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HomeMy WebLinkAbout04-12-2011 Agenda Chair James Ostlund (2011) 1245 W. Highway 96 Committee Members Jeff Johnson (2011) _'�RPE HILLS Arden Hills, MN 55112 Arlene Mitchell 2013 ( ) 651.792.7800 0 John Braun (2012) Arden Hills www.ci.arden-hills.mn.us Katy Peters (2012) (Vacant Seat) (2013) Financial Planning and Council Liaison David Grant Analysis Committee With City Council April 12, 2011 City Vision A strong community that values its unique environmental setting, strong residential neighborhoods, vital business community, well-maintained infrastructure, fiscal soundness, and our long-standing tradition as a desirable City in which to live, work, and play. Agenda Regular Committee Meeting Convenes 6:00 PM Call to Order 1. APPROVAL OF THE AGENDA 2. MINUTES A. March 29, 2011 - Special Meeting 74 '3. UNFINISHED AND NEW BUSINESS A. Continue discussion on developing a TIF policy . REPORTS A. Report from the City Council B. Financial Planning and Analysis Committee Comments and Requests 5. ADJOURNMENT A quorum of the City Council may be present at this meeting. • MINUTES -AR EN HILLS • FINANCIAL PLANNING&ANALYSIS COMMITTEE Tuesday,March 29,2011 6:00 P.M. Council Chambers,Arden Hills City Hall CALL MEETING TO ORDER AND ROLL CALL The meeting was called to order by Jim Ostlund at 6:00 pm. MEMBERS PRESENT: Jeff Johnson;Arlene Mitchell;Jim Ostlund;Katharine Peters,John Braun MEMBERS NOT PRESENT: David Grant,Council Liaison OTHERS PRESENT: Brenda Holden,Sue Iverson,Kyle Howard Call to Order 1. APPROVAL OF THE AGENDA Motioned:Jeff Johnson Seconded:Arlene Mitchell 2. APPROVAL OF March l5,2011,MINUTES Approved as amended Motioned:Arlene Mitchell Seconded:Jeff Johnson 3. UNFINISHED AND NEW BUSINESS 1111 A. Continue discussion on developing a TIF policy Discussion contunued about the TIF white paper. It was decided that after hearing from the speakers at the March 15d'meeting a modification of the paper was needed.The group discussed and came to the combined consensus that the following modifications be made: 1. On page 3 under"Develop TIF Spending Guidelines" a. Change the wording from"Limit"to"Gideline" b. Strike paragraph 2,which talks about TCAAP. 2. On page 4 under"Long-term TIF Selection Criteria" a. Strike"Projects Specifically not Authorized for TIF" 3. A new section was decided to be added.This section would sets guidelines to follow to activly review the cities current TIF projects and future projects. 4. The group requested that the City Council be invited to thte April 12, 2011 meeting. 4. REPORTS A. Report from the City Council Brenda Holden addressed the committee about the current issues affecting the city.Topics included Mc Donald's teardown and reconstruction, Pulte Home's development,council's goal setting and the Viking stadium. 5. ADJOURNMENT Motioned:Jim Ostlund at 7:05 pm Seconded:Jeff Johnson • Jim Ostlund, Chair Susan K. Iverson,Finance Director City of Arden Hills 1245 West Highway 96•Arden Hills Minnesota 55112 Phone 651.792.7800•Fax 651.634.5137 www.ei.arden-hills.mn.us • 'A EN jiILLS MEMORANDUM DATE: April 12, 2011 TO: Financial Planning and Analysis Committee FROM: Sue Iverson, Director of Finance and Administrative Services Kyle Howard, Finance Analyst SUBJECT: Meeting agenda • Discussion on Developing a TIF policy It was decided at the March 29th meeting, a meeting with the City Council would be beneficial to aid in the development of the TIF white paper. Supplemental items in packet Included in the packet are the latest revisions of the TIF white paper. 1. Struck sections made per 3/29/2011 meeting 2. Added content made per 3/29/2011 meeting(most recent revision) • • TIF Selection Process Whitepaper for Arden Hills February 1, 2011 Summary We recommend that the City Council: 1. Establish long-term TIF assessment criteria 2. Develop a point-based assessment system Background TIF The original argument made to legislatures to create TIF was that it created a way for cash- strapped communities to finance the upfront costs associated with redeveloping blighted areas, most commonly cleanup/remediation costs and infrastructure improvements. Subsidized • redevelopment in an area could then spur future, unsubsidized redevelopment. TIF has long-term effects that need to be considered when making a decision about providing TIF for a project. "Unlike property taxes, increments are not used to pay for the general costs of cities, counties, and schools. Instead, increments go to the development authority and are used to repay public indebtedness or current costs the city incurred in acquiring the property, removing existing structures or installing public services." (League of Minnesota Cities) FPAC Committee Arden Hills already has TIF Districts and anticipates the need for more TIF financing. The Financial Planning and Analysis Committee was asked to look at how the City selects TIF projects and make recommendations about the process. The Committee addressed three broad questions: • How much of the city's tax base can it afford to have in TIF Districts? • How does the city best allot its TIF dollars to support its long term goals? (First come, first served may not provide the best outcome for the city.) • Are there tools or methods that will help city Ieadership assess each TIF request? The committee has reviewed cases and policies from other cities around the United States as well as processes used in corporate America to evaluate long-term strategic options and projects. TIF Decision Process Overview There are many tools the City of Arden Hills can use to drive development in the city, including preferential use of city facilities, loans,direct subsidies,property tax abatement,and Tax Increment Page 1 of 6 Financing (TIF). These varying tools have different long-term and short-term costs. TIF is one type of business subsidy. Importantly,TIF is a long-term subsidy with long-term cost and • benefit impacts that must be considered.This stands in contrast to some other forms of subsidies where the costs and impacts tend to be more short-term nature. The use of TIF can be thought about as having two decision layers. The first layer involves near term considerations: • Is the individual project acceptable under the City of Arden Hills business subsidy Policy? • Is the project financially feasible? • Is the TIF request currently affordable under the cities TIF Spending Guidelines? (see recommendation below) The second layer of considerations involves long-term considerations. • How does an individual project compare to the stated long-term goals and vision of Arden Hills? • How does the project compare to other potential long-term projects that are not yet identified? • How much long term leverage can the City obtain from a particular TIF project? Before a TIF project is approved,the project should be acceptable under both levels of consideration. Short-term consideration In general,the short-term considerations are not particularly difficult to assess. The first step is to match the project to the City's Business Subsidy criteria. The project must fall within the guidelines outlined. The second step is also relatively straightforward: the project must meet the financial thresholds for a TIF project. Finally,as a third step the project alone or in conjunction with other known projects cannot drive the city to exceed its total desired TIF limit. • These short-term considerations should be considered a threshold. A project must pass these tests to be considered for TIF funding. However,TIF funding is long-term,therefore the more important considerations are the long-term considerations. Long-term consideration By its nature TIF has long term impacts. The creation of a TIF District sidelines tax money for a period of time measured in years or even decades. Because only so much TIF is affordable for the City,at a very minimum any individual TIF District presents a long-term (lost)opportunity cost—a project today may preclude another different, potentially more beneficial,yet unknown project tomorrow. Therefore the TIF decision making process should be focused on long-term considerations. Recommendation for Creating a TIF Evaluation Process Develop TIF Spending Guidelines In order to better manage TIF financing decisions over the long term we recommend the City debate and set into policy a guideline on the total projected tax capacity of all tax increments in the City. Without a specific need we believe the City should limit the total projected tax capacity of all tax increments to not exceed %of the state average of 6.4%. This would mean a guideline for projected tax capacity for all tax increments in the City not to exceed 5%. Page 2 of 6 In rder t,, better rteAdditionaliy, TIF f . de the l„ g term we iprecommend the FPAC monitors the City'sreg_ular graphically monitoring of TIF projects either every other year or after a certain level of new TIF activity. The items that will be reviewed should include the total projected tax capacity,the percentage of increase in services since the last review, the number of TIF projects and their respective end dates,the effectiveness of active TIF projects to their original concept, and any other statistics or benchmarks that the committee deemsdeemed to be of importance. We also recommend that any proposed change of this allocation be done by a 5/7 vote of the full City Council. Develop measurement criteria We recommend that the city debate and approve a set of long-term criteria with which to weigh potential TIF projects. The City has already developed a vision statement. The Committee considered whether this might be adequate as long term measurement criteria. One could simply compare a development project to the City's stated long-term strategic goals. While the process would be a good first step, we feel that it is too broadly worded to be used as criteria and would lead to confusion from both developers trying to assess how the city will view their individual projects and citizens who wonder why a particular project is or is not approved. We recommend the city develop a set of more refined, long-term selection criteria with which to weigh development projects seeking TIF. • We further recommend that developing these criteria be done outside the process of considering any individual project. This will help ensure, as best as possible, an independent view of the long-term needs and strategy of the City. These long-term criteria would then be integrated into the current process of evaluating business subsidies. Assign points We recommend using a point based assessment system. There are multiple ways to implement this,but the goal of any method should be that when a project is assessed it would be granted points relative to how much it met each criterion and how relatively important that criterion is. The intent of the points system is not that it would make the decision for the City Council, but rather that it would focus discussion on the most salient points of the project under consideration. Any large project is inherently complex and it is important to avoid prematurely debating its finer points. It has been suggested that an objective rather than subjective point system be developed, however given the complexity of redevelopment projects and the mix of short-and long-term costs and benefits involved, the Committee could come up with no strictly objective measure.That said,where possible we strongly encourage objective measure wherever feasible.We also recommend that specific minimum requirements be laid out,including enumerating any specific types of projects that are not considered appropriate for TIF because by their nature such projects do not provide the necessary long-term benefits. • Scoring would be done by the City Council or its designated representatives. Page 3 of 6 We commend that the following points, taken from our research, be held in mind throughout this . process: 1. The "but for" tests are only the minimum requirements for qualifying for TIF; prudent communities set more stringent requirements. 2. TIF is there to solve community problems. 3. Use TIF only when truly necessary; it was never designed to be an alternate financing method for private developers. Long-term TIF Selection Criteria Below is a draft of what selection criteria might look like. This is for discussion purposes only. The goal would be to modify the percentages and the specific criteria and have the City Council eventually, debate, vote and approve the Criteria. Once this is done the Economic Development Committee (EDC), with any assistance needed from FPAC, should develop a detailed scoring process and methodology. Minimum requirements to use TIF • The long-term viability of the development partner has been reviewed and the City has determined that the partner has the financial stability and track record to drive the full benefit of the project over the life of the project • The objective of the project produces long-term expected benefit that exceeds the length of the TIF and is at least 15 years in duration. • Selection Criteria (in rank priority order within each section) Community Goals 60% 1. Materially enhances the health, safety and well-being of all who live, work and play in the City. a. Enhances an interconnected system of trails, pathways and open spaces. b. Protects and preserves the community's natural resources including open spaces, lakes, wetlands, other significant natural features and historic resources. 2. Enhances or retains development of TCAAP in a way that accommodates a mix of land uses that is sensitive to the natural environment, economically sustainable and a benefit to the community 3. Retains or creates jobs that are long-term in nature and at or above the median for the State of Minnesota(vs. Business Subsidy Policy standard?) 4. Creates a desirable commercial/retail environment that enhances the long-term vitality of the City. 5. Provides a transportation system that has convenient and effective multi-modal connections within Arden Hills and to adjacent municipalities, the remainder of the Twin Cities Metropolitan Area and greater Minnesota. Future Leverage Goals 30% 1. Likelihood project will spur other projects that will not require further subsidy. a. Increases the ability to further develop a healthy and accessible community b. the center for further business development Page 4 of 6 c. Increases likelihood of job growth in a growing industry • Regional Goals 10% 2. Moves the region closer to its mix goals for affordable housing 3. Enhances the regional trail system and it's integration with the Arden Hills trail system Next Steps 1.) Circulate Whitepaper with entire FPAC; debate and modify as appropriate. 2.) Review the City of Bloomington's methodology for creating its TIF spending guidelines. 3.) Place topic on City Council working session agenda for discussion and feedback. 4.) City Council to debate and approve (subject to modifications and amendment) "Long- term TIF Selection Criteria" 5.) Based on City Council's approved Long-term TIF Selection Criteria, EDC (with assistance from FPAC) to develop Long-term TIF Criteria point system and revised TIF approval process • Page 5 of 6 6.) City to embody new process and point system into TIF approval policy.what the final components and process might look likeII TIF Assessment Components and Process City Management Information (Identified outside any project proposal) City development goals Prioritized and weighted City financial goals Prioritized and weighted TIF Budget and plan TIF Assessment Worksheet S TIF Assessment Process (The 3 steps of the worksheet done for each project) Initial project screening Passes City's subsidy criteria? TIF regulatory qualification? City has TIF capacity? Long-term screening Long term benefits to City? Long term viability of partner? TIF assessment How well does project rank? EDC recommendation? Matches well enough to continue Matches well enough to continue TIF assessment City Council approval? Ranks well enough to recommend to City Council S Page 6 of 6