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11. Resolution 4942 - Revision to the Adopted 2002 TIF Policy
ffi # ty of Kalispell Post Of�ce Box 1997 - Kahc-pelf, Montana 59903-1997 - Tclephone 114061758-7700 Fax(406)7 8-7758 REPORT TO: The Honorable Mayor Pamela B. Kennedy and City Council FROM: Susan Moyer, Community Development Director Frank Garner, Interim Manager SUBJECT: Revision to the Adopted 2002 TIF Policy MEETING DATE: October 4, 2004 BACKGROUND: 1. The existing TIF Policy was modified in February 2002 and now needs to be modified again to establish that the interest rate is tied to the Prime Rate as identified in the Wall Street Journal and subject to change from time to time the first day of the month following the annual anniversary of the loan. Additional, fifteen and twenty year terms for the mortgages are established based on the total amount borrowed. 2. The second revision. to the TIF Policy pertains to the deletion of land acquisition as an eligible activity from Item III — Utilization of Funds Involving City -Made TIF Loans to A Developer. A developer will either own the potential development site outright or will have the ability to roll the ........ acquisition costs into his upfront fnaneIng ....................... 3. Item IV — Utilization of Funds Involving TIF Interest Subsidized Loans is deleted from the 2004 Policy. This program has not existed for several years in the Airport and Westside TIF Districts and the Downtown TIF District no longer exists. It is the intent through the use of Program Income, as approved by City Council, for the City to be able to continue the implementation of the goals and objectives of the existing two TIF Plans as well as utilize revenues from state and federal grants in conjunction with TIF funds for eligible activities within the specific district(s). Additionally, the Ordinance: ➢ Identifies the funding sources for the Community Development Revolving Loan Program and Redevelopment Fund account. '�i, Identifies the eligible uses of the Fund. Prioritizes the Uses of the Fund. Establishes the criteria the Council must consider when approving such funding assistance. Outlines the application process and requirements to be followed when staff and council are reviewing assistance requests. RECOMMENDATION: Staff is recommending that Council approval the resolution before you to change the interest rate and terms on TIF loans as well as to delete the bulleted words "acquisition and land assemblage" on Page 3. Finally Item ##IV will be struck completely from the document inasmuch as this program no longer exists. FISCAL IMPACT: An ongoing source of economic development Program Income revenue to provide incentives to encourage development/redevelopment within the respective Urban Renewal Districts. ALTERNATIVES: Respectfully submitted, Susan Moyer, Director Community Development .................................................................. As suggested by Council. Memo generated: September 28, 2004 RESOLUTION NO.4942 A RESOLUTION TO AMEND THE POLICY AND APPLICATION PROCESS FOR TAX INCREMENT FINANCING IN ALL URBAN RENEWAL DISTRICTS AS AUTHORIZED BY ORDINANCE No. 933 ON REDEVELOPMENT PROJECTS IN THE CITY OF KALISPELL. WHEREAS, Title 7, Chapter 15, Parts 42 & 43, Montana Code Annotated authorize the City of Kalispell to develop a workable urban renewal plan to rehabilitate and eliminate blighted areas utilizing "tax increment finances" in partnership with private enterprise; and WHEREAS, the existing policy and application process for tax increment financing in all urban renewal districts was last modified in February of 2002 and based upon a review of that policy, it is in the best interests of the City that the existing policy be amended; and WHEREAS, the policy should be amended to establish that the interest rate of loans should be tied to the Prime Rate and subject to change on a regular basis and that loan and mortgage terms of 15 and 20 years be established based upon the total amount of the loan; and WHEREAS, the policy should no longer consider land acquisition as an eligible activity as previously allowed under Item III of the policy; and WHEREAS, Item IV of the policy, regarding the utilization of funds involving TIF interest subsidized loans, should be deleted, as the program no longer exists. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL AS FOLLOWS: .............. SECTION I. That pursuant to the authority granted to the City of Kalispell by Title 7, Chapter 15, Parts 42 & 43, Montana Code Annotated, and as a means of implementing the tax increment assistance provisions applicable to all Redevelopment Plan areas, the "Policy and Application Process for Tax Increment Financing in All Urban Renewal Districts", as amended as Revision 10/4/2004, is hereby adopted and authorized for use by the City of Kalispell. A copy of said Policy shall be available upon request at the Office of City Clerk of Kalispell. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL, THIS 4t" DAY OF OCTOBER, 2004. Pamela B. Kennedy Mayor ATTEST: Theresa White City Clerk Deleted: ORIGINAL TIP POLICY - NOW BEING REVISED POLICY AND APELI CATION PROCESS FOR TAX INCREMENT FINANCING IN ALL URBAN RENEWAL DJ[STRIC I S 1, INTRODUCTION The existence of blighted areas within the municipalities of Montana has been identified by the state legislature as a problem that 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 Ddetett: i renewal programs to be financed locally without reliance on limited federal funds. The principal Deleted, f ................... 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. On September 10, 1979 the City Council adopted an urban renewal plan and designated the central business district as a blighted area. Subsequently, City Council approved Ordinance No. 1259 creating the west Side Urban Renewal Plan that January 1, 1997 as the base year for calculating tax increment generated. Finally, Ordinance No. 1260 established the Airport/Athletic Complex Redevelopment Plan with a base year of January 1, 1996. The Tax Increment provision terminates upon the tenth (10`I') year following the adoption of the Plan(s) or upon the payment or provision for payment in full or discharge of all bonds for which the tax increment has been pledged and the interest thereon, whichever last occurs. Any tax increases due to new development, inflation, or re -appraisals are set aside for the City of Kalispell, the delegated authority, to undertake urban renewal efforts during either the ten-year life of the Urban Renewal District or upon the payment of all bonds: It. UTILIZATION OF FUNDS INVOLVING DIRECT CITY PARTICIPATION Tax increment financing is not an abatement program for new development. Revenues obtained, however, may be utilized to encourage the implementation of public or private projects, Publicly awned utility improvements for a development will be given priority in funding assistance vs. a request for on -site utility improvements assistance in the form of a low interest loan. As specified instate law, the City of Kalispell may utilize TIF for the following activities: ■ Land acquisition; I ■ Demolition and removal of structures; Deleted: rebiu@u 200z Formatted: Underline f .yea 1 1410A Page 1 of Deleted: ORIGINAL TIF POLICY — NOW BEING REVISER ■ Relocation of occupants ■ Public improvements; and ! Costs incurred in the exercise of urban renewal powers, including urban renewal projects as authorized by Kalispell City Council in Ordinances No. 933, 1259 and 1260. Loans and grants may be eligible under this provision. ■ Acquisition of infrastructure -deficient areas or portions thereof; ■ Administrative costs associated with the management of the industrial district; ■ 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; • The compilation and analysis of pertinent information required to adequately determine the infrastructure needs of secondary, value -adding industries in the industrial district; # The connection of the industrial district to existing infrastructure outside the industrial district,, and • The provision of direct assistance to secondary, value -adding industries to assist in meeting their infrastructure and land needs within the industrial district. Demolition Clearance Public Improvements, Building and Site Preparation Tax funds generated under an Urban Renewal District will be used primarily for the construction of public infrastructure improvements within public rights -of -way, or as otherwise provided for by law, as outlined in the City's annual budget, Urban Renewal Plans or as approved by the City Council pursuant to Developers' Agreements. The City of Kalispell is authorized to install and construct or to cause to be installed and constructed the public improvements, public facilities, and public utilities (within or outside the Project area) as appropriate or necessary to carry out the Plan or are of benefit to the Project. Such improvements, facilities, and utilities include, but are not limited to, over- or underpasses, bridges, pedestrian walkways, malls, streets, curbs, gutters, sidewalks, streetlights, sewers, storm drains, traffic signals, water distribution systems, parks, plazas, playgrounds, motor vehicle parking facilities, landscaped areas, civic buildings, bus or pedestrian shelters, and transit facilities. The Agency is authorized to demolish and clear buildings structures, and other improvements from any real property owned or acquired in the Project area as necessary to carry out the purpose of the Urban Renewal Plans. The Agency is authorized to prepare or cause to be prepared as building sites any real property in the Project area owned or acquired by the Agency. The Agency is authorized to rehabilitate or cause to be rehabilitated any building or structure in the Project area. The agency is also authorized to advise, encourage, and assist in the rehabilitation of property in the Project Area now owned by the Agency. As necessary or appropriate in carrying out this Plan, the Agency is authorized to move or to cause to be moved any standard or rehabitable structure or building to a location within or outside the Project Area.. _ tMeted: FexuarV 2902 Formatted: Urdedine M`'se l oliIQ4 Page 2 of 5 Deleted: ORIGINAL TIP POLICY —�' NOW BEING REVISED Generated increment from property taxes may be used for payment of bonds. The tax increment may be pledged for the payment of revenue bonds issued For the Project or of general obligation bonds, revenue bonds, or special assessment rands issued to pay Project. costs. The City may, by resolution of its governing body, enter into a covenant for the security of the bondholders, detailing the calculation and adjustment of the tax increment and the taxable value on which it is based. III UTILIZATION OF FUNDS INVOLVING CITY -MADE TIF LOANS TO A DEVELOPER The City Council of the City of Kalispell :has the authority to assist developers in the implementation of redevelopment projects. City Council may, at its discretion, if fundinv is available provide low -interest loan funds to qualifying developers for on -site work covering: Land a�semhlage • Landscaping Formatted: Sulleted + Level; 1 + • Site Lighting Aligned at: 0.25" + Tab after; 0.5" + '. • On -site utility work and utility taps Inde€rtat: 0.5° ____ ----- • Parking, paving and striping • Direct assistance in the rehabilitations, retention or development of affordable housing for the low and very -low income residents. Development activities such. as building, plan review, design or management fees are not eligible activities to be Funded with TIF, The eligible amount of on -site development activities will be considered as part of a 10% limit based on the total project cost. 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. The interest and repayment terms .for a low -interest loam For the above listed activities are. % ariable -interest Rate, The an rest late is Sii inclex Which is ®sae Prir � Rate L�Lill not ogcu ,none o er then � � �irw� d��.�f t �.. _o�t�_goilc ��ir: � r� �.al a�z�i��rs�r� �� the I'oar. Ti�xm: Deleted: 3%for loans not exceeding Priine wfth a Liars €LEI i€l it3C asiSt it Ed rc ; $75.000 i`ar a maximum 15•year term] Prirye witr'i a flttees€ year t rin for from %5. i t; Q 4%ftNloansrangingfrom S75,WOto - £ $125,000 for a maximum 15-year €erml °rime ,y'sth a ty,,er y- year term for CLss,sLage cf 150:o li 5%forloans orerS[44,(H1Dfor a maximum 20-year term Deleted: Deleted: Fi Formatted: 1 is 1 QM Page 3 of 5 Did: ORIGINAL TIF POLICY - NOW BEING REVISED (ication Process an Ria uirement for U-_Maske I, ns The Community Development staff will assist the developer in preparing a formal application. Upon submittal by the developer of all necessary information, staff will arrange for a presentation by the Developer to the City Council at a workshop session. The following information must be contained in the application: project Description - A description of the project, type of development and scope of work including: • Plans/schematics + Project schedule- proposed timetable for completion of project • Project feasibility - substantiate the market and economic feasibility of the project Project Financing - A description of the financial arrangements of the project to include. • Sources of funds - detailing terms and conditions + Lender commitments - evidence of commitments of funds necessary for completing the project • Cost breakdown - estimated cost of the project • Pro forma -- projections of anticipated income, expenses, cash flow and depreciation for the first five years of the project « Leverage Ratio - Ratio of public to private investment ➢ Development .Entity --- A public disclosure of the development entity and other involved parties including information on qualifications and past experience • financial Disclosure - Pull 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 ' I , fetter rr©tip na source. ......................................................... .............. .. . .......... Employment Generated -Provide the best estimate of construction and permanent jobs to be generated by the project and a wage/salary scale for employment created. > Letters of Intent from tenants for lease project Tax Generation - The existing tax base of the property upon which TIF assistance is requested must be compared to 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 often (Ia) years. The submission of an application to the Co ?r a ity .De aeloMment Dart-ent for tax increment W : > elxu•rr x[It12-_-_-- assistance begins the review process by City Council. Materials contained in the application __- ixotm•tCectc UnrJerline T �3r,e 0 1 14M 4 Page 4 of 5 - --------- Deleted: ORIGINAL TIF POLICY — NOW BEING REVISED 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 City Council to decide between competing projects or determine if a proposal has sufficient benefits to warrant assistance. The City Council will evaluate: Economic Stimulus • Employment Generation Tax Generation Elimination of Blight 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 steed for TIF assistance. ■ Developer Past Performance ■ Project Feasibility ■ Impact Analysis/Assessment — This is based on environmental impacts, design and dislocation associated with the project. ■ 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. Timely Completion ■ The Amount of TIF Assistance requested. Leverage Ratio — Ratio of public to private investment €s i i sldli Wage 5 of 5 Delfted: W - IJTILIZA'1-ION OF FUNDS INVOLVING TIF INTEREST SUBSIDIZED LOAN51€ The tow interest loan subsidy progrion is provided to assist businesses and property owners in making physical improvements to their commercial/rctad property. Working with participating banks, the City of Kalispell subsidizes the interest rate down to 3 % with the participating banks finding and seeming the principal on tilt loan_j I The interest subsidy is funded through the use of Tax Increment Funds (TIF) from the Urban Renewal Districts. The use of these public funds is to improve the tax base surd stimulate the revitalization of the Urban Renewal Areas. Properties within the districts are eligible to make a preliminary application to the City to determine the eligibility of work items to he funded by the prograrn. Eligible Amu- includc:¶ Eliminate code deficiencies¶ Energy conservation/weatherization' Removal or physical barriers to the haudicappedT Replacement of permancnt fixtures to existing structme4 Renovation through alteration, addition, to or enhancement of existing structtaesl Capital improvements to the real estate (pamanent fixtures Exterior storefront improvementsT Replacement of exterior signal On site improvements (paving and landscapingf I Items not eligible include acquisition of property, personal inventory, equipment and cash flow. Costs to be paid through TIP commercial monies may not be inctured by the applicant prior to the effezlivc .w.c. vfunding apiroval and satisfaction of anv ss nditisms of such ... approval.¶ The minimum amount of a subsidized commercial loan is S5,1*0 and the i maximnm amount is S5 O t7; and there is a requirement of a 5015Q dollar match between the TIF subsidized loan amount and the amount invested by the borrower. Loans will be made over a five-year amortization period or_ if the applicant is a tenant, for the term of the lease not to exceed five years. Loans may be used for interior andior exterior renovation; rl7 Formatted: Body Text Indent 3, Lest i Fwmatted: Fortt_ Not Italic � Meted: Febtus�r r %qt]a Forefetted: Underline page 5 [ I Susan Mayer 9/800" 1s50 PM IV UTILIZATION OF FUNDS INVOLVING TIF INTERE SUBSIDIZED LOANS The low interest loan subsidy program is provided to assist b sinesses and property owners in making physical improvements to their commerc' I/rettail property. Working with participating banks, the City of Kalispell. subsidizesye interest rate down. to 3% with the participating banks funding and securing the pri cipal on the loan. The interest subsidy is funded through the use of Tax crement Funds (TIF) from the Urban Renewal Districts. The use of these public ds is to improve the tax base and stimulate the revitalization of the Urban Renewal eas. Properties within the districts are eligible to make a preliminary application to t c City to determine the eligibility of work items to be funded by the program.. Eligi e items include: Eliminate code deficiencies Energy conservation/weatherization Removal of physical barriers to the ht Replacement of permanent fixtures to Renovation through alteration, additic Capital improvements to the real estal Exterior storefront improvements Replacement of exterior signs sting structures s to or enhancement of existing structures (permanent fixtures) On site improvements (paving an landscaping) Items not eligible include acq 'sition of property, personal inventory, equipment and cash flow: Costs to be paid throuo TIF-commercial-monies may -not be incurred by the applicant prior to the effect' e date of funding approval and the satisfaction of any conditions of such appror . The minimum amount a subsidized commercial loan is $5,000 and the maximum amount is $50,000; there is a requirement of a 50150 dollar match between the TIF subsidized loan amo t and the amount invested by the borrower. Loans will be made over a five-year anortization period or, if the applicant is a tenant, for the term of the lease not to exceeX five years. Loans may be used for interior and/or exterior renovation. An applicant s a time frame of ninety days to complete the application process and close on a to . This 90-day time frame will begin when the Community Development Department eceives the application. All necessary supporting documentation and attachmen must be attached to the application prior to presentation to the Architectural Review ommittee (ARC). The Afchitectural Review Committee reserves the right to review a request for extension of ti e on the actual implementation of the loan. This request will only be approved if the is a valid reason why the project has not begun.. The extension period will be ealuated on a case -by -case basis. Applications are available at the Community Development office. On/thcompleted application and all supporting documents are received, an ARC meetinbe scheduled and the applicant is expected to attend. `fhe ARC is chargedt only review for conformance to the Redevelopment Plan but also to makeuggestions if needed to improve the aesthetical appearance of the project as wellAs ADA requirements. Upon approval, the participating lender will be requested to pro Tide in writing the amount of interest subsidy required to close the loan.