Below is the text of the proposed Minneapolis TIF policy and companion procedures piece. This is a joint report over the signatures of John Moir, City Finance Office and Steve Cramer, Executive Director, MCDA. My apologies for the length of this post. I tried to send this as an attachment but suffered immediate technical rejection. These will be before the City Council's Ways & Means/Budget Committee on Monday, September 25 at 1 p.m., Room 319 City Hall. They will go to the full Council on Friday, September 29. Jack Kryst Manager, Project Planning & Finance Minneapolis Community Development Agency (612) 673-5130 Minneapolis Tax Increment Policy I. Purpose of Policy This Tax Increment Policy has been prepared by the Minneapolis Community Development Agency (MCDA) and the City Finance Department and approved by the MCDA Board of Commissioners and the Minneapolis City Council for the following purposes: � to guide MCDA staff in forming recommendations regarding the use of tax increment financing and negotiating contract terms with developers; � to guide City Finance Department staff in reviewing and commenting on the use of tax increment financing; � to provide a framework within which the City Council and Mayor can evaluate and compare proposed uses of tax increment financing; and � to inform the public of the MCDA and City's positions on the use of tax increment financing and the process through which decisions regarding the use of the tool are made. This policy supersedes the Tax Increment Policy approved by the Minneapolis City Council on July 11, 1986 and earlier versions of said policy. A separate document, Procedure for Analyzing Requests for Tax Increment Financing Assistance, outlines the administrative procedures to be followed in the review, analysis and approval of requests for tax increment financing assistance. II. MCDA Development Objectives The MCDA uses tax increment financing to accomplish these major objectives: A. Expand the Minneapolis economy to create more living-wage jobs, with an emphasis on providing job opportunities for the unemployed and underemployed. B. Attract and expand new and existing services, developments and employers in order to position Minneapolis and the region to compete in the economy of the 21st century. C. Increase the city's property tax base and maintain its diversity. D. Clean contaminated land to provide sites for uses that achieve MCDA and City redevelopment objectives. E. Provide an array of housing choices that meet the needs of current residents and attract new residents to the city, with an emphasis on providing affordable housing. F. Eliminate blighting influences throughout the city. G. Support neighborhood retail services, commercial corridors and employment hubs. H. Support redevelopment efforts that enhance and preserve unique urban features and amenities, including downtown, the riverfront and historic structures. III. General Guidelines in the Use of Tax Increment Financing A. The MCDA and the City of Minneapolis will comply with all requirements of the Minnesota Tax Increment Financing Act, as amended, and with all applicable Minneapolis ordinances, policies, plans and procedures. B. The MCDA and the City of Minneapolis will use tax increment financing only when a clear public purpose is served and only to the degree necessary to accomplish the desired development. The MCDA will undertake a rigorous analysis to ensure that the proposed project satisfies the "but for" test embodied within the Tax Increment Financing Act. C. Tax increment financing will only be used in cases where the economic feasibility of providing the public assistance as well as the economic feasibility of the development itself can be demonstrated. D. The MCDA and the City of Minneapolis will recapture the public subsidy to the maximum extent feasible after allowing the developer a reasonable return. E. Alternatives, such as "pay as you go" financing and reimbursing front-end public redevelopment costs with tax increment revenues, are preferable to bond financing and are to be considered and used when appropriate. F. Only those public improvements and public redevelopment costs directly associated with or needed to service the proposed development plan or project should be financed through tax increment. G. The MCDA will analyze each potential new tax increment financing district and recommend whether it should be included in or excluded from the fiscal disparity contribution. The impact of the fiscal disparity election on the City's general tax base will be analyzed using the methodology prescribed by the Minnesota Department of Revenue and will be reported to the City Council in a manner understandable to the general public prior to approval of the proposed use of tax increment financing. H. In order to prevent any loss of State aid (LGA/HACA) to the City, the MCDA will identify eligible sources for the required local contribution as part of the project finance plan. I. As part of the annual budget process, the MCDA will identify tax increment revenues deemed to be excess tax increment and will make related recommendations for decertification of parcels or districts. J. Developers requesting tax increment financing will be charged a non-refundable application fee. The amount of the fee will be based on the principal amount of tax increment requested as shown below: Tax Increment Principal Application Fee $ 1 - $ 1,999,999 $ 5,000 $ 2,000,000 - $ 9,999,999 10,000 $ 10,000,000 + 15,000 to 50,000* *Application fee will be dependent on MCDA estimates of the necessary degree of project analysis. IV. Economic Analysis and Risk Assessment Process A. Proposed uses of tax increment financing will be subject to rigorous economic analysis and risk assessment. MCDA staff will be responsible for overseeing the analysis and assessment process. Consultants will be used to complete needed analysis and assessment as appropriate. City Finance Department staff will participate in the analysis of proposed uses of tax increment financing. B. The analysis and assessment of all proposed uses of tax increment financing will address the following questions as part of the standard format for reports to the MCDA Board of Commissioners and the City Council: � What is the public purpose of the financial assistance to the project? � Why is there a financial need for public investment and/or subsidy? � What is the total cost of the project? � What is the appropriate level of public participation? � What are the risks associated with the project? � What are the alternative plans for managing the risk? � How does the proposed project finance plan compare with previously approved comparable projects? � What is the project's impact on other publicly financed projects? C. The results of the economic analysis and risk assessment will be presented to the City Council at the time of the request for approval of the proposed use of tax increment financing. The report will identify any elements of the proposed project that are not in conformance with this Tax Increment Policy. D. Projects with an anticipated term of increment collection greater than 15 years or projects with tax increment principal in excess of $10 million will be subject to a more extensive analysis, including appropriate market analysis and review by City Finance Department staff. E. This process for economic analysis and risk assessment does not replace the Administrative Procedure for Review of Development Proposals by an Interdisciplinary Proposal Review Team approved by the City Council on February 9, 1996, which remains in effect. V. Evaluation Criteria The following items will be taken into consideration in the evaluation of any development proposal requesting tax increment assistance. A. Need For Public Assistance - In all cases, it is required that the need for public assistance be demonstrated and documented by the developer to the satisfaction of the MCDA and the City Finance Department. All such documentation, including development budgets, cash flow projections, market studies and other financial and market information, must be submitted by the developer in accordance with the MCDA's Procedure for Analyzing Requests for Tax Increment Financing Assistance. If the request is based on financial gap considerations, the developer will demonstrate the profitability and feasibility of the project (i.e. gross profit, cash flow before taxes, cash-on-cash return, IRR, etc.), both with and without public assistance. B. Amount of Public Assistance versus Private Investment - All development proposals should seek to maximize the amount of private investment per dollar of public assistance. Public assistance as a percentage of total development costs will be determined for each project and compared to other development projects of similar scope and magnitude whenever possible. C. Term of Public Assistance -The term of the public assistance shall be kept to a minimum. The proposed term of any public assistance shall be fully documented and explained to the MCDA Board of Commissioners and the Minneapolis City Council. D. Development Benefits and Costs - The direct and indirect benefits of the development proposal shall be determined and quantified to the degree possible. Benefits shall include, but are not limited to, employment benefits (number of jobs retained or created, percentage of jobs held by City residents, wage and salary information, etc.), tax base benefits (estimated market value of new development, new property taxes generated, etc.), housing benefits (number of new rental or ownership units, number of affordable units, etc.), and other benefits relating to transportation, parking, blight remediation, environmental cleanup and historic preservation. Costs of the development proposal to both the MCDA and the City shall also be identified to the degree possible. Such costs shall include, but are not limited to, additional required infrastructure, required local contributions by the MCDA or the City, and the impact on the City's General Fund of the fiscal disparity contribution election if tax increment financing is used. The timeframe used for these cost estimates should equal the timeframe of the project finance plan and should separately identify any projected recapture of public subsidy. E. Recapture of Public Subsidy - It is the City's goal to recapture all, or a portion, of the public subsidy provided to the extent practical. Methods of recapture shall include, but are not limited to, long-term ground leases, subordinated loans, sale and/or refinancing provisions, and equity participation. September 18, 2000 Procedure for Analyzing Requests for TIF Assistance I. Receipt of Proposal Minneapolis Community Development Agency (MCDA) staff review of development proposals is triggered by the receipt of a formal written proposal by the Executive Director, although it is recognized that preliminary discussions between staff and developers will likely be held prior to submission and receipt of a formal proposal. Development proposals received by project coordinators are to be referred to the department manager, who will in turn notify the division director and the Executive Director. The written proposal shall include the following information: 1. identification of the site 2. description of proposed development 3. identification of development entities and statements of qualifications 4. development budget showing sources and uses of funds 5. operating pro forma showing developer's projected return on investment 6. market study if available, or other evidence of market feasibility 7. description of public assistance being requested 8. proposed timeframe and report on current project status It is understood that the information presented by the developer at this point in the process is preliminary, and may change as planning, review and negotiations progress. The following actions will be undertaken after receipt of a development proposal: 1. department manager assigns proposal to a project coordinator and requests assignment of financial analyst and attorney if appropriate at this point 2. initial meeting with developer for presentation of proposal 3. initial assessment of eligibility for tax increment financing and other sources of funding 4. determine and collect initial estimated application fee (subject to adjustment following Project Analysis Authorization) 5. notification to City Finance Department, City Planning Department, affected City Council Member and affected neighborhood group of receipt of proposal 6. advise developer to contact City Council Member 7. advise developer that process requirements include neighborhood and City Planning Department review of proposal 8. advise the developer as to the likely development process steps II. Preliminary Analysis MCDA staff will conduct a preliminary analysis of the development proposal prior to seeking direction from the Board of Commissioners regarding further consideration of the proposal. The following actions will be undertaken: 1. conduct coordination meeting to include project coordinator, financial analyst and other appropriate staff (such as planner, blight analyst, relocation staff, attorney) 2. conduct preliminary assessment of proposal's consistency with City goals and priorities, The Minneapolis Plan and other applicable land use plans, zoning code, MCDA Strategic Plan, applicable Development Objectives, redevelopment plans and NRP plans 3. identify public purpose to be served 4. conduct rudimentary sources and uses analysis 5. conduct preliminary analysis of financial feasibility and appropriate level of public participation 6. evaluate developer's financial capacity and experience 7. determine need for consultant 8. identify any significant factors that weigh for or against the proposal 9. determine whether to bring proposal to Board of Commissioners for Project Analysis Authorization 10. notify City Finance Department, City Planning Department and Council Member of results of preliminary analysis and decision regarding whether to seek Project Analysis Authorization III. Project Analysis Authorization Project Analysis Authorization from the Board of Commissioners directs staff to spend time and financial resources to continue to evaluate the development proposal, and signals the MCDA's position that the proposal warrants further analysis. It does not signify a commitment on the part of the City or the MCDA to undertake any specific actions or to grant final approval to the request for public assistance. Staff will obtain Project Analysis Authorization through these actions: 1. prepare report to Board of Commissioners in accordance with standard format, requesting as appropriate Project Analysis Authorization, designation of exclusive development rights, authorization to prepare redevelopment and tax increment finance plans, and establishment of Preliminary Planning Fund budget if necessary 2. receive Board direction IV. Economic Analysis and Risk Assessment In accordance with the Tax Increment Policy, staff will determine the appropriate level of analysis (standard vs. more extensive) to be conducted. Standard analysis: 3. identify public purpose and determine eligibility under state law 4. estimate development costs and public costs 5. "but for" analysis 6. analyze fiscal and economic impacts, including impact on other publicly financed projects and impact on MCDA and City revenues and expenditures 7. identify appropriate form and amount of public financial assistance 8. evaluate financial health and past performance of developer 9. identify risks and plans for managing risks 10. identify costs of not undertaking the project 11. compare project with previously approved projects 12. formulate recommendation regarding fiscal disparities contribution 13. identify eligible sources of local contribution to exempt City from loss of LGA/HACA 14. share results of analysis with City Finance Department 15. report to Development Finance Committee Extensive analysis (all of the above, plus): 16. consult with City Finance Department to determine the nature and scope of additional analysis 17. conduct or contract for needed financial analysis 18. conduct or contract for appropriate local economic impact analysis V. TIF Plan Preparation and Approval 19. prepare plan in accordance with State statute, local ordinance and approved administrative procedures 20. notify County, School Board, neighborhood organizations and other interested parties in accordance with State statute and local ordinance 21. seek City Planning Commission opinion on consistency with comprehensive plan 22. prepare report to the City Council and MCDA Board of Commissioners in accordance with standard format, including economic analysis and risk assessment, and with appropriate resolutions VI. Redevelopment Contract and Financing Authorization 23. prepare report to the City Council and MCDA Board of Commissioners, as appropriate, in accordance with standard format and with appropriate resolutions 24. report to include recommended contract and financing terms, including adjustment of application fee if necessary 25. report to be reviewed by Project Planning & Finance department prior to submission to the Executive Director for signature -----Original Message----- From: Rosalind Nelson [mailto:[EMAIL PROTECTED]] Sent: Tuesday, September 19, 2000 7:43 PM To: Multiple recipients of list Subject: Finance news items TIF The other is a proposed policy requiring economic-risk studies and an application fee for new TIF projects. On the face of it, this seems like good news to those of us who suspect TIF is a hinky way to route public money to entities that have lots of it already. Any comments? Rosalind Nelson Bancroft
