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MinobimaadiziwinApartmentsTax IncrementFinancing PlanDraft for Public


MinobimaadiziwinApartmentsTax Increment Financing PlanTable of ContentsIntroductionTIF District BoundaryType of TIF DistrictMaximum Duration of the TIF DistrictStatement of ObjectivesProposed Developm

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Document on Subject : "MinobimaadiziwinApartmentsTax IncrementFinancing PlanDraft for Public"— Transcript:

1 MinobimaadiziwinApartmentsTax IncrementF
MinobimaadiziwinApartmentsTax IncrementFinancing PlanDraft for Public ReviewJune , 2019 MinobimaadiziwinApartmentsTax Increment Financing Plan Table of ContentsIntroductionTIF District BoundaryType of TIF DistrictMaximum Duration of the TIF DistrictStatement of ObjectivesProposed Development ActivityA. Description of Proposed Development ActivityB. Property That May be AcquiredC. Other Anticipated Development ActivityDescription of FinancingA. Costs to be Paid With Tax Increment RevenueB. Construction of Affordable Housing Outside the TIF DistrictC. MaximumAmount of Bonds to be IssuedD. Original Net Tax CapacityE. Original Tax Capacity RateF. Fiscal Disparities ElectionG. Projected Captured Net Tax Capacity and Tax IncrementEstimated Impact on Other Taxing JurisdictionsIX.Basis for Finding That Development Would Not Occur Without TIF AssistanceExhibitsTIF District Boundary MapSite Plan and Renderings Assumptions ScheduleProjected Tax Increment Schedule MinobimaadiziwinApartmentsTax Increment Financing Plan Page IntroductionThe Mi

2 nobimaadiziwin Apartments Tax Increment
nobimaadiziwin Apartments Tax Increment Financing (TIF) Plan has been prepared to help finance the construction of a sixstory mixeduse building along Cedar Avenue South near the Franklin Avenue LRT Station. The building will include 110 affordable apartmenta clinic, and office spaceTheTIF Plan establishes a new housing TIF district to finance various public redevelopment costs and includes a budget for the use of tax increment revenue generated by the new TIF district. II.IF District BoundaryThe Minobimaadiziwin Apartments TIF District (the “TIF District”) will consist of the sixparcels identified below by their current property identification numbers and addresses. The TIF Districtwill also include land adjacent tothese parcels that iscurrentlyexcess rightofway from prior highway construction projects. The properties and the excess highway rightofway willbe replatted to create one parcel. PIDProperty Address 02900352105 Cedar Avenue South02900362109 Cedar Avenue South02900372113 Cedar Avenue South02900381800 22Street East0290

3 0391820 22Street East02900401834 22Stree
0391820 22Street East02900401834 22Street EastTheproperties are located within the Ventura Villageneighborhood.TIF District Boundary Map is attached as Exhibit 1.III.Type of TIF DistrictThe TIF District is a “housing district” as defined in the Minnesota Tax Increment Financing Act (the “TIF Act”, M.S. Sections 469.174469.1799).Pursuant to M.S. Section 469.174, Subd. 11, aousing district" means a type of tax increment financing district which consists of a project, or a portion of a project, intended for occupancy, in part, by persons or families of low and moderate income, asdefined in chapter 462A, Title II of the National Housing Act of 1934, the National Housing Act of 1959, the United States Housing Act of 1937, as amended, Title V of the Housing Act of 1949, as amended, any other similar present or future federal, state,or municipal legislation, or the regulations promulgated under any of those acts and that satisfies the requirements of section 469.1761. Housing project means a project, or a portion of a project,

4 that meets all of the qualifications of
that meets all of the qualifications of a housing district under this subdivision, whether or not actually established as a housing district. MinobimaadiziwinApartmentsTax Increment Financing Plan Page In order for a TIF district to qualify as a housing district, the development must comply with certainincome restrictionshere isalsoa limit on the amount of space that can beoccupied by nonresidential uses.In particular, for a residential rental property, the property must satisfy the income requirements for a qualified residential rental project as defined in Section 142(d) of the Internal Revenue Code.These income requirements specify that atleast one of the following two income tests must be met:50 Test Twenty percent or more of the residential units are occupied by individuals or families whose income is 50 percent or less of the area median gross income (AMI).60 Test Forty percent or more of the residential units are occupied by individuals or families whose income is 60 percent or less of AMI.The Minobimaadiziwin project meets both

5 income tests. It meetsthe first test be
income tests. It meetsthe first test because 66 (60 percent) of the 110 apartment units will be affordable at or below 50 percent AMI. It meets the second test because all 110 units will be affordable at or below 60 percent AMI.Additionally, no more than 20 percent of the square footage of any building that receivetax increment financing assistance may consist of commercial, retail, or other nonresidential uses. Thesixstorybuilding will contain approximately 23,000 square feet of commercial space on the ground floor, which is approximately 16percent of the total square footage of the buildingIV.Maximum Duration of the TIF DistrictThe maximum duration of the TIF District is that which is prescribed by the TIF Act for a housing district. At the time this documentwas prepared, the TIF Act allowed for a maximum of 26 years of tax increment collectionfrom a housing districtStatement of ObjectivesThe City of Minneapolis (the “City”) seeks to achieve the following objectives through the establishment of TIF DistrictIncrease the numbe

6 r of housing units and choices within th
r of housing units and choices within the City.Provide housing unitsaffordable to persons or families of low and moderate income.Support strong and diverse neighborhoods where people choose to live.Promote sustainable development.Increase the property tax base.VI.Proposed Development ActivityDescription of Proposed Development ActivityThe Red Lake Band of Chippewa (RLBC) plansto construct a new mixeduse building on a site along Cedar Avenue South approximately 400 feet south of the Franklin Avenue LRT tation. The Blue Line LRT runs immediately east of the site. MinobimaadiziwinApartmentsTax Increment Financing Plan Page The building is to be six stories in height, with one level of underground parking. Ground floor usesinclude a community room, a fitness center, a clinic, and the Red Lake Nation Embassy. The110 apartments on the upper floorswill include 10 studio, 15 onebedroom, 55 twobedroom, and 30 threebedroom unitsAll 110 apartments will be affordable housing units. Twentyfourunits will be affordable at 30 percent AMI, units will

7 be affordable at 50 percent AMI, and 44
be affordable at 50 percent AMI, and 44unitswill be affordable at 60 percent AMI.Thebuilding will be vshaped witha courtyard. There will beoutdoor amenity spaceand a landscaped path between the Franklin Avenue LRT Station andthe building entrance.See Exhibit for asite plan and renderings of the planneddevelopmentB.Property That May Be AcquiredThe City does not intend to acquire any property within the TIF District.C.Other AnticipatedDevelopment ActivityNo other development activity is currently anticipated within the TIF District.VII.Description of FinancingThe amount of tax increment financing identified in this TIF Plan based on the bestestimates and projections available at the time thplan was prepared. Slight changes can be expected. However, if significant changes occur that affect the structure or financial feasibility of the project, or increase the project costs to be paid with tax increment revenue beyond the amounts listed below, then a formal modification to thplan may benecessary. In this casethemodification would require t

8 he same review and approval process that
he same review and approval process that was required with the original TIF Plan.Costs to be Paid With Tax IncrementRevenueThe total development cost of theproject is currently estimated to be approximately $42 millionThe maximum amount of TIFeligible project costs that can be paid with tax increment revenuegenerated bye TIF District is shown below. Sources Tax IncrementRevenue4,462,000 Total Sources4,462,000 Uses Construction of Affordable Housing,0,000PayAsYouGo Note Interest City Administrative Costs44610% Total Uses4,462,000100% MinobimaadiziwinApartmentsTax Increment Financing Plan Page The City reserves the right to administratively adjust the amount of any of the line items listedabove, or to incorporate additional eligible uses, provided that the Total Uses amount is not increased.B.Constructionof Affordable Housing Outside the TIF DistrictPursuant to M.S. Section 469.1763, Subd. 2(b), the expenditure of housing district TIF for a housing project, as defined in M.S. Section 469.174, Subd. 11, is deemed to be an indistrict activit

9 y for pooling purposesAccordingly, tax i
y for pooling purposesAccordingly, tax increment expenditures are not restricted to the TIF district or “project area” (as that term is defined in M.S. Section 469.174), but may be spent on housing projectmeeting the qualifications of a housing district at M.S. Section 469.174, Subd. 11anywhere within the City of Minneapolis.C.Maximum Amount of Bonds to be IssueThe City does not currently anticipate issuing any tax increment bonds for the Minobimaadiziwin Apartmentsroject. It is anticipated that the City will issue the developer a payyougo TIF revenue note in anamount not to exceed $2,015,000. TheCity will semiannually distribute net tax increment to the developer under the terms of the TIF note. The developer will use this tax increment revenue, along with net operating incomefromthe housing developmentto pay debt service on private debtsecured by the developerthat isused to finance the construction of the project.Asprovided in M.S.Section 469.178, Subd.7, he City may advance one or more interfund loansbetween the tax incremen

10 t (“TI”) special revenue fund
t (“TI”) special revenue fund for the TIF District and the other TI special revenue funds of the City. Each such interfund loan to or from the TIF District shall be in the principal amount needed to offset a negative cash balance.The interest rate charged on each such interfund loan to or from the TIF District shall be equal to the average interest rate that revenue in the City’s TI special revenue funds earn at the time the loan is made, and such interest rate shall vary over time. In no event will the interest rate charged on any such interfund loan exceed the greater of the rates specified under Minnesota Statutes, Section 270C.40 or 549.09, as such statutory rates are adjusted from time to time. The maximum term of each such interfund loan to the TIF District shall be the earlier of 1) the date that all principal and accrued interest on the loan is repaid, and 2) the date the TIF District is decertified. The maximum term of each such interfund loan from the TIF District toanother TIF district shall be the earlier of

11 1) the date that all principal and accr
1) the date that all principal and accrued interest on the loan is repaid, and 2) the date the other TIF district is decertified.Original Net Tax CapacityThe TIF District is projected to have an originalestimated market value (EMV) of $1,011,500, and anoriginal net tax capacity (ONTC) of$12,644Original Tax Capacity RateThe original tax capacity rate for the TIF District will be the total local tax capacity rate for all applicable taxing jurisdictions for taxes payable in 20, which is not yet available. For the purpose of calculating the estimated impact on other taxing jurisdictions, the total tax capacity rate for taxes payable in 20was used (see Section VIII).For tax increment projection purposes, total tax capacity rate of 120percentwas assumed MinobimaadiziwinApartmentsTax Increment Financing Plan Page Fiscal Disparities ElectionFor the purpose of calculating tax increment, the City of Minneapolis elects that the fiscal disparity contribution thatis requiredfor all commercial and industrial property located within the TIF District

12 will be made from “outside” th
will be made from “outside” the TIF District (M.S. Section 469.177, Subd. 3, Paragraph (a)).G. Projected Captured Net Tax Capacity and Tax IncrementUpon project completion, it is projected that the total EMV of the property in the TIF District will be $18,450,000and the total net tax capacity (NTC) will be $160,625. The captured NTCof the TIF District is therefore projected to be$147,981The Assumptions Schedule (Exhibit ) shows the various assumptions used in projecting net tax increment from the TIF District.The Projected Tax Increment Schedule (Exhibit ) shows how tax increment was projected over the life of the TIF districtVIII.Estimated Impact on Other Taxing JurisdictionsIt is the position of the City of Minneapolis that the development of the property included in this TIF District would not occur as proposed without tax increment financing assistance.Nevertheless, it has beenassumed in theanalysis below that the proposed development would occur without TIFassistance. Under this assumptionthe projectedcaptured net tax ca

13 pacity at project completion would be im
pacity at project completion would be immediately available to the applicable taxing jurisdictionsand the resulting property taxeswould be as follows:Property TaxesResulting FromPay 2019147,981TaxCaptured Net Taxing JurisdictionCapacity RateTax Capacity City of Minneapolis57.312%,8Hennepin County41.747%778Minneapolis Special School District No. 122.270%955 Other7.501%100 Total128.830%190,644 Fiscal and Economic Implications of the TIF District The projected amount of tax increment revenue that would be distributed to the City over the maximum duration of the TIF District is $4,461,203The probable impact of the TIF District on Cityprovided services such as police and fire protection, public infrastructure, and borrowing costs attributable to the TIF District is projected to be very minor due to the small size of the project in comparison to the size of the City budget and tax base. MinobimaadiziwinApartmentsTax Increment Financing Plan Page The projected amount of tax increment revenue generated over the life of the TIF District that woul

14 d be attributable to the School District
d be attributable to the School District, assuming the School District’s tax rate remains at approximately 17.3% percent of the total tax rate, $771,788The projected amount of tax increment revenue generated over the life of the TIF District that would be attributable to the County, assuming theCounty’s tax rate remains at approximately 32.4%percentof the total tax rate, $1,445,430IX.Basis for Finding That Development Would Not Occur WithoutTIF AssistanceM.S. Section 469.175, Subd. 3 provides that, prior to approval of a TIF plan, the City Council must find that the proposed development or redevelopment would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future, and therefore the use of TIFis deemed necessary.After thorough financial analysis, it is the position of the City of Minneapolis that the proposed privatedevelopment to be constructed in the Minobimaadiziwin Apartments TIF District would not occur within the reasonably foreseeable future without public financial ass

15 istance.analysisindicatesthat projected
istance.analysisindicatesthat projected development costs exceed available funding sourcesand that a significant upfront funding gap exists. funding gap is in large part due to the inclusion of theaffordable rental housing units the project. The amount of TIF assistancethat has been requested is reasonable when compared to the overall cost of developing the project, and TIFassistance is therefore deemed necessary and appropriateto close this funding gap. CEDAR AVE S HIAWATHA AVE FRANKLIN AVE E 17TH AVE S 24TH ST E 22ND ST E MINNEHAHA AVE SNELLING AVE HIAWATHA AVE TO CEDAR AVE S 19TH AVE S 22ND ST E HIAWATHA AVE CEDAR AVE S HIAWATHA AVE TO CEDAR AVE S 0 500 250 Feet N Exhibit 1 Prepared by Development Finance Division Finance & Property Services Department City of Minneapolis, Minnesota June 2019 Mino-bimaadiziwin Apartments TIF District Boundary Map BLUE LINE LIGHT RAIL TRANSIT Mino-bimaadiziwin Apartments TIF District Southeast Aerial View 12January 31, 2019 CONCEPT AERIAL RENDERINGS Southwest Perspective 14January 31, 2019 CONCEPT REND