City Council Meeting Date: October 1, 2019
To: Mayor and City Council
City Administrator
From: Nate Carlson, Economic Development Coordinator
Title
Consider Resolution to Approve Creating a Tax Increment Financing District and to Approve a Tax Increment Financing Agreement for Fifth Street Lofts.
Body
Action Requested:
The Northfield City Council shall consider the attached Resolution approving the creation of a Tax Increment Financing District and approval of the Tax Increment Financing Agreement.
Summary Report:
Rebound Stencil Development, LLC is requesting Tax Increment Financing (TIF) incentives and other Business Subsidies from the City of Northfield and Northfield EDA to assist with a major redevelopment project consisting of a 79-unit urban residential complex at the southwest corner of 5th Street East and Washington Street, referred to as 5th Street Lofts. The developers, Rebound and Stencil, have provided an application for the TIF funds and the additional requests to make this a feasible project. The development team introduced their project to Community Development staff in the spring, to the EDA in June and to the City Council in July 2019.
The City’s financial consultant and staff completed a thorough review of the subsidy application and confirm this application meets criteria and can be considered a feasible TIF project.
Rebound Stencil Development will be constructing a $13.66 million urban residential complex at the southwest corner of 5th Street and Washington Street. This redevelopment project will have enclosed parking for tenants. There are significant site improvements with this redevelopment project, as well as site acquisition costs. These costs, as well as the shortfall in operating cash flow, are eligible uses for TIF as well as other incentives that will be considered by the EDA and the City to make the project financially feasible.
The project Site Plan is expected to be reviewed by the Development Review Committee in the coming weeks. If financing for the project is secured, the developers intend to begin construction this fall.
Rebound Real Estate is requesting TIF assistance, EDA-land contribution, and an EDA Loan. The redevelopment project requires a land contribution of 510 Washington Street, which the EDA authorized purchasing for $212,000. An EDA loan is requested to assist with site preparation in order to reduce upfront costs for the developer to prepare the site for construction.
The EDA Board met on Thursday, August 22 and reviewed the TIF request and additional subsidies. The EDA Board voted unanimously to recommend City Council approval of the TIF request. Staff has reviewed the application and has determined this application meets all eligibility criteria for Redevelopment TIF District. The EDA Board also authorized drafting agreements for the revolving loan and property contribution. However, both actions are contingent upon Council approval of the TIF District.
Staff has been consulting with the City’s Financial Advisor from Ehlers, Nick Anhut, to facilitate the TIF process and project subsidy request. They have provided an initial analysis of the TIF request and have found that the redevelopment project could create a certain level in Tax Increment over the 25-year life of Redevelopment TIF District depending on when the financing is needed. The TIF would occur in a “pay-as-you-go” structure over the course of the district life.
At this time, staff has identified the City could approve a Redevelopment TIF District to facilitate this request. The District boundaries encompass the current project site south of 5th St. E. and west of Washington St., along with the City Parking lot north of 5th Street E. along Washington Street. Including the area north of 5th Street at this time presents opportunities to consider using TIF in the future, should the opportunity present.
Alternative Options:
N/A
Financial Impacts:
• TIF Amount Requested: $1,804,000 (Present Value)
• Type of TIF District: Redevelopment District (25-year duration)
• TIF Uses: Site improvements, redevelopment costs and assistance with annual cash shortfall
• TIF Funding Structure: “Pay-as-you-go”
Timelines:
June 27 - Developer presented project to EDA Board
July 1 - Developer submitted Subsidy application
July 23 - Developer presented project to Council
August 30 - Rice County and Northfield School District notified of draft TIF Plan
September 18 - Publication of notice of public hearing for TIF
October 1 - Council holds public hearing on TIF
October 1 - Council consideration of Resolution approving TIF District and TIF Agreement