CR 98-151 Public Hearing Tax Increment District 2-11September 22, 1998
Proposed Action
Staff recommends approval of the following motion: Adopt Resolution 98 -061, adopting
modification to the redevelopment plan for Redevelopment Project No. 1, and establishing Tax
Increment Financing District 2 -11 therein and adopting the related tax increment financing plan.
With approval of this action, staff will undertake the necessary steps to certify this district with
Hennepin County.
Overview
The Hopkins Housing and Redevelopment Authority has entered into a redevelopment agreement with
SuperValu, Inc., to undertake a project on the former Hennepin County Public Works property.
Article V of this agreement states that in conjunction with the project the HRA will consider forming a
tax increment district to facilitate possible future construction phases.
The action being proposed is necessary to create the TIF District. A development agreement would
need to be approved and executed at some future date prior to actually providing any increment to
either SuperValu or any other developer.
By statute, the Council is required to hold a public hearing as part of this action. It needs to be noted
that the City Council would be under no obligation to approve the tax increment plan at the hearing
even though they may have approved it acting as the HRA.
Primary Issues to Consider
• What are the specifics of the tax increment plan?
• What is detailed in the redevelopment agreement dated July 20, 1998, concerning tax increment?
• Notification of other taxing jurisdictions.
• Other issues.
Supnorting Documents
• City Council Resolution 98 -061
• See HRA Report 98 -23 for the followning items:
o Document entitled "Tax Increment Financing Plan for the Establishment of Tax Increment
Financing District 2 -11 Within Redevelopment Project No. 1"
o Map of subject area
o Article V of the Redevelopment Agreement with SuperValu dated July 20, 1998
Jo -s D. e-'gan
P1 . `ng & Economic , ! elopment Director
O p
K
PUBLIC HEARING
TAX INCREMENT DISTRICT 2 -11
Council Report 98 -151
Council Report 98 -151
Page 2
Primary Issues to Consider
• What are the specifics of the tax increment plan?
TIF District 2 -11 is proposed to be a redevelopment tax district. This type of district allows
the City to capture increments for up to a 25 -year period; however, it can be terminated by
the City at any time prior to this period if there is no additional need within the district for
TIF assistance. TIF District 2 -11 includes a number of parcels, both east and west of
Highway 169 and south and north of Excelsior Boulevard. The attached map identifies the
specific parcels that would be included; they are generally as follows:
o All the property presently owned by SuperValu within Hopkins
The former Hennepin County Public Works property
o The industrial properties located directly north and west of the former Hennepin
County Public Works property
The former Hennepin County Public Works property is presently tax exempt. At the time
the district is established, the County assessor will establish a base value for this property.
The City assessor's 1998 value is approximately $5.1 million.
Subsection 2 -10 of the plan details the use of the tax increment funds that would be
generated during the full life of the district. In reviewing this budget, the CounciIIHRA
needs to be aware of the following:
o The amount of increment generated could vary substantially from what is identified in
the plan, depending on the actual development that takes place within the district. The
estimate that is detailed is based on a total redevelopment of all parcels within the
district and reflects an estimate of the maximum increment that might be received over
the 25 -year period.
There are four phases of development that are detailed within this section. This, again,
is an estimate based on discussion with SuperValu on possible future phases of
development and also the redevelopment of the north annex property. In reality all
these phases may or may not happen.
This section clearly states that the costs set forth within the budget for the use of funds
constitute estimates only and are not a commitment on the part of the HRA or City to
use tax increment to assist any particular development or redevelopment effort or pay
any particular costs. It further states that the HRA and City will only provide tax
increment assistance in connection with a development if the HRA and developer have
entered into a development agreement detailing the nature and amount of assistance to
be provided.
Increment would be collected and retained by the Authority until such time as there is an
executed development agreement. It is estimated the first increment would not be received
until 2001. Within five years of certification of the district, if it is determined there will not
Council Report 98 -151
Page 3
be any need for increment or the amount will be less than was anticipated within the district or
project area, either all or a portion of the retained increment could be returned to the County
for disbursement to the various taxing jurisdictions.
There will be a local match requirement, which is equal to 5 percent of the actual tax increment
received. This will require that the City put non -tax increment funds into the project. In
discussing this with Ehlers & Associates, they have suggested the source of dollars as the City
Economic Development Fund and municipal state aid street dollars. The structure of this
financing and the specific amount will need to be defined at the time the development
agreement is approved.
What is detailed in the redevelopment agreement dated July 20, 1998, concerning tax
increment?
Article V of the redevelopment agreement with SuperValu dated July 20, 1998, details the
specifics concerning tax increment. There is nothing in this document which obligates the
Authority to provide SuperValu with tax increment; however, Section 5.2 states that the
Authority will consider use of tax increment to facilitate future phases of their development. It
details that no use of increment, however, will be considered unless there is additional
development beyond Phase I (Phase I being the Hennepin County Public Works property).
The redevelopment agreement states that the increment that would be provided would be used
to reimburse SuperValu for acquisition and demolition costs in conjunction with future phases.
It is also detailed that there may be a reimbursement for certain transportation- related public
improvements that are necessary to facilitate the overall development project. The maximum
amount of increment that is detailed within the agreement that would be provided is seven
years of increment generated from the Phase I project. In accordance with state statute, all
costs that would be reimbursed with tax increment would need to be completed within five
years from certification of the tax increment district.
There is nothing in this agreement that would preclude the City from providing tax increment
to a developer other than SuperValu for undertaking a project within the district.
• Notification of other taxing jurisdictions.
Hennepin County and School District 270 were provided notification concerning creation of
the district in the upcoming hearing.
• Other issues.
In accordance with state statute, the Zoning & Planning Commission has approved a resolution
finding the tax increment plan for District 2 -11 is in conformance with the City's
Comprehensive Plan.
Council Report 98 -151
Page 4
Alternatives
The City Council has the following alternatives regarding this matter:
1. Approve the action as recommended by staff. The resolution specifically states that approval
is contingent upon City Council approval at a public hearing.
Continue for additional information. It should be noted that the district needs to be created
prior to demolition taking place on the Hennepin County Public Works property. The present
schedule is to stasrt demolition immediately after closing (October 13, 1998).
3. Deny approval.
CITY OF HOPKINS
HENNEPIN COUNTY
STATE OF MINNESOTA
Council member introduced the following resolution and moved its adoption:
Section 1. Recitals.
RESOLUTION NO. 98 -061
RESOLUTION ADOPTING THE MODIFICATION TO THE REDEVELOPMENT
PLAN FOR REDEVELOPMENT PROJECT NO. 1; AND ESTABLISHING TAX
INCREMENT FINANCING DISTRICT NO. 2-11 THEREIN AND ADOPTING THE
RELATED TAX INCREMENT FINANCING PLAN THEREFOR.
BE IT RESOLVED by the City Council (the "Council ") of the City of Hopkins, Minnesota (the
"City "), as follows:
1.01. The HRA has heretofore established Redevelopment Project No. 1 and adopted the
Redevelopment Plan therefor. It has been proposed that the City establish within Redevelopment Project
No. 1 Tax Increment Financing District No. 2 -11 ( "District No. 2-11") and adopt the related Tax Increment
Financing Plan therefor (the "Plan "); all pursuant to and in conformity with applicable law, including
Minnesota Statutes, Sections 469.001 through 469.047 and 469.174 through 469.179, all inclusive, as
amended, all as reflected in the Plan, and presented for the Council's consideration.
1.02. The Council has investigated the facts relating to the Plan.
1.03. The City has performed all actions required by law to be performed prior to the adoption and
approval of the proposed Plan, including, but not limited to, notification of Hennepin County and School
District No. 270 having taxing jurisdiction over the property to be included in District No. 2 -11, notice of
a potential redevelopment district to the local county commissioner, a review of and written comment on the
Plan by the City Planning Commission, and the holding of a public hearing upon published notice as required
by law.
1.04. Certain written reports (the "Reports ") relating to the Plan and to the activities contemplated
,therein have heretofore been prepared by staff and submitted to the Council and/or made a part of the City
files and proceedings on the Plan. The Reports include data, information and/or substantiation constituting
' or relating to the bases 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.
Section 2. Findings for the Adoption and Approval of the Plan.
2.01. The Council hereby finds that the Plan, is intended and, in the judgment of this Council, the
effect of such actions will be, to provide an impetus for redevelopment in the public purpose and accomplish
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certain objectives as specified in the Plan, which is hereby incorporated herein.
Section 3. Findings for the Establishment of Tax Increment Financing District No. 2-11.
3.01. The Council hereby finds that Tax Increment Financing District No. 2 -11 is in the public
interest and is a "redevelopment district" under Minnesota Statutes, Section 469.174, subd. 10 (a)(1).
3.02. The Council further finds that the proposed development would not occur solely through
private investment within the reasonably foreseeable future and that the increased market value on 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 District No. 2 -11 permitted by the Tax
Increment Financing Plan, that the Plan conforms to the general plan for the development or redevelopment
of the City as a whole; and that the Plan will afford maximum opportunity consistent with the sound needs
of the City as a whole, for the development of District No. 2 -11 by private enterprise.
3.03. The City elects to make a qualifying local contribution in accordance with Minnesota
Statutes, Section 273.1399, subd. 6(d), in order to qualify District No 2 -11 for exemption from state aid
losses set forth in Section 273.1399.
3.04. 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.
3.05. The City of Hopkins elects to calculate fiscal disparities for District No. 2 -11 in accordance
with Minnesota Statutes, Section 469.177, subdivision 3, clause b, which means the fiscal disparities
contribution will be taken from within District No. 2 -11.
Section 4. Approval and Adoption of the Plan.
4.01. The Plan, as presented to the Council on this date, including without limitation the findings
and statements of objectives contained therein, is hereby approved, ratified, established, and adopted and
shall be placed on file in the office of the Economic Development Director.
4.02. The staff of the City, the City's advisors and legal counsel are authorized and directed to
proceed with the implementation of the Plan and to negotiate, draft, prepare and present to this Council for
its consideration all further plans, resolutions, documents and contracts necessary for this purpose.
4.03 The Auditor of Hennepin County is requested to certify the original net tax capacity of
'District No 2 -11, as described in the Plan, and to certify in each year thereafter the amount by which the
original net tax capacity has increased or decreased; and the City of Hopkins 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 District No 2 -11, for which building permits have been issued
during the 18 months immediately preceding the adoption of this resolution.
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(Seal)
The motion for the adoption of the foregoing resolution was duly seconded by Council member
, and upon a vote being taken thereon, the following voted in favor thereof:
and the following voted against the same:
Dated: October 6, 1998
ATTEST:
Mayor City Clerk
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EXHIBIT A
RESOLUTION # 98-061
The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax
Increment Financing. District No. 2.11, ( "District No. 2-11") as required pursuant to Minnesota Statutes, Section
469.175, Subdivision 3 are as follows:
1. Finding that District No. 2 -11 is a redevelopment district as defined in M.S., Section 469.174, Subd.
10(a) (1).
District No. 2 -11 consists of 16 parcels, with plans to redevelop the area for commercial purposes. At least
70 percent of the area in the parcels in DistrictNo. 2 -11 are occupied by buildings, streets, utilities, or other
improvements and more than 50 percent of the buildings in DistrictNo. 2 -11, not including outbuildings,
are structurally substandard to a degree requiring substantial renovation or clearance (See Appendix E).
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 District No 2 -11 permitted by the Plan.
The proposed development, in the opinion of the City, would not reasonably be expected to occur solely
through private investment within the reasonably foreseeablefuture: This finding is supported by the fact
that the redevelopment proposed in this plan meets the City's objectives for redevelopment. Due to the
high cost of acquiring and redeveloping the parcels currently occupied by substandard buildings, which
parcels are under multiple ownership, the limited amount of commercial /industrial 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 reasonable 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 value of the projected tax increments for the maximum duration
of the TIF District permitted by the Plan. The City supported this finding on the grounds that the cost of
site and public improvements and utilities add to the total redevelopment costa Historically, site and public
improvements costs in this area have made redevelopment infeasible without tax increment assistance.
Therefore, the City reasonably determines that no other redevelopment of any kind is anticipated on this
site without substantially similar assistance being provided to the development. Accordingly, the increased
market value anticipated without tax increment assistance is $0.
A comparative analysis of estimated market values both with and without establishment of Tax Increment
Financing District No 2 -11 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 District No. 2 -11, the
total increased market value would be up to $58,192,400. The present value of tax increments from District
No 2 -11 is estimated to be $12,629,028. It is the Council's finding that no development with a market
value of greater than $45,563,372 would occur without tax increment assistance in this district within 25
years. This finding is based upon evidence from general past experience with the high cost of acquisition
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and public improvements in the general area of District No. 2 -11 (see the Cashflows in Appendix C).
3. Finding that the Tax Increment Financing Plan for District No. 2 -11 conforms to the general plan for the
development or redevelopment of the municipality as a whole.
The Plan was reviewed by the Planning Commission on September29, 1998. The Planning Commission
found that the Plan conforms to the general development plan of the City.
4. Finding that the Tax Increment Financing Plan for District No. 2 -11 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 projects to be assisted by District No. 2 -11 will be undertaken by private businesses, will result in
increased employment in the City and the State of Minnesota, the renovation of substandard properties,
increased tax base of the State and add high quality developments to the City.
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