Economic Development Authority - Erik Thorvig, Community Development Director
Title
Resolution Approving Tax Increment Financing Development Agreement and Business Subsidy with Artis REIT for Blaine 35 Project
Executive Summary
This item considers approval for general terms of a tax increment financing (TIF) development agreement and business subsidy agreement for the Blaine 35 Project developed by Artis REIT.
Background
As part of the development of a new TIF District, a development agreement with Artis REIT must also be approved outlining specific requirements of the developer in order to ensure project completion and performance. In general, the development agreement highlights are:
• Developer shall commence construction of Phase I by 6/1/2021 and complete construction by 12/31/21.
• Developer shall construct project to be consistent with all approved plans.
• EDA shall reimburse the developer for development costs by issuance of a TIF note of up to $1,004,167. This will be in the form of pay-as-you-go (PAYGO) financing.
• Artis REIT, through leasing of the building, is required to create 59 full-time equivalent jobs at an average hourly wage of at least $15, excluding benefits, within two years of the project completion.
• Developer must maintain operations in the City for a minimum of five years.
Strategic Plan Relationship
Development of this site as proposed is consistent with the strategic priority of Successful Development of the 35W Corridor.
Board/Commission Review
No board or commission review is required.
Financial Impact
TIF dollars provided to the developer are created as a result of this specific development. General property taxes from other taxpayers or other city funds are not the source of TIF dollars. The agreement is structured as a PAYGO, meaning the developer will not receive TIF dollars unless they complete the project, therefore there is no financial risk to the city, nor is the city obligated to pay the developer if they do not perform and/or taxable values are below projections.
Public Outreach/Input
Notice of the TIF plan was sent to other impacted taxing authorities including Centennial Schools and Anoka County. Other taxing authorities do not have approval authority, however have the right to comment on the proposed plan. Attached is Anoka County’s comment letter.
Staff Recommendation
By motion, approve the resolution.
Attachment List
Draft Development Agreement
TIF Plan
Anoka County Comment Letter
Body
BE IT RESOLVED by the Board of Commissioners (the “Board”) of the Blaine Economic Development Authority (the “EDA”) as follows:
Section 1. Recitals.
1.01 The EDA has proposed to establish Tax Increment Financing District No. 1-22 (An Economic Development District) (the “TIF District”) within the Blaine Economic Development Project (the “Project Area”) and to adopt the Tax Increment Financing Plan relating thereto (the “TIF Plan” and, together with the heretofore established Project Plan, the “Plans”), all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.001 through 469.047, 469.090 through 469.1082, 469.124 through 469.134, and 469.174 through 469.1794, respectively (collectively, the “TIF Act”), all as reflected in that certain document, dated May 3, 2021, entitled “Amendments relating to Blaine Economic Development Project Plan of the Blaine Economic Development Authority, including establishment and approval of the Tax Increment Financing Plan for Tax Increment Financing (Economic Development) District No. 1-22 (Phase 1 - 35W Industrial Park Development)” and presented for the Board’s consideration.
1.02 The Board has investigated the facts relating to the establishment of the TIF District and adoption of the TIF Plan.
1.03 Certain actions required by law have been or will be taken prior to the adoption and approval of the TIF Plan, including, but not limited to, delivery of the TIF Plan to the County Auditor and School District Clerk, and the holding of a public hearing by the City Council (the “Council”) of the City of Blaine, Minnesota (the “City”) thereon following notice thereof published in the City’s official newspaper.
1.04 Certain written reports and other documentation (collectively, the “Reports”) relating to the TIF Plan including the tax increment application made and other information supplied by Artis REIT (or an affiliate thereof, the “Developer”) as to the activities contemplated therein, have heretofore been assembled or prepared by staff or others and submitted to the Board and/or made a part of the City and EDA files and proceedings on the TIF Plan. The Reports include data, information and/or substantiation constituting or relating to (1) why the assistance satisfies the so-called “but for” test and (2) the bases for the other findings and determinations made in this resolution. The Board 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.
1.05 The Developer has proposed to acquire, construct and equip an approximately 118,500 square foot building for light industrial facility for manufacturing, warehouse and distribution, related research and development activities and other related space (collectively, the “Development”) and has requested that the EDA provide tax increment assistance to pay a portion of the public redevelopment costs of the Development.
Section 2. Findings for the Creation of the TIF District and Adoption and Approval of a TIF Plan Therefor.
2.01 The Board hereby finds that the land within the Project Area is proper and desirable to establish and develop within the City, its effect will be to carry out the objectives of the Project Plan by creating an impetus for the development of a light industrial facility for manufacturing, warehouse and distribution and related structures in the City, and otherwise promote certain public purposes and accomplish certain objectives as specified in the Plans. The Project Area has been previously established by the City and the EDA and is not being expanded in connection with the establishment of the TIF District.
2.02 The Board hereby finds that the TIF District is in the public interest and is an “economic development district” within the meaning of Minnesota Statutes, Section 469.174, Subdivision 12, because it will discourage commerce and industry from moving their operations to another state, it will result in increased employment in the state, and it will result in capital investment in the City and therefore preservation and enhancement of the tax base in the state.
2.03 The Board hereby makes the following additional findings in connection with the TIF District:
(a) The Board further finds that the proposed development, in the opinion of the Board of Commissioners, would not occur solely through private investment within the reasonably foreseeable future and, therefore, the use of tax increment financing is deemed necessary. The specific basis for such finding being:
The Developer has represented that it could not proceed with the proposed construction of the Development in the TIF District without tax increment assistance due to the high cost of the specialized nature of the construction of the facility.
(b) The Board further finds that the TIF Plan conforms to the general plan for the development or redevelopment of the City as a whole. The specific basis for such finding being:
The TIF Plan will generally complement and serve to implement policies adopted in the City’s comprehensive plan. The Development contemplated on the property is in accordance with the existing zoning for the property and the City has determined that the Development is consistent with the comprehensive plan.
(c) The Board further finds that the TIF Plan will afford maximum opportunity consistent with the sound needs of the City as a whole for the development of the TIF District by private enterprise. The specific basis for such finding being.
The proposed Development will be used by private enterprise primarily for light industrial facility for manufacturing, warehouse and distribution and related activities and will afford maximum opportunity for the development of the applicable parcels consistent with the needs of the City. The Development will maximize the potential of an underutilized site and will increase the taxable market valuation of the City and the available manufacturing facilities in the City.
(d) For purposes of compliance with Minnesota Statutes, Section 469.175, Subdivision 3(b)(2)(ii), the Board of Commissioners hereby finds that the increased market value of the property to be developed within the TIF District that could reasonably be expected to occur without the use of tax increment financing is probably $0 (other than amounts due to inflation), which is less than the increased market value estimated to result from the proposed development (i.e., approximately $9,776,912) after subtracting the present value of the projected tax increments for the maximum duration of the TIF District (i.e., approximately $822,334) which is approximately $8,954,578. Thus, the use of tax increment financing will be a positive net gain to the City, the School District, and the County, and the tax increment assistance does not exceed the benefit which will be derived therefrom.
2.04 The EDA elects to retain all of the captured tax capacity to finance the costs of the TIF District. The EDA elects the method of tax increment computation set forth in Minnesota Statutes, Section 469.177, Subd. 3(b).
2.05 The provisions of this Section 2 are hereby incorporated by reference into and made a part of the TIF Plan.
2.06 The Board further finds that the Plans are intended and, in the judgment of this Board, their effect will be, to promote the public purposes and accomplish the objectives specified therein.
Section 3. Creation of the TIF District and Approval and Adoption of the Plans; Interfund Loans.
3.01 Subject to the approval by the City Council following a public hearing, the establishment of the TIF District and adoption of the TIF Plan, as presented to the Board on this date, including without limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted.
3.02 The staff of the EDA and the advisors and legal counsel of the City and the EDA are authorized and directed to proceed with the implementation of the TIF District and the TIF Plan therefor.
3.03 The Board hereby approves a policy on interfund loans or advances (“Loans”) for the TIF District, as follows:
(a) The authorized tax increment eligible costs (including without limitation out-of-pocket administrative expenses in an amount up to $52,851 and other project costs in an amount up to $1,004,167) payable from the TIF District, as its TIF Plan is originally adopted or may be amended, may need to be financed on a short-term and/or long-term basis via one or more Loans, as may be determined by the City Finance Director from time to time.
(b) The Loans may be advanced if and as needed from available monies in the City’s or the EDA’s general fund or other City or EDA fund designated by the City Finance Director. Loans may be structured as draw-down or “line of credit” obligations of the lending fund(s).
(c) Neither the maximum principal amount of any one Loan nor the aggregate principal amount of all Loans may exceed $1,057,018 outstanding at any time.
(d) All Loans mature not later than February 1, 2032 or such earlier date as the City Finance Director may specify in writing. All Loans may be prepaid, in whole or in part, whether from tax increment revenue, TIF bond proceeds or other eligible sources.
(f) The outstanding and unpaid principal amount of each Loan shall bear interest at the rate prescribed by the statute (Minnesota Statutes, Section 469.178, Subdivision 7), which is the greater of the rates specified under Minnesota Statutes, Section 270C.40 or 549.09 at the time a Loan, or any part of it, is first made, subject to the right of the City Finance Director to specify a lower rate (but not less than the City’s or the EDA’s then-current average investment return for similar amount and term).
(g) Such Loans within the above guidelines are pre-approved. The Loans need not take any particular form and may be undocumented, except that the City Finance Director shall specify the principal amount and interest rate and maintain all necessary or applicable data on the Loans.
Section 4. Approval of Development Agreement.
4.01. The Developer has presented the EDA with a proposal for the construction of the Development and there has been prepared a certain Tax Increment Development Agreement (the “Agreement”) between the EDA and the Developer, stating the terms and conditions of the Developer’s responsibilities with respect to the Development and the EDA’s the assistance therefor, which has been presented to the Board for its consideration.
4.02. Subject to the approval by the City Council of establishing the TIF District and adopting the TIF Plan therefor following a public hearing, the Board hereby approves the Agreement substantially in the form presented to the Board, together with any related documents necessary in connection therewith, including but not limited to any agreements referred to therein, (collectively, the “Development Documents”) and hereby authorizes the President and Executive Director to negotiate the final terms thereof and, in their discretion and at such time, if any, as they may deem appropriate, to execute the same on behalf of the EDA, and to carry out, on behalf of the EDA, the EDA’s obligations thereunder.
4.03. The approval hereby given to the Development Documents includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by legal counsel to the EDA and by the officers authorized herein to execute said documents prior to their execution; and said officers are hereby authorized to approve said changes on behalf of the EDA. The execution of any instrument by the appropriate officers of the EDA herein authorized shall be conclusive evidence of the approval of such document in accordance with the terms hereof. This Resolution shall not constitute an offer and the Development Documents shall not be effective until the date of execution thereof as provided herein.
4.04. In the event of absence or disability of the officers, any of the documents authorized by this Resolution to be executed may be executed without further act or authorization of the Board by any duly designated acting official, or by such other officer or officers of the Board as, in the opinion of the City Attorney, may act in their behalf. Upon execution and delivery of the Development Documents, the officers and employees of the EDA are hereby authorized and directed to take or cause to be taken such actions as may be necessary on behalf of the EDA to implement the Development Documents, including without limitation the issuance of the Tax Increment Revenue Note thereunder.
4.05. The Board hereby determines that the execution and performance of the Development Documents will help realize the public purposes of the Act.
BE IT FURTHER RESOLVED by the Board of Commissioners (the “Board”) of the Blaine Economic Development Authority (the “EDA”) as follows:
Section 5. Recitals.
5.01 The EDA has proposed to establish Tax Increment Financing District No. 1-23 (An Economic Development District) (the “TIF District”) within the Blaine Economic Development Project (the “Project Area”) and to adopt the Tax Increment Financing Plan relating thereto (the “TIF Plan” and, together with the heretofore established Project Plan, the “Plans”), all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.001 through 469.047, 469.090 through 469.1082, 469.124 through 469.134, and 469.174 through 469.1794, respectively (collectively, the “TIF Act”), all as reflected in that certain document, dated May 3, 2021, entitled “Amendments relating to Blaine Economic Development Project Plan of the Blaine Economic Development Authority, including establishment and approval of the Tax Increment Financing Plan for Tax Increment Financing (Economic Development) District No. 1-23 (Phase 2 - 35W Industrial Park Development)” and presented for the Board’s consideration.
5.02 The Board has investigated the facts relating to the establishment of the TIF District and adoption of the TIF Plan.
5.03 Certain actions required by law have been or will be taken prior to the adoption and approval of the TIF Plan, including, but not limited to, delivery of the TIF Plan to the County Auditor and School District Clerk, and the holding of a public hearing by the City Council (the “Council”) of the City of Blaine, Minnesota (the “City”) thereon following notice thereof published in the City’s official newspaper.
5.04 Certain written reports and other documentation (collectively, the “Reports”) relating to the TIF Plan including the tax increment application made and other information supplied by Artis REIT (or an affiliate thereof, the “Developer”) as to the activities contemplated therein, have heretofore been assembled or prepared by staff or others and submitted to the Board and/or made a part of the City and EDA files and proceedings on the TIF Plan. The Reports include data, information and/or substantiation constituting or relating to (1) why the assistance satisfies the so-called “but for” test and (2) the bases for the other findings and determinations made in this resolution. The Board 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.
5.05 The Developer has proposed to acquire, construct and equip two buildings on the site for a total of an approximately 198,500 square feet of light industrial facilities for manufacturing, warehouse and distribution, related research and development activities and other related activities (collectively, the “Development”) and has requested that the EDA provide tax increment assistance to pay a portion of the public redevelopment costs of the Development.
Section 6. Findings for the Creation of the TIF District and Adoption and Approval of the TIF Plan.
6.01 The Board hereby finds that the land within the Project Area is proper and desirable to establish and develop within the City, its effect will be to carry out the objectives of the Project Plan by creating an impetus for the development of light industrial facilities for manufacturing, warehouse and distribution and related structures in the City, and otherwise promote certain public purposes and accomplish certain objectives as specified in the Plans. The Project Area has been previously established by the City and the EDA and is not being expanded in connection with the establishment of the TIF District.
6.02 The Board hereby finds that the TIF District is in the public interest and is an “economic development district” within the meaning of Minnesota Statutes, Section 469.174, Subdivision 12, because it will discourage commerce and industry from moving their operations to another state, it will result in increased employment in the state, and it will result in capital investment in the City and therefore preservation and enhancement of the tax base in the state.
6.03 The Board hereby makes the following additional findings in connection with the TIF District:
(a) The Board further finds that the proposed development, in the opinion of the Board of Commissioners, would not occur solely through private investment within the reasonably foreseeable future and, therefore, the use of tax increment financing is deemed necessary. The specific basis for such finding being:
The Developer has represented that it could not proceed with the proposed construction of the Development in the TIF District without tax increment assistance due to the high cost of the specialized nature of the construction of the facility.
(b) The Board further finds that the TIF Plan conforms to the general plan for the development or redevelopment of the City as a whole. The specific basis for such finding being:
The TIF Plan will generally complement and serve to implement policies adopted in the City’s comprehensive plan. The Development contemplated on the property is in accordance with the existing zoning for the property and the City has determined that the Development is consistent with the comprehensive plan.
(c) The Board further finds that the TIF Plan will afford maximum opportunity consistent with the sound needs of the City as a whole for the development of the TIF District by private enterprise. The specific basis for such finding being.
The proposed Development will be used for primarily by private enterprise primarily as light industrial facilities for manufacturing, warehouse and distribution and related activities and will afford maximum opportunity for the development of the applicable parcels consistent with the needs of the City. The Development will maximize the potential of an underutilized site and will increase the taxable market valuation of the City and the available manufacturing facilities in the City.
(d) For purposes of compliance with Minnesota Statutes, Section 469.175, Subdivision 3(b)(2)(ii), the Board of Commissioners hereby finds that the increased market value of the property to be developed within the TIF District that could reasonably be expected to occur without the use of tax increment financing is probably $0 (other than amounts due to inflation), which is less than the increased market value estimated to result from the proposed development (i.e., approximately $16,188,650) after subtracting the present value of the projected tax increments for the maximum duration of the TIF District (i.e., approximately $1,303,653) which is approximately $14,884,997. Thus, the use of tax increment financing will be a positive net gain to the EDA, the School District, and the County, and the tax increment assistance does not exceed the benefit which will be derived therefrom.
6.04 The EDA elects to retain all of the captured tax capacity to finance the costs of the TIF District. The EDA elects the method of tax increment computation set forth in Minnesota Statutes, Section 469.177, Subd. 3(b).
6.05 The provisions of this Section 2 are hereby incorporated by reference into and made a part of the TIF Plan.
6.06 The Board further finds that the Plans are intended and, in the judgment of this Board, their effect will be, to promote the public purposes and accomplish the objectives specified therein.
Section 7. Creation of the TIF District and Approval and Adoption of the TIF Plan; Interfund Loans.
7.01 Subject to the approval by the City Council following a public hearing, the establishment of the TIF District and adoption of the TIF Plan, as presented to the Board on this date, including without limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted.
7.02 The staff of the EDA and the advisors and legal counsel of the City and the EDA are authorized and directed to proceed with the implementation of the TIF District and the TIF Plan therefor.
7.03 The Board hereby approves a policy on interfund loans or advances (“Loans”) for the TIF District, as follows:
(a) The authorized tax increment eligible costs (including without limitation out-of-pocket administrative expenses in an amount up to $87,150 and other project costs in an amount up to $1,655,827) payable from the TIF District, as its TIF Plan is originally adopted or may be amended, may need to be financed on a short-term and/or long-term basis via one or more Loans, as may be determined by the City Finance Director from time to time.
(b) The Loans may be advanced if and as needed from available monies in the City’s or the EDA’s general fund or other City or EDA fund designated by the City Finance Director. Loans may be structured as draw-down or “line of credit” obligations of the lending fund(s).
(c) Neither the maximum principal amount of any one Loan nor the aggregate principal amount of all Loans may exceed $1,742,977 outstanding at any time.
(d) All Loans mature not later than February 1, 2033 or such earlier date as the City Finance Director may specify in writing. All Loans may be prepaid, in whole or in part, whether from tax increment revenue, TIF bond proceeds or other eligible sources.
(e) The outstanding and unpaid principal amount of each Loan shall bear interest at the rate prescribed by the statute (Minnesota Statutes, Section 469.178, Subdivision 7), which is the greater of the rates specified under Minnesota Statutes, Sections 270C.40 or 549.09 at the time a Loan, or any part of it, is first made, subject to the right of the City Finance Director to specify a lower rate (but not less than the City’s or the EDA’s then-current average investment return for similar amount and term).
(f) Such Loans within the above guidelines are pre-approved. The Loans need not take any particular form and may be undocumented, except that the City Finance Director shall specify the principal amount and interest rate and maintain all necessary or applicable data on the Loans.
PASSED by the Blaine Economic Development Authority this 3rd day of May, 2021.