07-08-2019 Council Work Session Packet

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r E H L E RS LEADERS IN PUBLIC FINANCE Potential TIF District Statutory Authority Soils Condition TIF District (max of 21 TIF collection years). A type of tax increment financing district consisting of a project, or portions of a project, within which the HRA or City finds by resolution that the following conditions exist: a. the presence of hazardous substances, pollution, or contaminants requires removal or remedial action for use; b. the estimated cost of the proposed removal and remedial action exceeds the fair market value of the land before completion of the preparation. There is an exception if the estimated costs of the proposed removal or remedial action exceeds $2 per square foot for the area of each parcel. The proposed removal or remediation action must be specified in a development action response plan submitted to the Pollution Control Agency and the actions recommended in the plan or proposal are approved in writing by the commissioner of the agency as reasonable and necessary to protect the public health, welfare, and environment. Tax Increment can be used to correct the applicable conditions. 2. Redevelopment (26 years) or Renovation and Renewal (16 years) TIF District. A TIF district created to facilitate redevelopment of a site that contains one or more substandard buildings or areas occupied by surface improvements in need of significant renovations and/or clearance. A substandard building is defined as one containing structural defects or deficiencies in essential light, utilities, ventilation, layout and egress; and requiring repair costs to bring it up to applicable building codes in excess of 15% of the cost of constructing a new building of same size and type on the site. Tax Increment can be used for site acquisition, environmental remediation, demolition, site preparation, pubic improvements and parking necessary to redevelop the site. 3. Housing TIF District (26 years). A tool to assist with projects intended for occupancy, in part, by persons or families of low and moderate income. A rental housing development can comply with the income requirements if at least: (1) 20% of the units are held for persons at or below 50% Area Median Income, or (2) 40% of the units are held for persons at or below 60% Area Median Income. The income limits must remain in place for as long as the TIF is collected and spent to assist the costs of developing the housing project. Tax Increment Financing allows for the capture of most of the increased local tax revenue created from a new development for a limited period of time. TIF is structured in a way so that taxes generated from the undeveloped site ("Base Taxes") continue to flow to local jurisdictions, as well as certain state and local school operating tax revenues generated from the new development. A sample breakdown between the uncaptured base taxes collected from a property today and captured TIF is included below. In this example, the school district operating referendum levies would benefit from the new development even during the TIF District. New Development $50000000 625000 Gross Taxes: 16.4060% 41.8610% 10.1190% 23.5520% 0.22649% Multifamily Housing ,, , $102,538 $261,631 $63,244 $147,200 $113,245 $687,858 As is Today- $623,000 _ _ red $1278 $3260 $788 $1834 1,411 $120,405 Ongoing Base Value Baa Base Taxes: ,, , $111,834 l ntalValue $49,377,000 617,213 TIF: $101,260 $258171 $62,456 $145,366 $0 ,453 BUILDING COMMUNITIES. IT'S WHAT WE DO. LJ infv@ehlers-inc.com � 1 (800) 552-1171 (D www.ehiers-inc.com