Consider Modification of TIF District 14

At the October 23 Council meeting, a motion was made to decertify TIF (Tax Increment Financing) District 14.  The motion failed, and the majority of comments were that some decertification might be of interest, but that the Council lacked enough information at the time to move forward to decertify the district.  Subsequently, the Mayor has requested that this item be put on the agenda to determine whether the Council would like to proceed.

A total decertification would require the City to escrow $7.42 million to cover the GO Bond.  Due to this requirement, the most workable alternative would be for the Council to approve a modification of the district that would remove selected parcels.

Current City obligations include a $7.42 million GO bond for the apartment project, and a commitment to the the rail station.  Also, the City received special legislation to be able to use TIF revenue to reimburse the City for the $6.75 million land acquisition cost and the $5.8 million in public improvements that were assessed to the land.  Over the life of the district, approximately $68 million in public infrastructure expenditures were proposed to be funded with TIF revenue (see attached).  These improvements include highway interchanges, road projects, local streets, sewer, water, and storm water management.  Without TIF financing, the City would need to find other sources of funding for these projects.

No public hearing is required to modify a TIP plan if all the parcels to be removed are tax exempt.  This would cover any of the HRA land.  However to remove taxable parcels, a public hearing is required.  With a ten day notification requirement, a public hearing could be held as soon as November 27th.  Staff recommends that, if this item moves forward, that it be scheduled for no earlier than the regular meeting of December 11, to allow a financial analysis to be prepared.

According to statute (MS469.175-attached), modification of the plan may be done per the following section:

Subd. 4.Modification of plan.
(a) A tax increment financing plan may be modified by an authority.
(b) The authority may make the following modifications only upon the notice and after the discussion, public hearing, and findings required for approval of the original plan:
(1) any reduction or enlargement of geographic area of the project or tax increment financing district that does not meet the requirements of paragraph (e);
(2) increase in amount of bonded indebtedness to be incurred;
(3) a determination to capitalize interest on the debt if that determination was not a part of the original plan;
(4) increase in the portion of the captured net tax capacity to be retained by the authority;
(5) increase in the estimate of the cost of the project, including administrative expenses, that will be paid or financed with tax increment from the district; or
(6) designation of additional property to be acquired by the authority.


Keeping the existing district in place allows the maximum flexibility to the City to create development that will pay off the City's current level of investment.  Because, under TIF, the City receives the County's portion of the tax payment, this is the quickest way for the City to pay-off these obligations.  At a minimum, enough properties need to remain in the district to cover 20% of the principal payment of the bond over the life of the bond issue.

The TIF district adds value to the land and makes it more likely that the City will be able to sell land to a private developer because it provides a means to finance the necessary public improvements.

A schedule of the proposed sources and uses of TIF District 14 is attached and a more detailed exhibit of current  obligations will be presented at the meeting.

It is recommended that the City keep the existing TIF district in place, at least until existing obligations are met.

However, if the Council wishes to modify the district in some fashion, it is recommended that the City consider removing parcels that are expected to develop in the later phases of the project.  The district is limited to a 25-year life and as parcels develop, much of their TIF revenue generating ability will have been diminished.  A detailed financial analysis of the districts ability to pay off currently obligated expenditures will need to be conducted.

A total decertification is not practical at this time because it would require pay-off of the Flaherty and Collins project bonds.

Professional services account in General Fund.

This item is on the regular Council agenda as a case with the following recommendation:

Direct staff to schedule this item for the regular meeting of December 11, and to bring forth recommendations for modifications to TIF District 14 to remove selected parcels from the district, along with a financial analysis of the district.

The action of the Council may be modified based upon work session discussion.