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02/05/90 Tax Increment Policy Manual004 TAX INCREMENT POLICY MANUAL (Procedures Necessary to Implement Tax Increment Provisions of ordinance #933) Adopted Pursuant to Resolution No. 3922 , February 5, 1990 OR4 To assist the City Council, the Kalispell Development Department Corporation (KDC) contemplates working as closely as possible with developers seeking the use of tax increment funds. The KDC's primary objective relative to assisting potential developers will be to assure that all project proposals are complete in terms of -providing all the necessary information to allow the City Council to make a decision regarding the proposal. Successfully performing this function should eliminate the possibility of the City Council delaying action due to a lack of information. The KDC's primary objective in assisting the City Council is to prepare a sound recommendation pertaining to each project proposal's potential for efficient use of the funds. The KDC has adopted the following goals and priorities pertaining to the use of tax increment funds. All project proposals will be evaluated according to how well they meet the goals and priorities._ - REDEVELOPMENT GOALS To eliminate slums and blighting influences as well as inappropriate land uses within the Redevelopment Area and specifically the Central Business District, and to free land for development into more economic uses. To establish a pattern of land use within the Redevelopment Area which is functional, imaginative, and achievable, and which provides for residential, commercial, and industrial development. To provide a system of off-street parking facilities which recognizes the needs of the shopper, the businessman, and the employee. To develop a traffic circulation system within and around the Central Business District and Redevelopment Area which provides for safe and convenient automotive and pedestrian movement. To strengthen the Central Business District's position as the retail, business, and financial center of northwest Montana. PROJECT PRIORITIES The amount of economic activities to be generated by the project, the total employment generated by the proposed activities, the increase and expansion of the tax base with the planned development and the project's impact on the fiscal deterioration within the Redevelopment District and community. Other forms of financing that will be leveraged with the project, the developer's past performance and the total feasibility of the project. Section 7-15-4288, MCA. Costs whict financing. The tax increments may be the following costs of or incurred in project: (1) may be paid by tax increment used by the municipality to pay connection with an urban renewal 05*4 PSI (1) land acquisition; (2) demolition and removal of structures; (3) relocation of occupants; and (4) the acquisition, construction, and improvements of streets, curbs, gutters, sidewalks, pedestrian malls, alleys, parking lots and off-street parking facilities, sewers, waterlines, waterways, public buildings, and other public improvements authorized by parts 41 through 45 of chapter 12, Parts 42 and 43 of chapter 13, and part 47 of chapter 14 and items of personal propero be used in connection with improvements for which the foregoing costs may be incurred; and (5) costs incurred in connection with the redevelopment activities allowed under 7-15-4233; (6) acquisition of inf rastructure-def icient areas or portions thereof; (7) administrative costs associated with the management of the industrial districts- (8) assemblage of land for development or redevelopment by private enterprise or public agencies, including sale, initial leasing, or retention by the municipality itself at its fair value; (9) the compilation and analysis of pertinent information required to adequately determine the infrastructure needs of secondary, value -adding industries in the industrial district; (10) the connection of the industrial district to existing infrastructure outside the industrial district; and (11) the provision of direct assistance to secondary, value -adding industries to assist in meeting their infra- structure and land needs within the industrial district. Tax increment may be pledged to the payment of the principal of premiums, if any, and interest on bonds which the Agency may issue pursuant to state law for the purposes listed above for the purpose of providing funds to pay such costs. PROCEDURE FOR REVIEW OF PROPOSALS FOR TAX INCREMENT FUNDS 1. Initial contact to present a proposal for the use of tax increment funds shall be made through the Community Development Department. Application forms and development criteria will be made available to developers. Applications shall consist of a written project proposal providing the following information: -Name, address, etc. of the applicant. -Location of the project. -How much money is being requested? -Will TIF funds be in the form of a loan? -What is the proposed use of the funds? M -What are the requested terms of the agreement? (How long for repayment? How will it be repaid?) -What combination of funding will be used in the project? -Some idea of what increase in taxes would be generated from the project. -A brief history or track record of the applicant. -Do they plan to take advantage of the tax incentives such as the remodeling tax credit? -Any additional items as determined by City staff or the KDC. 2. The Community Development staff shall submit the project proposals to the City Council for informational purposes. Staff will refer all proposals to the KDC for processing. 3. KDC Action - the KDC working through the Tax Increment Committee (TIC) will conduct meetings upon demand with proper public notices. The KDC/TIC will provide the City Council with copies of minutes of all meetings® City staff will act as staff for the KDC/TIC and provide the members with copies of project proposals prior to _meetings. Groups making proposals will be asked to limit their presentations to approximately 20 to 30 minutes with only one speaker participating in the actual presentation. Under no circum- stances will the KDC/TIC consider taking action on a proposal unless all parties involved in the proposal are present or represented by someone with the authority to make commitments on their behalf. The KDC/TIC will prepare a written recommen- dation for consideration to the City Council. Presentation will be made by the KDC/TIC and the proposed developer at a work study session of the City Council. The applicant will receive a copy of the recommendation. 4. City Council Action - The City Council, as Urban Renewal Agency, may act upon the proposal at the regularly scheduled meeting or work session or, if it deems necessary, may schedule a public hearing to consider the proposal. At the time that the Council considers the proposal, it will permit all interested parties to present information pertinent to the proposal. Any project proposal receiving approval by the City Council should be documented and finalized through the use of a legally binding "Development Agreement". Such an agreement will specify, in detail, what all parties involved in the proposal have committed to loan, pay, develop, etc. 'PON APPLICATION PROCESS TAX INCREMENT FINANCING I. INTRODUCTION The existence of blighted areas within the municipalities of Montana has been identified by the state legislature as a problem which requires government action. Enabling legislation has given local governing bodies the authority to establish urban renewal districts, utilize urban renewal powers, and implement urban renewal projects through the use of tax increment financing. Tax increment financing (TIF) is a significant element of the urban renewal law, allowing urban renewal programs to be financed locally without reliance on limited 'federal funds. The principal behind TIF is the ability of the local governments to use the increase in taxes within a specified district above an established base year for redevelopment projects. In 1979 Kalispell adopted an urban renewal plan and designated the central business district as a blighted area. Property taxes continue to be paid to all taxing jurisdictions on the basis of the 1979 taxable valuation. Any subsequent tax increases due to new development, inflation, or re -appraisals, however, are set aside for the City of Kalispell which has been delegated the authority to undertake urban renewal efforts. After the expiration of urban renewal authority on 1987 or after retiring of all bonded indebtedness incurred for renewal activities, the base year restriction is eliminated and the local taxing jurisdictions obtain the additional tax revenues generated through redevelopment. Tax increment financing is not an abatement program for new development. Revenues obtained, however, may be utilized to encourage the implemen- tation of public or private projects. As specified in state law, the City of Kalispell may utilize TIF for the following activities: 1) land acquisitiion; 2) demolition and removal of structures; 3) relocation of occupants; 4) public improvements; and 5) costs incurred in the exercise of urban renewal powers, including urban renewal projects as authorized by Kalispell City Council, Ordinance #933. Loans and grants may be eligible under this provision. 6) acquisition of infrastructure -deficient areas or portions thereof; 7) administrative costs associated with the management of the industrial district; 8) assemblage of land for development or redevelopment by private enterprise or public agencies, including sale, initial leasing, or retention by the municipality itself at its fair value; 9) the compilation and analysis of pertinent information required to adequately determine the infrastructure needs of secondary, value -adding industries in the industrial district; Eli 10) the connection of the industrial district to existi infrastructure outside the in« R and 11) the provision of direct assistance to secondary, .•• • • assist in meeting their infrastructur • land needs within the industrialdistrict. I II. APPLICATION PROCESS The City Council of the City of Kalispell has the authority to assist developers in the implementation of redevelopment projects. The following procedure has been developed to process TIF funding requests. Costs to be paid with TIF monies may not be incurred by the applicant prior to the effective date of funding approval and the satisfaction of any conditions of such approval. Contact the City of Kalispell Community Development Department, 12 Third Street East, Whipps Building, Suite 9, to discuss the project and determine eligibility for TIF assistance. Prepare Application - The CD staff will assist the developer in preparing a formal application. Staff Review - upon submittal of all necessary information, the staff reviews the merits of the project and the need for funding. Board Review & Decision - The Kalispell Development Corpor- ation (KDC)/Tax Increment Committee (TIC) reviews the project and staff recommendation, and either recommends approval/ disapproval for funding request or requires more applicant information. City Council Review and Approval - The City Council of the City of Kalispell will review and make the final decision on the KDC/TIF recommendation. A developer must submit a written application for each proposed project. The following information would generally be required in the application. Based on the nature and amount of the request, the CD director may exercise discretion in the application information requirements. In particular, the director may waive the requirement of personal financial statements when not deemed necessary for the evaluation of a project. At any point in the review process, the staff or board may request more information of the applicant. The CD staff will assist the developer, when necessary, in developing the information. 1. Project Description - a description of the project, type of development and scope of work including: (5) W - plans/schematics - project schedule completion of project - project feasibility and economic feasibility proposed timetable for substantiate the market of the -project. 2. Project Financing - a description of the financial arrangements of the project to include: - source of funds - detailing terms and conditions. -lender commitments - evidence of commitments of funds necessary for completing the project -cost breakdown - estimated cost of project -proforma - projections of anticipated income, expenses, cash flow and depreciation for the first five years of the project. 3. Development Ent ily - a public disclosure of the development entity and other involved parties including information on qualifications and •. experience. 4. Financial Disclosure - full financial disclosure of development entity with evidence that the developer has both the financial and legal ability to complete the proposed project. As per adopted policy, this information will be kept confidential, subject to a challenge of this policy in a court of law. Provide a letter from financial source. 5. Necessity of TIF - a "but for statement." that private investment is contingent on TIF® based on cash -on -cash return and internal rate of return. 6. Leverage Ratio - ratio of public to private investment. 7. Employment Generated - best estimate of construction and permanent jobs to be generated by the project and a wage/salary scale for employment created® 8. Letters of intent from tenants for lease project. 9. Tax Generation - The existing tax base of the property upon which TIF assistance is requested must be compared t* the anticipated tax base resulting from the proposed project and must demonstrate that the increase in taxes generated by proposed project will cover TIF assistance over a period of ten years. The following hypothetical development would be a realistic juide for development using a $2 million project: nu $2,000,000-00 Market 3.86 77,200.00 Assessed .459425 Consolidated Hill 35,467.70 Taxes Generated by Proposed Project -5,211.99 Existing Taxes $ 30,255.61 TIF Tax Annual Increase IV.' CRITERIA FOR REVIEW The submission of an application for tax increment assistance begins the review process which is undertaken by the Community Development staff and the KDC/TIC. Materials contained in the application provide information needed to assess the merits of the project in relation to the goals and objectives of the Urban Renewal Plan. This will allow the KDC/TIC to decide between competing projects or determine if a proposal has sufficient benefits to warrant assistance. The KDC/TIC evaluates a project based on the following criteria. 1. Economic Stimulus - The amount of economic activity to be generated by the project. This includes an- earnings statment and/or projections of annual gross sales which result from the project. 2. Employment Generation - Total employment generated by the project including short-term construction and long-term permanent jobs. Included should be a wage/salary scale for all employment created. Additional employment "spinoff" or the multiplier effect is also considered. 3. Tax Generation - The estimated taxable value or a breakdown of the project's total construction cost must he submitted. This will allow the City to determine additional tax payments and the amount of assistance to be provided. 4. Elimination of Blight -' The project's impact on the physical and fiscal deterioration within the urban renewal district and the community. 5. Financial Assistance- Other forms of financing associated with the project including equity, lender participation, industrial development revenue bonds, and state or federal monies will be examined to assess the need for TIF assistance. In addition, tax incentives under the Economic Tax Recovery Act will be considered. 6. Developer Past Performance - The applicant's demonstrated performance in implementing similar projects. 7. Project Feasibility - Based upon the proforma and financial arrangements, a review of project feasibility will be undertaken. (7) S. Impact _Analysis/Assessment - This review will be based on environmental impacts, design, and dislocation associated with the project. 9. Special or Unique Opportunities - The extent to which the project represents a special or unique opportunity to meet local priority needs that are consistent with economic revitalization and urban redevelopment objectives. 10. Timely Completion - The feasibility of accomplishing the project in a timely manner (one or two years) within the total project budget. 11. TIF Assistance - TIF assistance to a proposed projIM14,13 �J shall not exceed 10% of the entire project including, b not limited to, land assemblage, acquisition, demolitio construction, landscaping, utility connections, parking, et Based upon this criteria, a decision will be made on the provision of financial assistance. If approved, post approval requirements will be undertaken. 1. Development Agreement - The City and the developer must sign a legally binding development agreement which finalizes the terms and conditions of the TIF assistance. 2. Reporting Requirements - Developer shall provide the City with 90 day progress reports and other reports on approved projects as specified in the development agreement. nu