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CR 93-138 Thermotech Prelim Tax Increment ( '1 .' '"' I / '<>, ," ',.. ; "{ y ~L_ !.ml r.y '" I . August 23, 1993 : . 0 p. K. \ "_.. : CR93-138 THERMOTECH PRELIMINARY TAX INCREMENT APPLICATION Pro'Posed Action. Staff recommends adoption of the following motion: ,Approve the preliminary tax increment application as made by Thermotech subiect to staff conditions. with approval of this action, Thermotech will have the ability to submit a final tax increment application at a future date. . Overview -Thermotechuis presently-contemplating expanding theirdexisting manufacturing building on South Fifth Street. The area of property where the expansion would occur is located in a designated flood plain. In order to facilitate the project, City staff and Thermotech have been working with the Nine Mile Creek Watershed Board to undertake improvements to the creek so that the subject area, and other adjacent areas, would be removed from the flood plain. Based upon the present time schedule, and assuming Watershed District approval, these improvements are proposed to be undertaken some time in early 1994. As part of this overall project City staff and Thermotech have . discussed the use of tax increment financing to pay for a portion of the public and possibly private costs involved with this project. Tax Increment District 2-7 was recently established within .this area to allow use of this tool. Recently, Th~rmgtecl1_Sl1bmi tteda_preliminarytax nincrementapplication. The-yuare-i:1-sking for tax increment assistance to reduce some of the cost that they would incur as a result of this project. This is the first step in the tax increment process as established by the City. If this application is approved by the HRA and city council, they would then have the ability to submit a final application at a future date. primary Issues to consider o What is being requested by Thermotech? _ 0' Does this application meet the goals and Objectives, for the use of tax increment? ._' .,' _ _' n'" n o ' U What are the staff recommended conditions? , .. ouu 'What-isutheim.pactof theact.i6n mas recommended? o What are other issues related to this project? supporting Documents o Application by Thermotech o Tax I rement POlicy <.. . Director ~- --- -- - -- - -- - -- ---~---- ,:;;:"."- '-t CR 93-138 Page 2 . primary Issues to consider Based on the action as recommended, the city council has the following issues to consider: 0 What is being requested by Thermotech? Thermotech is asking for $500,000 in tax increment assistance. These fundswol.lld be used to pay for the following costs in conjunction with this project: - Improvements to Nine Mile Creek on the property occupied by Thermotech. These improvements are required in conjunction with the overall proposed flood plain reduction project for this area. These improvements are estimated to be approximately $309,000. - Installation of pilings on the area where the building would be located. Because of the poor soil conditions in this area, these pilings are required in order to provide a stable surface on which to construct the building. The estimated cost of thi~ work is $150,000 to $200,000. . The applicant has indicated that because both of these above work items are over and above what is ordinarilYurequired in order to constructaubuilding, that theY need pUblic assistance in order to make the project financiallY feasible. Menasha, the parent corporation of Thermotech, is a large company which has the financial feasibility to undertake this project regardless of cost. However, Thermotech representatives have stated that Menasha needs to feel comfortable that they are not expending substantially more dollars to undertake this project on the proposed site as compared to a different location, either within or outside of Hopkins. 0 Does the application meet the goals and objectives for the use of tax increment? The request as proposed meets a variety of eligible uses as identified within the tax increment pOlicy. These include the following: - Increase the tax base of the city - Retain or increase local job base. Thermotech is estimating that as a result of this project they will be able to increase their employment over the next few years by . approximately 100 individuals. ,. ~ .. i. ~ r CR 93-138 . Page 3 - Offset increased costs of redevelopment over and above those . costs the developer would incur in normal development. The Hopkins tax increment policy also details a variety of project approval and evaluation criteria. The project as proposed should u _,_ __Il\~~t-a_yar iety__of_thesecr iter ia-which will beeval uatedin -more detail in conjunction with the final tax increment application. The Hopkins tax increment policy and state statute require that any project receiving tax increment assistance meet the "but for" test. This means that TIF will not be used unless the need for the City's economic participation is necessary in order for the project toiproceed in a manner as proposed. Because of the extraordinary costs of doi.n9_thi.f3pr()j ect, Thermotech - u_ ---- " un------repres-entatives-nave- us-tilted 'I'IF dollars are necessary to make the ,_proj~ct_financiallyfeasible to Menasha Corporation. 0 what are the staff recommended conditions? staff is recommending that if the council wishes to approve the preliminary TIF Application that the following conditions be adopted as part of the motion: - Approval of the tax increment preapplication does not obligate the city_ to any approval of a final application -or' . use of tax increment dollars in conjunction with this project. - Approval of a final tax increment application will be contingent upon Thermotech agreeing to the following: + Execution of a redevelopment agreement + Payment of a developer fee to offset any LGA/HACA loss experienced by the city in conjunction with the project. + The specific amount of tax increment assistance will be determined subsequent to the receipt of more detailed costs for both public and private improvements. 0 What is the impact of the action as requested? The tax increment policy as adopted by the city requires both approval of a preliminary and final tax increment application in order to provide tax increment assistance ,. to a proj ect. The preliminary tax increment application is undertaken by the Council for the following purpose: - To provide a general overview of the proj ect__ -- -- --------- - - -~ -- --- ------ - -- ------- ---- -- - ---- --- --. - ------ - - To determine on a conceptual basis whether the Council wishes to consider the use of tax increment dollars in order to facilitate the project. .;;,~;_:( ~j CR 93-138 Page 4 . Approval of this action in no way, obligates the City to provide tax increment assistance for this project. However, with approval of the preliminary application it will be assumed by both the applicant and staff that the City is willing on a conceptual basis to consider providing such assistance. 0 What are other issues as relates to this project? - In order to facilitate this project, a variety of public and private improvements need to be undertaken to Nine Mile Creek in order to remove the sUbject property from the flood plain elevation. The Nine Mile Creek Watershed District Board will consider these improvements at a public hearing in October. This project cannot proceed in the manner proposed without approval of the Board. - Tax Increment District 2-7 was recently established to incorporate the Thermotech property. For the most part the only tax increments that will be generated within this districtuwill-come from the propOsed Thermotech expansion. These tax increments are proposed to be used to pay for a portion of the public improvements to Nine Mile Creek which will not be reimbursed by the Watershed District. Until the cost of these improvements and the amount of reimbursement by . the Watershed District are finalized it is impossible to determine how much tax increment dollars will potentially be available for assistance to Thermotech. Alternatives The city Council has the following alternatives regarding this matter: 0 Approve the action as recommended by staff. It is assumed that based on this action Thermotech will submit a final tax increment application at some future date. This would probably be in November or December. 0 continue for additional information 0 Deny the preliminary tax increment application. Under this scenario it would be assumed that Thermotech would not proceed with the project. This could result in requiring them to either look for another site in Hopkins to expand or to locate their operation outside of the City. .