EDSR MEMORANDUM 11-15-1993 - Laserfiche WebLink

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As TIF District No. 12 is currently proposed, the City/EDA collects new property taxes from the Kjellberg facility beginning in 1996 and ending in the year 2006 . This allows the City/EDA to repay a privately placed noted totalling $195,000, with interest. The $195,000 covers the site preparation reimbursements up to $165,000, and, covers capitalized interest, cost of issuance fees, and miscellaneous expenses, etc. The current TIF Plan does not include the collection of additional tax increments to recover the value of the land which was acquired by the City in July, 1991, at a price of $109,540 . Prevailing opinion here is that in order for a redevelopment project to move forward, EDA Commissioners would likely have to convey the property by virtue of a complete write down of its cost. In order to recover the additional, say, $110, 000, District No. 12 would have to be extended an additional four years to the year 2010 . The inherent problem with extending the District is that of four additional years of state aid losses by the City. As a result of the last Legislative Session, developer reimbursement of state aid losses is prohibited. Staff and the City Attorney are currently working on other mechanisms to address this prohibition. The issue of extending the District' s life is that of where and when to cut the City/EDA losses in order for redevelopment to be achieved. In addressing this issue, • EDA Commissioners should keep in mind: - The current TIF Plan calls for TIF collections during eleven years; - State law allows a City/EDA to collect tax increments from a "Redevelopment District" for twenty-five years; - In order to recover the City' s acquisition price, District No. 12 would have to be extended four more years (that is, collecting tax increments for fifteen years) . A final element for consideration is that of the developer benefitting from the TIF assistance during the time tax increments are being collected. That is, the developer, in one form or another, realizes significant incentives from this project. To prevent the developer from "building and bolting" (that is, obtaining the land free of charge and then selling the project to an investor two or three years down the line with the land value being factored into the sale) , the City/EDA should consider a mechanism by which it is reimbursed, in whole or in part, for the land value if a transaction occurs during the TIF collection timeframe. For example, if the developer sells the project within the first five years of TIF repayments, perhaps 100% of the site's value is paid to the City/EDA. In subsequent years (years six through eleven) , the land repayment scenario is 85% (year six) , 70% (year seven) ,