PUBLIC HEARING: Adopt Resolution #21-241 Approving The Modification To The Development Program For Development District No. 1 and Establishing Tax Increment Financing District No. 18: Oppidan Industrial Within Development District No. 1 and Approving The Tax Increment Financing Plan Therefor; and Authorizing An Interfund Loan and Resolution #21-242 Authorizing Execution of a Tax Increment Financing (TIF) Agreement: Oppidan Incorporated, Case of Ramsey Industrial Owner LLC and Oppidan Incorporated

 

PURPOSE
The purpose of this case is to consider multiple actions regarding the Oppidan Incorporated TIF Business Assistance Application which was received by reviewed by the EDA at the July 8, 2021 meeting.  This request is specifically related to Oppidan Incorporated proposed three building 405,000 square foot industrial complex

1. TIF PLAN AND INTERFUND LOAN: Consider support of the attached Resolution #21-XXX Approving the Modification to the Development Program for Development District No. 1 and Establishing Tax Increment Financing District No. 18: Oppidan Industrial. This step does not award TIF but is a step in the process that allows the City to award TIF. Awarding the TIF Request is covered in Step 2 below. Some highlights included in the TIF Plan:
   1. Geographical boundary of Development District No. 1 and TIF District 18
   2. Statutory requirements relating to type of TIF District being created, duration of TIF District and impacts to future tax base. This district is considered an Economic Development District. 
   3. Provision of a a not-to-exceed budget number ($3,091,277) for eligible development activities to take place within the proposed TIF District 18 that can be financed ($1,172,000 in business assistance, remainder for uses such as public infrastructure improvements and administration of district).
   4. Findings and "But For" Test (Appendix C) documenting that the TIF plan and project is in compliance with Minnesota Statutes.
   5. The TIF Plan does not include inter fund loan language. However, Resolution #121-XXX establishes an "ability" for the City to utilize an inter fund loan to pay for up front administrative/legal costs associated with TIF District #18; and repay said inter fund loan with TIF District #18 proceeds. The City is not borrowing any money in this request. It is set up as a 'pay as you go' package, meaning assistance is only provided if tax increment is created.
2. TIF AGREEMENT: Consider support of the attached Resolution #21-XXX authorizing execution of a Tax Increment Financing (TIF) Agreement: Oppidan Industrial.  This is the actual TIF award for Ramsey Industrial Owner and Oppidan Incorporated ($1,172,000 Pay-Go TIF Note).  This document includes all terms and conditions for this specific deal.

BACKGROUND (project)
The project consists of:

1. The purchase of 43 acres of land from Hageman Holdings for the Oppidan Industrial project and further development of Bunker Lake Business Park. The estimated total cost for this step is $4.050M. Assistance is only provided the the area related to the Oppidan site plan, not areas for future development.
2. Within the larger 43-acre parcel, the Developer desires to plat 27.06 acres to construct Building 1 - 111,300 SF, Building 2 - 147,000 SF and Building 3 - 147,000 SF.  Collectively, these three industrial buildings will total 405,300 SF. No users have been identified for these buildings but they need to be manufacturing, warehousing or other TIF eligible uses. The developer is obligated to bring tenants to the buildings that will satisfy the to goal of 100 new jobs. If this does not occur the assistance is prorated based on actual job creation The estimated total cost for the project is 42.7M.

BACKGROUND (subsidy request)
The Developer has asked the City for public financial incentives related to both items above in relation to project (A and B).  The Developer requested $1,172,000 in Tax Increment Financing/Assistance to assist with eligible project costs. See analysis below outlining Staff/EDA recommendation of $1,172,000.  The Developer is requesting the City provide 9 years of pay-as-you-go (PayGo) TIF for the 3 building 405,300 square foot project.  Based on their modeling and project pro-forma, the Developer believes financial assistance is needed, in order to make this project work.

The Developer has completed and submitted a business subsidy application, including a $10,000 non-refundable fee to establish a project escrow.  Staff has reviewed and scored the application.  The application scores a 30 out of 35 which is a moderate to high score.  The application states that this project will bring approximately 100 new jobs to Ramsey upon completion of the construction and opening of the new buildings.   Ehlers and staff have reviewed the financial assistance request and have determined that is satisfies the "But-For" test and has conducted financial analysis determining that $1,172,000 in assistance and the return on investment for the Developer is within industry standards and does not unduly enrich the Developer. A copy of the analysis conducted by Ehlers is attached to this case.

Both the the Anoka Hennepin 11 School District and Anoka County have been notified of this action, as required by Statute. The Public Hearing has been properly noticed and a copy of the notice has been attached to this case.

Project Benefits Summary

• 100-150 new jobs for the City of Ramsey.  At least 100 of the new jobs are anticipated to be created paying a minimum wage of at least $17.50 per hour excluding benefits.
• Opportunity for employment for Ramsey and Anoka County Residents.
• Payment of required outstanding 2011 and 2017 special assessments ( for the extension of Bunker Lake Boulevard and City Utilities (Bunker Lake Business Park / Puma Street) attributable to the developed parcel will be made at time of proposed property closing in September 2021. (Approximately $441,000)
• 42.7 Million Dollar private sector project investment.
• $1M in annual property taxes after project is completed. The newly created local tax revenue will be captured by the TIF District 18 for 9 years.
• The proposed 405,000 square foot manufacturing buildings are high-quality and market relevant.  This industrial complex will be the largest in Ramsey and be a significant investment for the City's new Bunker Lake Industrial Park.
• The proposed funding sources for the subsidy request would be from a newly created TIF District 18.   Meaning, this subsidy will not have a direct impact on the existing general tax levy and Ramsey taxpayers.  Also, like any TIF project, the existing tax base remains in place, 100%.
• The proposed $1,172,000 in Tax Increment Financing will be through a PayGo Note (pay as you go) at 4.5% interest rather than "up-front" financing or bonding. The Developer will receive 60% of the TIF generated by the project
• The City of Ramsey will retain 40% of the TIF generated to help pay for future improvements such as Bunker Lake Boulevard adjacent to the site and/or other eligible costs.
• The City of Ramsey is seeking retail and restaurant users.  Common feedback from the development community and prospects is that Ramsey needs to improve it demographics in order attract these users.  Ramsey can do that by increasing both population (rooftops) and increasing trip generation (i.e. large employers and destination users).  The development of Bunker Lake Industrial Park helps improve demographics needed by retail and restaurant users (via new vehicle trip generation and increased daytime populations).

Further Analysis

• This business subsidy request has been reviewed and meets Ramsey's business subsidy policy criteria.
• The Developer's request for $1,172,000 is justified and meets State of Minnesota Business Subsidy Statutes. 
• Staff has contracted with Ehler's to conduct a third party analysis of the project and to evaluate if the project meets the "But For" test and it has been determined that this project meets that criteria. Findings satisfying this "But-For" test can be found within the attached Ehlers Memo dated June 30, 2021 and the TIF Plan.
• Projected cash on cost return on investment for the Developer is 6.72% which falls within the industry standard of 6.5-7%. the analysis by Ehlers concludes that the $1,172,000 in proposed City assistance does not unduly enrich the company.

New 9-year TIF District (TIF #18) for the business subsidy and $10,000 fee from the Developer for processing the Application and legal related to TIF Plan and TIF Agreement.

STAFF
Staff recommends moving forward with this proposed project and supports the Resolutions #21-241 and #21-242 in this case.  Staff believes this project meets several goals outlined within the City's Adopted Strategic Plan and EDA Work Plan.  Please see observations section for benefits and considerations regarding this request. 

EHLERS
Ehlers completed the underwriting for this project.  Please see the attached Ehlers MEMO.  In summary, Ehlers' findings support moving forward with approving this request. 

EDA
The EDA reviewed this project, completed application and analysis by Staff and Ehlers on July 8 and August 12, 2021.   The EDA in favor of moving forward with this project with the $1,172,000 in TIF Pay-Go-Note Assistance.   The EDA determined that this request is consistent with with the City of Ramsey Business Subsidy Policy.  The EDA unanimously passed a motion recommending approval of the actions in the two attached resolutions.  Attached to this case are  EDA minutes from July 8 amd August 12.

Motion to adopt Resolution #21-241 Resolution Approving The Modification To The Development Program For Development District No. 1 And Establishing Tax Increment Financing District No. 18: Oppidan Industrial Within Development District No. 1 And Approving The Tax Increment Financing Plan Therefor; And Authorizing An Interfund Loan , subject to review by the City Attorney.

 --and--

Motion to adopt Resolution #21-242 Authorizing Execution of a Tax Increment Financing (TIF) Agreement: Oppidan Incorporated; subject to review by the City Attorney.