Loading...
HomeMy WebLinkAbout01.03.23 Work Session Packet CITY OF Meeting Location: FARMINGTONFarmington City Hall 430 Third Street Farmington, MN 55024 CITY COUNCIL WORK SESSION MEETING AGENDA January 3, 2023 5:00 PM 1. CALL TO ORDER 2. APPROVE AGENDA 3. DISCUSSION ITEMS (a) Tax Increment Financing(TI F) Overview(1 hour) (b) 2040 Comprehensive Plan Update- Process Update(15 minutes) (c) Annual Organizational Matters (20 Minutes) 4. CITY ADMINISTRATOR UPDATE S. ADJOURN CITY OF O 43o Third St., Farmington, MN 55024 FARMINGTON © 651-280-6800 Farmington MN.gov TO: Mayor, Councilmembers and City Administrator FROM: Deanna Kuennen, Community Development Director SUBJECT: Tax Increment Financing(TI F) Overview(1 hour) DATE: January 3, 2023 INTRODUCTION Tax I ncrement Financing(TI F) is a powerful tool available for use to support development/redevelopment in the community.Jason Aarsvold, Senior Municipal Advisor from Ehlers will present an overview of TI F and answer questions. DISCUSSION Tax I ncrement Financing is an economic development, redevelopment, and housing development tool that was authorized by the State of Minnesota in 1979 for cities, counties and other local authorities to use to offset certain development and redevelopment costs. While a number of tests must be met to determine that the project qualifies for TI F and that the project wouldn't proceed without this type of assistance-once in place a TI F captures the"new"taxes associated with the development to offset development costs and the local government forgoes the new taxes associated with a development for a set number of years. When utilizing TI F to encourage development/redevelopment-each project is reviewed based on its own merits and facts.Through this review a number of factors are analyzed to determine the minimum amount of public financing assistance needed for the project to proceed. Jason Aarsvold, Senior Municipal Advisor from Ehlers will present a TI F overview, discuss the different types of TI F districts, and review the analysis process and how recommendations for the amount of TI F is determined. He will also lead a discussion on how public assistance such as TI F can be used to support city goals. BUDGET IMPACT None. ACTION REQUESTED None at this time.This is for informational purposes only, with anticipation that future TI F requests will be brought forward to support development/redevelopment projects. *; EHLERS ® PUBLIC FINANCE ADVISORS TIF Basics Discussion City of Farmington 1-3-2023 Today's Discussion • Planning & Policies • Providing Financial Assistance and Protecting Local Resources 41 Local Financial Tools ✓ Tax Increment Financing (TIF) ✓ Tax Abatement • Project Examples gs*EHLERS Why Provide Financial Assistance? • Fundamentally: Existence of financial barriers preventing the private market from developing a site in accordance with City vision ✓ Contaminated land and/or existence of blighted buildings ✓ High development fees ✓ Market rents too low ✓ Infrastructure costs too high ✓ Cheaper alternatives elsewhere ✓ City vision incompatible with market iEHLERS Preparing for Success Establish an economic development/redevelopment plan! • Helps unite staff & policy makers 11, • Provides foundation for a successful project • Ensures you're prepared when opportunity knocks • Sets priorities for limited resources • Farmington has plans in place `EHLERS Preparing for Success Adopt policies to set parameters for public involvement • Business subsidy policy ✓ Required per MN statues 116J.993 - 116J.995 ✓ Include additional local goals ,po1ie • Developer fee policy ercI ar�z ,.StaQrtiant or9 • Application for assistance irnP • Farmington has a policy and procedure in place lEHLERS Protecting Local Resources • Review developer's application & financial information to establish appropriate level of public assistance ✓ pro forma analysis • Ensure project qualifies for proposed type of assistance ✓ Default format is Pay-As-You-Go • Maximize private funding sources • Minimize public assistance needed to make a project financially feasible EHLERS f The "But For" Test • Required TIF finding: The development would not be possible but forthe use of tax increment ✓ Increased market value greater than alternatives - net of assistance ✓ Likelihood of similar development in the foreseeable future without assistance - evidenced by pro forma analysis • Captured tax revenues would not exist if TIF was not used to assist the project • Elected body must make this finding 'EHLERS LOCAL FINANCIAL TOOLS g'EHLERS Development Tools Know the tools available to help facilitate development. Be EDA LEVY FUNDS LOCAL REVOLVING TAX INCREMENT TAX ABATEMENT STATE&LOCAL LOAN FUNDS FINANCING(TIF) RESOURCES(DEED, COUNTY,ETC.) .EHLERS What is Tax Increment Financing? Tax Increment Financing (TIF): The ability to capture and use most of the increased local property tax revenues from new development within a defined geographic area for a defined period of time without approval of the other taxing jurisdictions. `EHLERS 10 TIF EXAMPLE > W th u) in Baseline Property Value LE Creation Time Termination 1�',-'EHLERS Types of TIF Districts • Redo substandard / obsolete buildings ✓ Redevelopment TIF District (26 year maximum) ✓ Renewal and Renovation TIF District (16 year maximum) • Affordable housing -/ Housing TIF District (26 year maximum) • Job and tax base creation ,/ Economic Development TIF District (9 year maximum) gEHLE`%' RS 12 1k,-, 4 , 11-— Redevelopment TIF District - 26 Years Parcels consisting of 70% of area must be improved More than 50% of buildings must be substandard 90% of TIF must be used to correct redevelopment issues Reasonable distribution of conditions ®EHL'111-ERS Renewal and Renovation District - 16 Years Parcels consisting of 70% of area are improved Only 20% of buildings are structurally substandard 30% of other buildings require substantial renovation or clearance: remove inadequate street layout, incompatible uses or land use relationships, overcrowding of buildings, excessive dwelling unit density, obsolete buildings not suitable for improvement or conversion, etc. EHLERS Reasonable Distribution EM � ® ❑ M � ® ® ❑ EN ❑ 0 ❑ 80%Substandard 60%Substandard buildings buildings 80%Coverage 80%Coverage O"PERS s Housing TIF District - 26 Years Affordable Housing Income test is main qualification TIF law references federal rules on income limitations More liberal rules on pooling 100% tax increment used for affordable housing; but 20% of project's value can include commercial/industrial development (mixed-use) 9SENLERS Housing TIF District - Rental Income Requirements: 40% of units restricted to 60% of county median income, OR 20% of units restricted at 50% of county median income Annual test for income compliance for life of TIF assistance 'EHLERS Housing TIF District - Owner Occupied Income requirements: 95% of first buyers is limited to: • 100% of the greater of State or local median income for a family of 2 or fewer • 115% of the greater of State or local median income for a family of 3 or more First buyer test ONLY for income compliance 'EHLERS 1N Economic Development District - 9 Years At least 85% of new building space must be: • Manufacturing • Warehousing, storage, distribution • Research and development • Telemarketing • Space necessary and related to the above L µ Ig`EHLERS TIF Process: Notices /N —_ Notice to County TIF Plan with fiscal Hearing notice Commissioner 30 impacts to County & publication at least days prior to hearing School Districts 30 10 days prior to notice publication days prior to public hearing hearing yEHLERS TIF Process: Public Hearing • Council holds public hearing, considers resolution to adopt TIF plan ✓ Type of district ND ✓ But-for finding ✓ District conforms to general development plan a ✓ Plan affords maximum opportunity for city's development needs %EHLERS Tax Abatement • Working Definition of Tax Abatement: The ability to capture and use all or a portion of the property tax revenues within a defined geographic area for a defined period of time - typically to assist with housing or commercial development. • Uses: ✓ When a TIF district can't be created • Market rate rental housing • Business retention • Office/retail aEHLERS 22 .� , .,,_ , How Tax Abatement Works Allows each major taxing jurisdiction to choose to contribute its share of the taxes and limit abatement in any manner it determines appropriate Duration limit varies ✓Participation by all 3 entities - 15 years ✓Participation by 1 or 2 entities - 20 years ✓Resolution is silent as to the term - 8 years Can use to retain business by abating existing taxes IgEHLERS TIF / Abatement Financing Options • Pay-as-you-go TIF Note ✓ No up-front funds from the City ✓ Developer funds eligible expenses and is repaid with interest, over time, from available tax increment/ abatement ✓ No risk to TIF/ abatement authority if term expires before note is retired • G.O. or Revenue Bonds ✓ Bond proceeds fund up-front project costs and TIF revenue is used to repay bonds ✓ Higher-risk to City for G.O. debt g'EHLERS MIN PROJECT EXAMPLES %EHLERS 25 Capstone Industrial - Burnsville • 16.6-acre site r,,.s h • 231,760 sq. ft. Industrial Development � • Challenge: Extraordinary site costs totaling $3.5 million • $27 million project cost ($196,000/unit) EHL.ERS Capstone Industrial - Burnsville • Review of developer pro forma ✓ Land assembly costs °�, - ✓ Construction costs _ ✓ Market rents - need to ensure 4' projections are high enough ✓ Proposed financing (debt, = equity, rate, term) ✓ Developer fee ✓ Rate of return target `EH�ER$ Capstone Industrial - Burnsville ount Pct. Developer's yield on cost Developer Financing-First Mortgage 1 56.63% projected at 5.3% without Developer Financing-TIF Note 1,760,143 6.47% TIF Developer Equity 8,291,973 30.49% Subtotal 25,451,494 93.59% • 6.5%-7% desired DEED Grants 950,000 3.49% Dakota County RIG 250,000 0.92% Met Council 430,000 1.58% Located within existing Dakota County ELF 111,871 0.41%.6 Subtotal 1,741,871 6.41 City TIF district TOTALSOURCES 27,193,365 100.00% $1.76 in City TIF, plus USES-- Amount % Acquisition Costs •11.03% Bldg.12.94 outside grant sources Remediation Costs 3,502;014 12.88% 15.11 Construction Costs 17, 45 64.20% 75.33 • Yield on cost reaches Professional Services 1,117,439 4.11% 4.82 Financing Costs 1,073,702 3.95% 4.63 6.3% Developer Fee 902,805 3.32% 3.90 �EHL.ERS Cash Accounts 136,960 0.51% 0.60 TOTAL USES 27,193,365 100.00% 117.33 f f Capstone Industrial - Burnsville • P.C. consideration on ��i�';i"'i July 26 • City Council ' consideration on August 2 • TIF is approved • Grant applications in process AMULM ■'www ! Birdtown Flats - Robbinsdale • Challenge: Redevelopment; .III ����� land assembly; market rents too low to support new construction �r • Beard Group identified a gap of $4.5 million (24 years of TIF assistance) • Qualifies as a redevelopment €- TIF District '%'EHLERS 30 Birdtown Flats - Analysis • Review of developer pro forma ✓ Land assembly costs ✓ Construction costs ✓ Market rents - need to ensure projections are high enough ➢Required review of detailed market study ✓ Proposed financing (debt, equity, rate, term) ✓ Developer fee ✓ Rate of return target lgpEHLERS 5; SOURCES TIF Request Pct. Per Unit Analysis Pct. Per Unit First Mortgage 22,332,658 74.9% 146,925 22,332,658 74.9% 146,925 City TIF Note 4,500,000 15.1% 29,605 2,500,000 8.4% 16,447 Developer Equity 3,000,000 10.1% 19,737 4,141,600 13.9% 27,247 TOTAL SOURCES 29,832,658 100% 196,267 28,974,258 97% 190,620 USES I TIF Request Pct. Per Unit i Analysis Pct. Per Unit Acquisition Costs 1,794,000 6.0% 11,803 1,794,000 6.2% 11,803 Construction Costs 22,415,400 75.1% 147,470 22,415,400 77.4% 147,470 Permits/Fees 907,029 3.0% 5,967 907,029 3.1% 5,967 Professional Services 1,539,560 5.2% 10,129 1,539,560 5.3% 10,129 Financing Costs 918,269 3.1% 6,041 918,269 3.2% 6,041 Developer Fee 2;258,400 7.6% 14,858 1,400,000 4.8% 9,211 TOTAL USES 129,832,658 100% 196,267 28,974,258 100% 190,620 RETURN ON INVESTMENT Year 3 Year 15 Year 3 Year 15 Average Annual Cash on Gash 8.3% 14.0% 8.6% 11.5°!0 (Annual Cash Flow/Equity) r Birdtown Flats - After • Redevelopment of underutilized site • 152 new market rate housing units • 10 years of TIF ; Y_ s rather than 24 y E years 1 O.'*'-EHLERS CITY OF O 43o Third St., Farmington, MN 55024 FARMINGTON © 651-28o-6800 woo ® ® Farmington MN.gov TO: Mayor, Councilmembers and City Administrator FROM: Deanna Kuennen, Community Development Director SUBJECT: 2040 Comprehensive Plan Update- Process Update(15 minutes) DATE: January 3, 2023 INTRODUCTION Last summer the city issued a Request for Proposal(RFP) seeking qualified consultants to update the land use and transportation components of the 2040 Comprehensive Plan. Staff will provide an update on that process and propose a path forward to complete the update to the Comprehensive Plan, incorporating a community vision component. DISCUSSION In August 2022,the city issued a Request for Proposal(RFP)seeking qualified consultants to update the land use and transportation components of the 2040 Comprehensive Plan. The initiative was to focus on undeveloped land within the city,in order to provide clear direction to developers and landowners regarding future development expectations that will meet the needs of the community. The city received several responses,at which time the project was put on hold due to staffing changes. This unplanned pause provided necessary time to fill open leadership positions and reassess the project. Staff is now ready to reengage upon this process—but is recommending moving forward with a slight twist. It is still the goal to revisit land use and transportation planning for the undeveloped areas of the city and have an implementable and attainable plan. But Staff sees benefit and importance in establishing and defining a community vision first,which will then serve as a foundation to build a blueprint for future growth by guiding and informing the comprehensive plan update.This change in scope requires City Council consideration as it is anticipated that the completion of a combined vision and comprehensive plan amendment will have added expense and a slightly longer timeframe for completion. If the City Council also sees value in using this opportunity to incorporate a planning activity that will lead to articulating the community's vision—the following draft process and timeline is recommended: • January 3,2023—City Council Work Session—discuss the proposed change in the 2040 Comprehensive Plan Update: 2023 Amendment to include a "community vision"component. • January 4,2023—Based on City Council feedback,contact list of consultants who submitted proposals in August 2022,informing them of the new plan for the project. This will include a schedule for the consultants to submit an updated proposal. • February 17,2023— Due date for updated proposals from consultants,incorporating into the project scope a community vision process. • March 1,2023—Conduct interviews with finalists. • March 6,2023-City Council Meeting—present recommendation on consultant,seeking authorization to execute contract. • March 20,2023—City Council Meeting—appoint vision task force/steering committee. • April 10,2023—Project Kick-Off Meeting • July/August 2023—City Council approval of Community Vision • March 2024—City Council approval of final 2040 Comprehensive Plan Update BUDGET IMPACT The Comprehensive Plan Update is being funded by ARPA dollars.ARPA dollars are available to fund the anticipated additional(yet to be determined) costs associated with adding a visioning component to the Comprehensive Plan Update: 2023 Amendment. ACTION REQUESTED Provide direction on the proposed updated Comprehensive Plan Update: 2023 Amendment and Vision Plan process and funding. CITY OF 0 43o Third St., Farmington, MN 55024 FARMINGTON © 651-280-6800 0111 ® Farmington M N.gov TO: Mayor, Councilmembers and City Administrator FROM: Lynn Gorski, City Administrator SUBJECT: Annual Organizational Matters (20 Minutes) DATE: January 3, 2023 INTRODUCTION Annually at the first City Council meeting of the year, appointments are made to a variety of committees and assignments. DISCUSSION State law requires that the City Council address annual organizational matters during its first regular meeting of the year to make certain designations and appointments. The attached supporting documentation identifies the 2023 organizational matters. BUDGET IMPACT N/A ACTION REQUESTED Discuss appointment to all of the committees and assignments for 2023. ATTACHMENTS: Type Description 0 Backup Material 2023 Annual Organizational Matters D Backup Material 2022 Council Committee Assignments COUNCIL MEETING ANNUAL ORGANIZATIONAL MATTERS JANUARY 3, 2023 MOTION by , second by as follows: (1). That Councilmember be designated as Acting Mayor from January 3, 2023, through December 31, 2023. (2). That the Dakota County Tribune be designated as the official publication from January 3, 2023,through December 31, 2023. (3). Continue the Agreement for Legal Services with Campbell Knutson,as City Attorney for 2023. (4). That Old National Bank of Farmington, Oppenheimer & Co., Inc., RBC Capital Markets and Castle Rock Bank, be designated as the Official Depositories from January 3, 2023, through December 31, 2023. (5). That all sworn personnel in the Farmington Police Department be designated as process servers for the calendar year 2023. (6). Approve a $1,000,000 Faithful Performance bond for the City Clerk. (7). ORDINANCE NO. 022-770 Establishing Fees and Charges for licenses and permits for 2023 was adopted December 5, 2022. (8). Appointments to Boards and Commissions — Candidates were interviewed December 12, 2022, and appointments will be made at the January 17, 2023, Council Meeting. (9). Appoint Councilmember as the primary and Councilmember as the alternate representative to the ALFAmbulance Board. (10). Appoint Councilmember as Director and Councilmember as the Alternate Director to the Dakota 911 Board of Directors through December 31, 2024. (11). Appoint Councilmember as the City's representative to the CEEF Committee. (12). Appoint Councilmember Staff member Lynn Gorski and a Planning Commission member to the Farmington/Empire Planning Advisory Committee. (13). Appoint Councilmember , Staff member Lynn Gorski and a Planning Commission member to the Farmington/Castle Rock Discussion Group. (14).Appoint Councilmember , Staff member Lynn Gorski, and a Planning Commission member to the Eureka/Farmington Planning Advisory Committee. (15). Appoint Councilmembers and to the MUSA Review Committee. (16). Appoint Councilmembers and to the Liquor Operations Committee. (17). Appoint Councilmember as a member and Councilmember as alternate to the Dakota Broadband Board. (18). Appoint Peter Gilbertson as Primary and Lynn Gorski as alternate to the Dakota Broadband Executive Committee. (19). Councilmember Wilson serves as the primary representative and Councilmember Porter serves as the alternate through December 31, 2023, on the Airlake Airport Advisory Commission. (20). Appoint Councilmember to serve on the Fire Relief Board of Trustees as an elected municipal official and City Administrator Lynn Gorski as the municipal representative and Justin Elvestad as Fire Chief. (21).Appoint Jim Constantineau as Director and Chris Regis as Alternate to LOGIS for 2023. (22). Appoint by RESOLUTION R -23 Lynn Gorski as the Responsible Authority for data practices and Julie Flaten as Data Practices Act Compliance Officer and Gary Rutherford as Responsible Authority for law enforcement for 2023. (23). Approve City Council By-laws as presented. (24).Approve the Council Policies as presented or advise of any desired changes. APIF, MOTION CARRIED. Council Committees Committee Meeting Date/Time Location 2022 Council Representatives ALF Ambulance 4`h Thurs Jan,April,July, Oct Rotates Steve Wilson—Primary Nick Lien-Alternate Apple Valley/Lakeville/Farmington Dakota 911 Board of Directors 8 a.m., 3rd Thurs, Feb, May, Dakota 911 Training Room Katie Bernhjelm—Primary Sept, Nov Katie Porter-Alternate Formerly known as Dakota Communication Center CEEF As needed Joshua Hoyt—Primary Steve Wilson-Alternate Castle Rock/Empire/Eureka/Farmington EFPAC As needed Katie Bernhjelm Empire/Farmington Planning Advisory committee Farmington/Castle Rock Discussion As needed Steve Wilson Group Eureka/Farmington Planning Advisory As needed Joshua Hoyt Committee MUSA Review Committee As needed Katie Bernhjelm Steve Wilson Municipal Urban Service Area Liquor Operations Committee Once a year Liquor Store(s) Katie Porter Katie Bernhjelm Dakota Broadband Board Monthly,2nd Wed,4 pm Apple Valley Joshua Hoyt—Primary Katie Porter—Alternate Airlake Airport Advisory Commission Twice a year Steve Wilson—Primary Katie Porter—Alternate Fire Relief Board Quarterly City Hall Joshua Hoyt—Elected Lynn Gorski—Elected or Appointed official Acting Major City Council By-Laws: Section 1 Meetings: SUBD. 3 -At the first regular city council meeting in January of each year, the city council shall: (1) designate the depositories of city funds; (2) designate the official newspaper; (3) pursuant to this section, choose an Acting Mayor from the trustees, who shall perform the duties of the Mayor during the disability or absence of the Mayor from the city, or in case of a vacancy in the office of Mayor, until a successor has been appointed and qualifies. The Acting Mayor shall be selected as follows: Odd Numbered Year-Member serving third year of term who received the most votes when elected; Even Numbered Year- Member serving fourth year of term who received the second most votes when elected. 2022— Katie Bernhjelm 2023-Steve Wilson