2009-05-19_Agenda - Laserfiche WebLink

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�� .►-• REQUEST FOR HRA ACTION Date: May 19, 2009 Item No. : 10. a. Executive Director Approval �� �. � �r'. � Item Description: Discussion of Har Mar Apartments Tax Increment Financing District (TIF District No. 18) Request 1.0 BACKGROUND 1.1 On March 11, 2009, Aeon, the owners of the Har Mar Apartments, submitted a formal request to the City for consideration of establishing a housing tax increment financing (TIF) district on their parcel. The purpose of this request is to create a funding source to fill the projected $913,610 financial gap in the second phase of their initiative to revitalize this aging apartment complex. As planned by Aeon, Phase II will consist of the construction of a new 48-unit apartment building consisting of a combination of affordable two- and three-bedroom units. 1.2 Aeon is seeking a wide variety of funding sources to assist them with their revitalization effort. In October 2009, they will be applying to Minnesota Housing for housing tax credits to finance a significant portion of this proj ect. In order to bolster their application, Aeon would like to demonstrate that other sources of funding are available to this project, such as TIF. 1.3 TIF is a financing tool available to local units of government to assist with "public costs" of private development using future property tax revenue as the funding sources. To generate tax increment, a TIF district must be established, which identifies the parcels whose future taxes will be collected, and, after a public hearing, a TIF plan is adopted by the City Council identifying how much increment will be generated in future tax increment based on a development scenario, the use of these funds, and the possible impacts to other taxing jurisdictions. A housing TIF district can collect increment for 25 years after the collection of the first increment (26 total years). 1.4 The State of Minnesota created housing TIF districts to help cities finance affordable housing proj ects and has created affordability tests to qualify proj ects for this type of district. Rental housing must meet one of the three affordability tests, which are: ■ 20-50 test: 20 percent of the units are occupied by individuals whose incomes are 50 percent or less of the area median income ■ 40-60 test: 40 percent of the units are occupied by individuals whose incomes are 60 percent or less of the area median income ■ 50-80 test: 50 percent of the units are occupied by individuals whose incomes are 80 percent or less of the area median income 1.5 Beyond the possible increment generated within a district, a TIF plan must also discuss the "but for" test. Before a TIF district can be established, the City Council must make two findings: that that development within the district would not happen solely through Page 1 of 3