No. 1. Section 4. Findings for the Establishment of Tax Increment Financing District No. 1-4 4.01. The Council hereby finds that the District is in the public interest and is a "redevelopment district" under Minnesota Statutes, Section 469.174, Subd. 10 (a)(1). 4.02. The Council further finds that the proposed redevelopment would not occur solely through private investment within the reasonably foreseeable future and that 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 the 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 District permitted by the Tax Increment Financing Plan, that the Plans conform to the general plan for the development or redevelopment of the City as a whole; and that the Plans will afford maximum opportunity consistent with the sound needs of the City as a whole, for the development or redevelopment of the District by private enterprise. 4.03. The Council further finds, declares and determines that the City made the above findings stated in this Section and has set forth the reasons and supporting facts for each determination in writing, attached hereto as Exhibit A. 4.04. The Council and HRA elect to calculate fiscal disparities for the District in accordance with Minnesota Statutes, Section 469.177, Subd. 3, clause b, which means the fiscal disparities contribution would be taken from inside the District. Section 5. Public Purpose 5.01. The adoption of the Plans conforms in all respects to the requirements of the Act and will help fulfill a need to redevelop an area of the City which is already built up, to remove, prevent and reduce blight, blighting factors and the causes of blight, to prepare the area for redevelopment in accordance with the Redevelopment Plan, to provide employment opportunities, to improve the tax base and to improve the general economy of the State and thereby serves a public purpose. The assistance to be provided pursuant to the Plans serves primarily a public purpose for the reasons set forth in Exhibit A. Section 6. Approval and Adoption of the Plans 6.01. The Plans, as presented to the Council on this date, including without limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted and shall be placed on file in the office of the City Clerk. 6.02. The staff of the City, the City's advisors and legal counsel are authorized and directed to proceed with the implementation of the Plans and to negotiate, draft, prepare and present to this Council for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. 6.03 The Auditor of Hennepin County is requested to certify the original net tax capacity of the District, as described in the Plans, and to certify in each year thereafter the amount by which the original net tax capacity has increased or decreased; and the Hopkins Housing and Redevelopment Authority is authorized and directed to forthwith transmit this request to the County Auditor in such form and content as the Auditor may specify, together with a list of all properties within the District, for which building permits have been issued during the 18 months immediately preceding the adoption of this resolution. 6.04. The City Clerk is further authorized and directed to file a copy of the Plans with the Commissioner of the Minnesota Department of Revenue pursuant to Minnesota Statutes 469.175, Subd. 4a. The motion for the adoption of the foregoing resolution was duly seconded by Council member .Halverson ,and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Dated: April 18, 2006 Ma (Seal) EXHIBIT A RESOLUTION N0.2006-022 The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan (TIF Plan) for Tax Increment Financing District No. 1-4 (District), as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as follows: Finding that Tax Increment Financing District No. 1-4 is a redevelopment district as defined in M. S., Section 469.174, Subd. 1 D(a)(1). The District consists of 12 parcels, with plans to redevelop the area for housing and commercial purposes. At least 70 percent of the area of the parcels in the District are occupied by buildings, streets, utilities, paved or gravel parking lots or other similar structures and more than 50 percent of the buildings in the District, not including outbuildings, are structurally substandard to a degree requiring substantial renovation or clearance. (See Appendix F of the TIF Plan.} It has further been determined that these conditions are reasonably distributed through the District. These findings and the conclusion that the District qualifies under the statutory criteria and formulas for a redevelopment tax increment financing district are further described in the "Report of Inspection Procedures and Results for Determining Qualifications of a Tax Increment Financing District As a Redevelopment District, Hopkins Block 64, Tax Increment Financing District," dated June 9, 2005, prepared by LHB, Inc. and updated for purposes of creating the District (and appendices). 2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and that 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 the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of Tax Increment Financing District No. 1-4 permitted by the TIF Plan. The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future: The proposed development consists of the construction of a mixed use condominium, townhouse and retail development consisting of approximately 52 condominiums, 9 townhouses and 5300 square feet of retail/commercial space. The proposed development will clean up blighted sites and remove substandard buildings in the City's downtown area and continue with the redevelopment of the area. City staff and consultants have reviewed the estimated redevelopment costs for the development which include acquisition, demolition, infrastructure improvements, site preparation and environmental remediation and the available methods of financing. The developer was asked for and provided a letter and a proforma as justification that the developer would not have gone forward without tax increment assistance. (See attachment in Appendix G of the TIF Plan.) Due to the high cost of redevelopment on the parcels currently occupied by substandard buildings, the limited amount of commercial and for sale housing property for expansion adjacent to the existing project, the incompatible land uses at close proximity, and the cost of financing the proposed improvements, this project is feasible only through assistance, in part, from tax increment financing. 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 TIFDistrict permitted by the Plan: This finding is justified on the grounds that the cost of site and public improvements and utilities add to the total redevelopment cost. Historically, site and public improvements costs in this area have made redevelopment infeasible without tax increment assistance. At the current time, the site has an estimated $1,312,700 in land acquisition, demolition and remediation costs. In addition, the site requires substantial other site preparation activities to prepare it for development. Finally, the development requires the expenditure of substantial sums for the construction of parking to serve the owners of the housing units. These costs result in a cost per unit for land that exceeds the amount acceptable under current or foreseeable market conditions. The tax increment is needed to reduce these costs to a point where the housing units will be marketable. Therefore, the City reasonably determines that no other redevelopment of similar scope is anticipated on this site without substantially similar assistance being provided to the development. Attached in Exhibit G of the TIF Plan is a proforma which shows that in order to make the project financially feasible, $2,900,000 in TIF is needed to offset the high cost of land acquisition, site preparation and parking. The Development Agreement is anticipated to contain alook-back provision to ensure that projected profits match the actual results. A comparative analysis of estimated market values both with and without establishment of the District and the use of tax increments has been performed as described above. If all development which is proposed to be assisted with tax increment were to occur in the District, the total increase in market value would be up to $14,713,000. The present value of tax increments from the District is estimated to be $ 3,220,954. It is the Council's finding that no development with a market value of greater than $ 11,492,046 would occur without tax increment assistance in this district within ZS years. This finding is based upon evidence from general past experience with the high cost of acquisition and public improvements in the general area of the District. (See Cashflow in Appendix D of the TIF Plan.) 3. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 1-4 conforms to the general plan for the development or redevelopment of the municipality as a whole. The Planning Commission reviewed the TIF Plan and found that the TIF Plan conforms to the general development plan of the City. 4. Finding that the Tax Increment Financing Plan for Tax Increment Financing District No. 1-4 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Redevelopment Project No. 1 by private enterprise. The project to be assisted by the TIF District will result in increased employment in the City and the State of Minnesota, the redevelopment of substandard properties, increased tax base of the State and add a high quality development to the City. Through the implementation of the TIF Plan, the HRA and City will also increase the availability of safe and decent life-cycle housing in the City. S. Finding that the expenditure of tax increment serves a primarily public purpose. The private benefit that would be enjoyed by the developer if it is able to proceed with the proposed development is the provision oftax increment financing in an estimated principal amount of $2,900,000 (net present value). However, the Council finds that this "private benefit" is necessary for the City and HRA to accept in order to achieve the many public benefits which implementation of the development will provide. Those public benefits substantially outweigh any "private benefit." It is unlikely that redevelopment of the District would occur without public assistance. At the time that the Council approved creation of Tax Increment Financing District No. 1-3, the Council made numerous findings of public benefit that would result from the developments proposed within that tax increment financing district. The Council hereby reaffirms those findings of public benefit as they relate to the property to be included in the District and to the proposed development of the District. Therefore, the Council continues to find that the public expenditures to be expended pursuant to the proposed District in implementing the contemplated development would be primarily for public benefit and that any private benefits would be merely incidental. 6. Finding concerning modification of the Redevelopment Plan for Project No. 1. At the time that the Council approved creation of Tax Increment Financing District No. 1-3, the Council made findings concerning the modification of the Redevelopment Plan for Redevelopment Project No. 1, which findings are hereby reaffirmed with respect to the current modification of the Redevelopment Plan.