Memo TIF
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M E M 0 R A N 0 U M
To: Honorable Mayor & City Council
From: Steven C. Mielke, City Manager
Date: January 8, 1993
Subject: Discussion - Tax Increment Financing - Legislation - Tech Center and
NapcoNenturian properties
PURPOSE OF DISCUSSION
The purpose of this memorandum and 'worksession discussion is to update the Council
on the current status of the Tech Center and NapcoNenturian properties south of
County Road 3 and west of Nine Mile Creek. Staff has been analyzing and discussing
the many environmental problems associated with these properties and have
. concluded .that it may be helpful to have the ability to use tax increment financing on
these properties for future environmental clean-up activities.
BACKGROUND
The Hopkins Tech Center property was placed in a tax increment financing district
several years ago. This was done in anticipation of a redevelopment project on that
site. For a variety of reasons the property was never redeveloped. Possible
redevelopment of the site seems only possible if the current property owner and
financier of the property are able to make the property more affordable than it currently
is, however, the site also has some contamination on site and any redevelopment of
the site would likely require clean-up activities as part of a redevelopment project.
The NapcoNenturian property lies between the Tech Center and Nine Mile Creek.
This property is currently used for office and warehouse activities by Napco
International as its corporate headquarters.
The site, during the 1950's, was a burn and fill site for municipal solid waste, The
property at the time was owned by Hennepin County as was operated by the City of
Hopkins. At the conclusion of the filling of the site it was sold to a company for
development and the current office structure is built on refuse. The warehouse facility
is not built on refuse but the rear yard storage area is about 10 feet of refuse.. Napea
. and Venturian have attempted to sell the property for several years and have not been
able to sell the property primarily due to the waste deposits on the property. Napco has
discussed their inability to sell the property with City staff and they express frustration
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I. over their inability to sell. The main concern with property such as this is the inability to
obtain financing from institutions who would underwrite a loan to a company to
purchase the property. Since Napco has been unable to sell, they have contemplated
other options which they have discussed with the staff. These range from financial
assistance to an outright purchase by the City of the Napco Venturian sites. If Napco
were unable to be satisfied, it is possible that the City could become part of a legal suit
over damages to Napco due to the prior use of the property by the City and County.
POINTS OF. DISCUSSION
As a result of the discussions between NapcoNenturian and the City staff, the concept
of utilizing tax increment financing on the sites has been discussed as a source of
funds to assist in any future clean-up activities on those sites.
The TIF uses contemplated would include, not only future clean-up assistance, but the
establishment of a long-term indemnity fund which would allow the City to place TIF
revenues into an escrow account which would be used to cover clean-up costs at the
site.
The City of 5t. Louis Park acquired similar legislation during the previous legislative
~ session. St. Louis Park intends to use an indemnity fund as a source of financing to
~ allow Park Nicollet to develop the site at Highway 1 00 and County Road 3.
The legislation as it is proposed in Hopkins would take existing tax dollars, remove
them from the tax rolls and place them into and indemnity fund. The indemnity fund
would be left to build a reserve of funds which could be used for future clean-up at the
sites should it become necessary.
Preliminary studies have indicated that dean-up at the NapcoNenturian property is not
necessary or called for under today's conditions. The City does not have equal
info'rmation on the Tech Center property but preliminary information indicates a
stronger need for environmental clean-up at that site.
The use of existing tax dollars within a tax increment financing district is called a
subdistrict. This legislation is currently in place and would allow the use of funds for
clean-up activities. This legislation, if approved, would allow us to establish a reserve
account without immediate plans for use of the funds. This is not allowed under current
TIF law. It is presumed that at some point in the future the tax dollars which had been
placed in an escrow account, and not used for clean-up activities would be returned to
the taxing jurisdictions when they are considered no longer necessary to the property.
It is also assumed and hoped that the establishment of this reserve account would
provide adequate impetus for a purchaser and a bank to feel comfort in purchasing the
. site from NapcoNenturian.
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. There are several additional items which need to be discussed as part ofthis concept
and staff will be presenting this material along with the discussion on Tuesday January
12th. If we are to proceed, we need to enter the legislation as quickly as possible and
therefore, the Council may be asked to pass on this legislation at its second meeting in
January or a subsequent meeting in February.
Mr. Dick Nowlin of Doherty, Rumble and Butler will be in attendance at the meeting and
can discuss these properties and the City's options with the Council.
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