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HomeMy WebLinkAboutSt Croix Mall - Revised TIF Projections VOTO, TAUTGES, REDPATH & CO., LTD. CERTIFIED PUBLIC ACCOUNTANTS \W� / Birch Lake Professional Building e 1310 E. Hwy. 96 ® White Bear Lake, MN 55110 ® Fax (612) 426 -5004 e Phone (612) 426 -3263 April 30, 1991 ROBERT J. VOTO, CPA ROBERT G. TAUTGES, CPA JANIES S. REDPATH, CPA D. KENNETH GEORGE, CPA DAVID J. MOL. CPA To the Honorable Mayor and Members of the City Council City of Oak Park Heights 14168 N 57th St Stillwater, MN 55082 RE: ST. CROIX MALL - REVISED TIF PROJECTIONS Attached herewith are the following schedules projecting the TIF calculations and Developer assistance for the St. Croix Mall - TIF Agreement based upon current (1991) data: Exhibit A - Computations of total tax allocations (county basis) including City TIF monies based upon an $8,410,300 final project value. Exhibit B - Computations of developer assistance based upon an $8,410,300 final project value. When the City Council /HRA approved this TIF Agreement, it was anticipated that payments to the Developer would total $960,000 over eight years (i.e. approximately $120,000 per year). However, this level of assistance will not be reached due primarily to a change in the "economic adjustment factor" to be used for this project and TIF tax revenues which will be "lost" to this project. ECONOMIC AD,TUSTMENT FACTOR The economic adjustment factor is computed by the County and is used to adjust the base property values before computing annual incremental (TIF) values. For example, if the base value starts at $3,000,000 and the economic adjustment factor is 2 %, the base value will be increased by 2% per year. This base value (adjusted upwards annually) cannot be used for TIF purposes. It remains as part of the City's (plus County and School District) regular tax base. In effect, this adjustment allows the regular tax base to increase annually over the life of the TIF District (based upon inflationary increases prior to the creation of the TIF District). I MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS < PRIVATE COMPANIES PRACTICE SECTION MINNESOTA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS GOVERNMENT FINANCE OFFICERS ASSOCIATION . MINNESOTA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS To the Honorable Mayor and Members of the City Council City of Oak Park Heights April 30, 1991 Page 2 When the initial TIF projections were prepared, we used an economic adjustment factor of 1.91 % per year. This factor was based upon data estimated by the developer and the County. The actual economic adjustment factor for this project is 5.7858 % or more than three times the estimated amount. This change has the effect of increasing future base values for this project and decreasing future TIF values for this project. The effect of this change is reflected in the following schedule: Original Revised Estimates Estimates Year Base TIF Base TIF 1991 71.0% 29.1% 76.9% 23.1% 1992 45.3% 54.7% 48.0% 52.0% 1993 45.3% 54.7% 49.8% 50.2% 1994 45.3% 54.7% 51.6% 48.4% 1995 45.3% 54.7% 53.5% 46.5% 1996 45.3% 54.7% 55.5% 44.5% 1997 45.3% 54.7% 57.6% 42.4% 1998 45.3% 54.7% 59.7% 40.3% The above, original estimates reflected a consistent split of 45.3 %/54.7% between base and TIF because we used an economic adjustment factor of 1.91 % which closely approximated our annual inflationary factor of 2.0 %. The revised estimates are based upon the actual economic adjustment factor of 5.7858% and the original inflationary factor of 2.0 %. This results in an increasing base value and decreasing TIF value after the second year. "LOST" TIF REVENUE The original projections were based upon State Statutes and Regulations in effect at that time. Recent State changes have reduced the level of TIF revenue available to the City for TIF purposes. 1. Tax capacity ratios for industrial /commercial property have been decreased from 3.30 %/5.25 % to 3.20 %/4.95 %. This change reduces the level of TIF revenue generated (from an equal fair market value of this property) by approximately 5.75 % per year. 2. The tax capacity ratio (including all jurisdictions) was 92.031 % for 1988/89. This has increased to 106.784 % for 1990/91. This increase is partially the result of increased tax levies (i.e. school district referendum) and partially the result of decreased tax capacity ratios (see item #1 above). However, TIF taxes resulting from increased tax ratios will be "lost" to the TIF District. To the Honorable Mayor and Members of the City Council City of Oak Park Heights April 30, 1991 Page 3 The combined effect of the above two factors will result in "lost" TIF revenue totalling $219,867 over the term of this project (i.e. 1991 through 1998). These "lost" TIF taxes will be assessed against the properties and collected by the County. However, they will not be remitted to the City as TIF revenue; rather, they will be remitted to the primary taxing jurisdictions (City, County and School District) based upon relative increases in tax capacity rates of such jurisdiction. As a practical matter, most of this "lost" TIF revenue will be remitted to the local school district. Any amount received by the City will be used to reduce future general- purpose (levy limitation) tax levies of the City. PROJECTED /ESTIMATED DEVELOPER ASSISTANCE The annual and total estimated amount of developer assistance is shown in Exhibit B at the $8,410,300 completed project value. A comparison of the original estimates (at the $8,417,300 completed project level) and revised estimates is as follows: Developer Assistance Original Revised % Year Estimates Estimates Decrease Chan e 1991 $ 46,034 $ 30,908 $(15,126) (32.9 %) 1992 138,414 118,928 (19,486) (14.1%) 1993 141,196 117,154 (24,042) (17.0%) 1994 144,032 115,094 (28,938) (20.1%) 1995 146,924 112,732 (34,192) (23.2 %) 1996 149,876 110,056 (39, 820) (26.6%) 1997 152,884 107,050 (45, 834) (30.0%) 1998 40,640 103,701 63,061 155.0% $960,000 $815,623 ($144,377) (15.0)% The decreased developer assistance is primarily the result of the increased economic adjustment factor as stated previously. As clearly shown above, the revised estimates are 15 % below the original estimates. The above schedule reflects the effects of the higher economic adjustment factor. Each year a greater portion of this tax base is retained as part of the regular (i.e. Non -TIF) tax base. Alternatively, the TIF portion of this tax base will decrease, unless the overall value is increased at or above the economic adjustment factor level. To the Honorable Mayor and Members of the City Council City of Oak Park Heights April 30, 1991 Page 4 CITY TIF REVENUES The original TIF plan and projections were based upon developer assistance equal to 60% of the incremental tax base. The remaining 40 % is applied towards the City's fiscal disparity contribution amount - -in theory. In actual practice, the City's fiscal disparity factor was 15.6% for 1990/91 applied against all (100 %) commercial /industrial property values. This 15.6% against all commercial /industrial value equates (equals) 40% against post 1971 increased commercial /industrial property values. This variance (methodology between theory and practice) creates a situation whereby the developer receives his full 60 % assistance and the City receives additional amounts (i.e. 40% fiscal disparity in theory vs. 15.6% fiscal disparity in actual practice) of TIF revenues. Under normal circumstances, all commercial /industrial property will contribute to the fiscal disparity pool. However, under current TIF State Statutes, the City has the option of excluding TIF property from fiscal disparities. If this option is elected, the excluded amount will be applied to other City property values. The City of Oak Park Heights did make this election for this TIF project. Accordingly, actual TIF revenues should be split 60% to the developer and 40% to the City for other TIF purposes. Revised estimates of City TIF revenue are shown in Exhibit B attached to this report. CITY TIF COMMITMENTS In conjunction with the developer project, the City partially committed its TIF revenue to finance a street re- alignment project at 58th Street and Osgood Avenue. The primary purpose of this project was to improve traffic flows and patterns. A summary of construction costs at December 31, 1990 plus estimated final costs is as follows: Construction Estimated Costs @ Completed Description ....... 12/31/90 Project Contractor $97,816 $110,000 Engineering 21,488 24,200 Other 6,372 7,200 Total Actual /Est. $125,676 $141,400 Projected Interest 24,000 Projected Total $165,400 To the Honorable Mayor and Members of the City Council City of Oak Park Heights April 30, 1991 Page 5 The City's financing plan for this project calls for 100% City TIF financing. However, most of the above costs were incurred prior to 1991 and all of these costs will be incurred by the end of 1991. The first City TIF revenue will not be received until June and December of 1991 ($8,772 each). Additionally, sufficient City TIF revenues will not be actually received until December, 1993 to fully finance this project. We recommend that the City formalize a loan (between its TIF Fund and the Closed Bond Fund) to provide interim financing for this project. The interfund loan can be dated January 1, 1991 in the amount of $140,000; carry interest at 8% per annual; and, payable on or before December 31, 1993. The City can make partial repayments of this loan as City TIF monies are actually received. The above 58th Street and Osgood Avenue project will substantially commit City TIF revenue through 1993. Thereafter, the City can expect to have the following amounts available to finance other City TIF projects: Year Amount Accumulative 1994 $78,228 $78,228 1995 76,777 155,005 1996 75,119 230,124 1997 73,231 303,355 1998 71,090 374,445 As shown above, future City TIF revenue will not be available until 1994. Additionally, these amounts are limited -- averaging only approximately $75,000 per year for five years. DEVELOPER TIF The City's final committment to the Developer of this project generally called for the Developer to receive 60% of the additional or incremental taxes generated by this project with a maximum amount of $960,000 to be paid over the term of this TIF District. Tax Increment Financing has been the subject of various State Statutes over the past several years, most of which has limited TIF revenue and /or uses of TIF revenue (especially additional or excess TIF revenue). Accordingly, a formula was devised to guard against future State Statute changes and to insure substantial compliance with the interest of the City Council. The attached Exhibit B computes the 1991 (and future years) amounts to be paid to the Developer and retained by the City over the term of this TIF District. As shown in Exhibit B, total TIF Tax Revenue - Net is projected to be $1,371,561 over the years 1991 through 1998. The Developer's portion is projected to be $815,623 or 59.5% and the City's To the Honorable Mayor and Members of the City Council City of Oak Park Heights April 30, 1991 Page 6 portion is projected to be $555,623 or 40.5% of the total. This percentage split (between Developer and City) deviates slightly from the 60%/40% original goal because of changes in State Statute and County Assessor's methodology since 1989. However, it is substantially in accordance with the final City committment to the Developer. The City's Agreement with the Developer calls for the City to remit Developer TIF revenues within 30 days of the actual receipt of such monies. The City will be receiving these monies (both Developer TIF and City TIF) as part of its normal tax settlement each June and December. However, the City usually does not receive the detailed allocations (of its overall tax settlement) until sometime after the monies are received. Accordingly, it may not be possible for the City to remit these monies within 30 days of receipt. We recommend that the City remit such monies as soon as possible after receipt of all required information. The attached Exhibit B computes the Developer's TIF at 60% of the computed total and presents actual net TIF tax based upon Washington County methodology. The percent amounts shown in the last two columns can be used by the City to allocate actual TIF tax receipts to the Developer. For example, (assuming prompt payment of the 1991 property taxes) the City should receive its first TIF tax settlement equal to one -half of the 1991 total amount (i.e. 1/2 of $52,322 or $26,161) in June or July, 1991. When this occurs, the City should remit $15,454 (or 59.1 % of the actual amount received) to the Developer. A similar amount will be payable after receipt of the December, 1991 tax settlement. As an option, the City may wish to remit an even 60% of actual TIF receipts in 1991. This option would be fully consistent with the interest of the City Council when final approval for the level of developer assistance was determined. We will be available to discuss this report and other matters with the City Council at a later date. Respectfully submitted, VOTO, TAUTGES, REDPATH & CO., LTD. Robert J. Voto, CPA cc: Mark Veirling Dan Wilson Attachments CITY OF OAK PARK HEIGHTS MALL91 BX0 l[iE PROJECTIONS-ST. ORO[XMALL EXHIBIT A R.E. TAX kLL0OATION-WA8H. {-TY. DA08 TAX CO CITY / TAX CDLL FAIR MARKET VALUE TAX CAPACITY VALUE TAX TOTAL {XY. DEYEL LOST FISCAL COLL YEAR BASE INCR. TOTAL BASE ]NCR. TOTAL RATE TAX DUM. l[LF. l[iF' D|OF! TOTAL YEAR 1888 ]410 0 3,410 177 177 0.82031 184,138 ACTUAL 148.024 0 0 15,312 184.136 1909 1890 3007813 -l26713 3 10003 '6,308 174 0.80303 108304 ACTUAL 14�400 O 0 19 160 1350 1881 18183342 1,144368 4960700 186 56853 241805 186784 2F6 55 ACTUAL 159 52 8 30S14 269 1881 1882 4 4,371152 8410,300 187769 216 414 1.08784 442 PROJECT 144 180515 31,883 66 442 1SLI 1893 4270,729 4 8578,508 209212 213874 422806 1.06704 40 PROJECT 1 EA S8S 196648 31 67 451,574 1883 1894 4 4 8750078 221 210 431,378 1.08704 400044 PROJECT 187,234 1S]322 30 69 460,643 1384 1835 4 4 8 234 05318 440041 1�00784 485803 PROJECT 1705 21 180503 30,373 70 469 1835 1896 5,865733 �047847 g1 03A0 247,688 201,208 448877 1.08704 478,320 PROJECT 192 105,175 29,684 71,899 470, 1896 1887 5 3,937,404 8,285,85L 281 1350S2 457,880 1.00704 488 PROJECT 206 100,201 28300 73,348 488853 1987 1898 5 3,813 9471,305 277 18392G 467003 1.06784 498,770 PROJECT 221,143 174 28020 74,818 498,770 1080 TUTALO-1891-1998 ONLY 3 1,428,301 1 219,687 633 3551,501 NOTES: |N[OALB At' E Y AWE E&UALQTHE1880M9REAL ESTATE TAX YALUE A SF0LLOYVO� BU(2/U}T1 1,140,100 PARKING / MALL EXPANSION 01402-2150 8[K2/ LOT 2 1,05 MAIN MALL 01402'220O DLK2/ LOT 3 438 MALL/M_�,LLEXPANS|0N 01402'2250 OLK2/L0T4 26 MALL/MALLEXPANS|0N 0402-2300 8LK2/ LOT S 15U3U8 MALL-THEATER 61402-2350 TOTAL MKT. VALUE 3 TOTAL HARKET VALUE QAOWQT0 SET AMOUNT AT1O82YvT[H2% P'kNNU,_',L INCREASES THEREAFTER ANNUAL ECONOHlIC ADJUSTMENT FACTOR (APPUED TO BASE) PER VVA'_sHINGTON 0OUN 0.057050 LOOTTi�R�PR�O�NT�T|��TAX�O{N�XO��SOFl8U8TAXCAPAQTYFAJEOF.9ZU3l M AILL91DXL8 CITY OF OAK PARK MB8HT8 l[iF.PRDJE{TlONS-8T. OR00(MAUL EXHIBIT TAX FAIR MARKET VALUES TAX TOTAL TAX NET DEVEL OOLL ADJUST' TAX INCR. PROP. INCR. LOST INCR. T{F TiF TAX -M.BASIS-NET PEFKC. PERO' YEAR TOTAL BASE |NORE. FACTOR TAX TAX T|F TAX 11 0096 ° DEVEL CITY TOTAL DEVFL. OO`/ 1088 3410308 1410300 0 0.0000 1830 3480800 3 -126713 '0.0304 1991 4960,700 3 1,144,358 0.2307 259 59802 3 61,514 36 309 08 21,414 6 581% 40.9% 1882 8,410,300 4037 4,373 0.5208 442 2]8,18K 31,883 198 118 110,928 00,507 188,515 59.6% 40.00 1893 8 5 4 4 0.5021 451 226 31 185257 117,154 117 79 196 59.8% 404% 1984 8 4517,825 4232,251 0.4037 40,643 222813 30,880 181,O23 115 115 78 19 3 53.5% 40.5% 1885 8925,070 4778217 4 0.4845 489,093 218 30 107,886 112732 112,732 76 189 59.6% 40.6% 1830 9 5 4 0.4440 479328 213 29 183 110,050 110058 75,118 185 59.4% 40.0% 1997 9 1 5 ' 348248 ]9]7,404 0.4240 488,955 287,316 28,380 178,410 107,050 107,050 73,231 180 59.4% 40.0% 1980 8471,365 5 1013678 0.4027 498 200 2�020 17�035 103,701 103.701 71 174 58.3% 40.7% 3551.601 1,579,237 219807 1,359,370 815,623 815G23 555.938 1,371,�8� 59.5 40.6 NOTE: THE ANNUAL ECONOMIC INDEX FACTOR HAS BEEN OHANQFD FROM 1.91%TO 6J858% IN kC(ORDANCFWTM THE FINAL CERTIFICAT RECEIVED FROM THE WASHINGTON COUNTY ASSESSORS OFFICE NOVEMBER 27'1809.