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HomeMy WebLinkAbout04-092 - ADMIN Resolution - City Council - 2004/08/02RESOLUTION NO. 04-092 RESOLUTION ADOPTING A MODIFICATION TO THE • REDEVELOPMENT PLAN FOR REDEVELOPMENT PROJECT NO. 1 AND ESTABLISHING THE AQUILA COMMONS TAX INCREMENT FINANCING DISTRICT THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN THEREFOR BE IT RESOLVED by the City Council (the "Council") of the City of St. Louis Park, Minnesota (the "City"), as follows: Section 1 Recitals. 1 01. The Board of Commissioners (the "Board") of the City of St. Louis Park (the "EDA") has heretofore established Redevelopment Project No. 1 and adopted a Redevelopment Plan therefor. It has been proposed by the EDA and the City that the City adopt a Modification to the Redevelopment Plan for Redevelopment Project No 1 (the "Redevelopment Plan Modification") and establish the Aquila Commons Tax Increment Financing District (the "Distract") therein and adopt a Tax Increment Financing Plan (the "TIF Plan") therefor (the Redevelopment Plan Modification and the TIF Plan are referred to collectively herein as the 'Plans"), all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.001 to 469.047, Sections 469 090 to 469.1082, and Sections 469.174 to 469.1799, all inclusive, as amended, (the "Act") all as reflected in the Plans, and presented for the Council's consideration. 1.02. The City has investigated the facts relating to the Plans and has caused the Plans to be prepared. 1.03. The City has performed all actions required by law to be performed prior to the establishment of the District and the adoption and approval of the proposed Plans, including, but not limited to, notification of County of Hennepin and Independent School Distnct No. 283 having taxing junsdiction over the property to be included in the Distnct, a review of and written comment on the Plans by the City Planning Commission, and the holding of a public heanng upon published notice as required by law. 1 04. Certain written reports (the "Reports") relating to the Plans and to the activities contemplated therein have heretofore been prepared by staff and consultants and submitted to the Council and/or made a part of the City files and proceedings on the Plans The Reports include environmental studies, data, information and/or substantiation constituting or relating to the basis for the other findings and determinations made in this resolution. The Council hereby confirms, ratifies and adopts the Reports, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein 1.05 The City is not modifying the boundaries of Redevelopment Project No. 1. Section 2. Findings for the Adoption and Approval of the Plans. 2.01. The Council hereby finds that the Plans, are intended and, in the judgment of this Council, the effect of such actions will be, to provide an impetus for development in the public interest and accomplish certain objectives as specified in the Plans, which are hereby incorporated herein. Resolution No. 04-092 -2- Section 3. Findings for the Establishment of the Aquila Commons Tax Increment Financing District. 3.01. The Council hereby finds that the Distnct is a "housing distnct" under Minnesota Statutes, Section 469.174, Subd. 11. 3.02. The Council further finds that the proposed development would not occur solely through pnvate investment within the reasonably foreseeable future and that the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the Distnct permitted by the TIF Plan, that the Plans conform to the general plan for the development or redevelopment of the City as a whole; and that the Plans will afford maximum opportunity consistent with the sound needs of the City as a whole, for the development or redevelopment of the Distnct by pnvate enterprise. 3 03. The Council further finds, declares and determines that the City made the above findings stated in this Section and has set forth the reasons and supporting facts for each determination in writing, attached hereto as Exhibit A. 3.04. Although it is not anticipated that the Distnct will contain commercial/industnal property, the City elects to calculate fiscal disparities for the Distnct in accordance with Minnesota Statutes, Section 469.177, Subd. 3, clause b, which means the fiscal disparities contnbution would be taken from inside the District. Section 4. Public Purpose 4.01. The adoption of the Plans conforms in all respects to the requirements of the Act. The Plans will facilitate the development of a site that is occupied by a former school building, which has been vacant for more than one year. The re -use of the site will create 122 units of limited equity cooperative housing for seniors, which will improve the tax base and improve the general economy of the State, and thereby serves a public purpose. Section 5. Approval and Adoption of the Plans. 5.01. The Plans, as presented to the Council on this date, including without limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted and shall be placed on file in the office of the Economic Development Coordinator. 5.02. The staff of the City, the City's advisors and legal counsel are authorized and directed to proceed with the implementation of the Plans and to negotiate, draft, prepare and present to this Council for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. 5.03 The Auditor of Hennepin County (the "Auditor") is requested to certify the original net tax capacity of the District, as described in the TIF Plan, and to certify in each year thereafter the amount by which the original net tax capacity has increased or decreased, and the City is authorized and directed to forthwith transmit this request to the Auditor in such form and i • • Resolution No. 04-092 -3- content as the Auditor may specify, together with a list of all properties within the District, for which building permits have been issued dunng the 18 months immediately preceding the adoption of this resolution. 5.04. The Economic Development Coordinator is further authonzed and directed to file a copy of the Plans with the Commissioner of the Minnesota Department of Revenue pursuant to Minnesota Statutes 469.175, Subd. 4a. Reviewed for Administration: City ATTEST: Adopted by the City Council August 2, 2004 (Seal) Resolution No. 04-092 -4- EXHIBIT A RESOLUTION NO. 04-092 The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for the Aquila Commons Tax Increment Financing Distnct, as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as follows: 1 Finding that the Aquila Commons Tax Increment Financing District is a housing district as defined in M.S., Section 469.174, Subd. 11. The Distnct consists of one parcel. The development will consist of approximately 122 senior, limited equity cooperative housing units. At least 95% of the units assisted with tax increment will be occupied with persons at 100% of median income for a family of two or less and 115% of median income for families of three or more (rental housing would have stncter income limitations). Median income under this provision is the greater of the statewide median or the county median. For Hennepin County, in the Minneapolis -St. Paul Metropolitan Statistical Area (MSA), the median the median income is $76,400 and the statewide median is $66,000 (year 2004). The market value of non -assisted housing or commercial property will be less than 20 percent of the total fair market value of the planned improvements. Appendix E of the TIF Plan contains background for the above finding. 2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future and that the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the Aquila Commons Tax Increment Financing District permitted by the TIF Plan. The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future: The site is occupied by a former school building that has been vacant for more than one year. The proposed development -122 units of limited equity cooperative housing for seniors—will require demolition and clearance of the site. Further, based on analysis of the developer's pro forma and the Maxfield Research study (See Subsection 2-16 of the TIF Plan), the City has determined that a gap of over $1,000,000 needs to be filled through tax increment in order to make the proposed development financially feasible. The City, therefore, believes the proposed housing facility is not likely to occur without the assistance descnbed in this TIF Plan (See Appendix E of the TIF Plan). While the property could be sold to another developer for some other use, these scenarios are not feasible in the market due to various constraints. First, adaptive reuse of the building would produce far less market value than the proposed 122 -unit housing facility. Second, commercial development is not feasible due to inadequate market location and it is unlikely that spot zoning would be supported (changing the zoning to commercial for only one parcel) due to the surrounding land uses, which are predominately single-family homes. Third, a higher valued senior cooperative would not be feasible based upon research • o Resolution No 04-092 -5- EXHIBIT A completed by Maxfield Research Inc. The surrounding target market of moderate income seniors would be unable to afford to purchase a higher valued unit due to the increased cost for entry share cost and ongoing monthly fees (maintenance and mortgage). This would decrease the economic attractiveness of the development to the intended target market and would reduce demand for the cooperative product since some households would decide they would not be able to afford the entry share costs and have sufficient funds remaining to support the ongoing monthly fees. Fourth, according to Maxfield Research, a general occupancy condominium development would not be feasible since the target market generally consists of younger, first-time home buyers and older senior households. Both of these markets are pnce sensitive... younger buyers have limited funds for down payment and seniors that are selling their major asset (their home), want to spend on par or less than the equity they receive from selling their home. Finally, higher end condominium units are unlikely due to the value of the existing housing in the surrounding neighborhood. Maxfield Research completed a review of the market area and determined that the proposed pricing for the cooperative units of $130,000 - $200,000 was reflective of the market in this area of the City. The property is located in an area of modest home values and as such, the development of even a middle-pnced condominium development would exceed the values of the single-family homes in the neighborhood and most likely would not be supported due to lack of neighborhood amenities, etc. In addition, there are over 500 condominium units in the pipeline for St. Louis Park at vanous locations within the City. All of these developments are proposing to offer product pnced well above the $180,000 price point. These developments are situated in locations with amenity value to support these higher prices, unlike this location. Ehlers & Associates completed an analysis of the development proforma based upon this information and research and the proposed development costs provided by the developer. It was determined that a gap of over $1,000,000 existed to make the project financially feasible for the developer, which means that the developer would need to purchase the land for under the proposed $1,900,000 and receive no development fee. Given that the Assessor has placed a value on the land of $1,947,000 and the school had an appraisal completed two years ago that showed a value of $2,750,000, it is unlikely that the land cost will be lowered in the near future for this proposed housing development or another housing development. It should be noted that any alternative redevelopment scenano faces the same high land cost and demolition/clearance costs faced by the proposed developer, and in the City's experience such properties have not been redeveloped in St. Louis Park without significant public assistance. The City has required the developer to abide by a "look back" provision, which measures the actual sales price of the units and costs of construction versus the project revenues and costs. If the developer achieves a higher than market rate return, the amount of TIF assistance will be reduced. Therefore, the City concludes as follows: IIIa The City's estimate of the amount by which the market value of the entire Distnct will increase without the use of tax increment financing is $0. Resolution No. 04-092 -6- EXHIBIT A b. If all development which is proposed to be assisted with tax increment were to occur in the Distnct, the total increase in market value would be up to $23,125,250. c. The present value of tax increments from the District for the maximum duration of the district permitted by the TIF Plan is estimated to be $3,431,932. (See Appendix F in the TIF Plan) d. Even if some development other than the proposed development were to occur, the Council finds that no alternative would occur that would produce a market value increase greater than $19,693,318 (the amount in clause b less the amount in clause c) without tax increment assistance. 3. Finding that the Tax Increment Financing Plan for the Aquila Commons Tax Increment Financing District conforms to the general plan for the development or redevelopment of the municipality as a whole. The Planning Commission reviewed the TIF Plan and found that the TIF Plan conforms to the general development plan of the City. 4. Finding that the Tax Increment Financing Plan for Aquila Commons Tax Increment Financing District will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Redevelopment Project No. 1 by private enterprise. The project to be assisted by the Distnct will result in the development of a vacated former school site, preserve and enhance the tax base, and provide an impetus for residential development, which is desirable and necessary for increased population and an increased need for life -cycle housing within the City.