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HomeMy WebLinkAboutResolution 2862 Adopting TIFID program elements .:..-.~...",,- n__._____ - ~ -- '.1 , COMMISSION RESOLUTION NO. 2862 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, ADOPTING PROGRAM ELEMENTS FOR THE TAX INCREMENT FINANCING INDUSTRIAL DISTRICT (TIFID) PROGRAM. WHEREAS, the City Commission has previously created a TIFID program; and WHEREAS, the City Commission has previously created a TIFID Advisory Board to advise the Commission on matters relative to the TIFID program; and WHEREAS, the TIFID Advisory Board has recommended the adoption of Program Elements for the administration of the TIFID program. NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of Bozeman, Montana, that the TIFID Program Elements, as contained in Exhibit" A", attached hereto and by this reference made a part hereof, are hereby adopted. PASSED AND ADOPTED by the City Commission of the City of Bozeman, Montana, at a regular session thereof held on the 11 th day of May 1992. ~~~ /TIMOTH SWANS . YOl ATTEST: ~ J .LII~ ROBIN L. SULLIVAN Clerk of the Commission APPROVED AS TO FORM: 1JL(ClX:~ pAUL J. L E. City Attorney ----- ~ -..-. .. -- ....--. .. --...- ....::;:-...0;;&....- , .. , . ,.. 4.30 DRAFT EXHIBIT A BOZEMAN, MONT ANA T AX INCREMENT FINANCING INDUSTRIAL DISTRICT PROGRAM ELEMENTS Introduction The creation and expansion of secondary, value-adding industries provides new jobs and an expanded tax base for the community. The City of Bozeman wishes to encourage the attraction and retention of such industries. The Bozeman City Commission recognizes, however, that industries require expensive industrial infrastructure improvements, which may be beyond the aVplilable resources of the City of Bozeman to provide. Other funding sources are needed to assist in the provision of these infrastructure improvements. To provide such alternatives, the Bozeman City Commission created a Tax Increment Financing Industrial District (TIFID) program and a TIFID Advisory Board. TIFIDs are designated areas which meet the district requirements outlined below. Once a district has been designated as a TIFID, an applicant may apply for various types of Tax Increment Financing (TIF) assistance for eligible industrial development projects within the district. The TIF element of the TIFID program is a financing mechanism designed to assist in the funding of industrial infrastructure within a TIFID. New tax dollars generated by private investment within the district may be made available to assist in providing eligible infrastructure improvements. TIF redirects all or a portion of the increased tax revenue from a district, including the revenue that may result if the infrastructure improvements stimulate private investment within the TIFID. As private investments add to the tax base within the TIFID, the increased tax revenues are placed in a special fund that can be used for eligible infrastructure improvements as described herein. District Requirements As provided in 7-15-4299, M.C.A., the Bozeman City Commission may create a TIFID by ordinance after a public hearing if the proposed district: 1. consists of a continuous area with an accurately described boundary; 2. is zoned for light or heavy industrial use in accordance with the area master planning document; 1 ....--.-...."....-- - ..-- __.._.._.."'. ".._u , 3. does not include any property included within an existing urban renewal area district created pursuant to this part; 4. is found to be deficient in infrastructure improvements for industrial development; and 5. has as its purpose the development of infrastructure to encourage the growth and retention of secondary, value-adding industries. ELIGIBLE ACTIVITIES The tax increment received from an industrial district may be used to pay for the following costs incurred for an industrial infrastructure development project (in that district) : (1 ) land acquisition; (2) demolition and removal of structures; (3) relocation of occupants; (4) the acquisition, construction, and improvement of infrastructure or industrial infrastructure, which includes streets, roads, curbs, gutters, sidewalks, pedestrian malls, alleys, parking lots and off-street parking facilities, sewers, sewer lines, sewage treatment facilities, storm sewers, waterlines, waterways, water treatment facilities, natural gas lines, electrical lines, telecommunication lines, rail lines, rail spurs, bridges, publicly owned buildings, and any public improvements authorized by 7- 12-41 through 7-12-45, 7-13-42,7-13-43, and 7-14-47, M.C.A., and items of personal property to be used in connection with improvements for which the foregoing costs may be incurred; (5) costs incurred in connection with the redevelopment activities allowed under 7-15-4233, M.C.A.; (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 enterprises 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, through industrial infrastructure development projects, to secondary, value-adding industries to assist in meeting their infrastructure and land needs within the industrial district. 2 -- - --- - - _..... _. _.. _n___ .____ ._____._ Tax Increment Financing Assistance The City of Bozeman, wishing to encourage the attraction and retention of secondary value-adding industries which may require expensive infrastructure improvements which are beyond the available resources of the City of Bozeman to provide, has established a TIFID program to assist in the financing of industrial infrastructure improvements. Public Infrastructure Improvements Examples of financial assistance for eligible public infrastructure improvements include the following: Tax Increment Financing - Financial assistance with the costs of a specific development proposal for "infrastructure" improvements (curbs, gutters, sidewalks, public landscaping, utility connection or relocation, parking and street improvements, and other similar improvements) which generally benefit the public. Annual Tax Increment Appropriations ~ The City of Bozeman may finance infrastructure improvements by appropriation from annual tax increment receipts. Available funds would be determined by the amount of increment revenue and prior commitments for such revenue. Conventional Financing - principal and interest paid with tax increment revenues Tax Increment Financing Bonds - The City of Bozeman may, when appropriate, finance large scale public infrastructure development (rail spurs, utilities service, sewage treatment, sewer lines, water, land and buildings) through the sale of tax increment bonds. Tax increment revenues would be pledged to pay bond principal and interest annually for the term of the bond. The size and term of the bond would depend on tax increment revenues available from private sector taxpayers within the TIFID. While Montana law provides that tax increment districts may only be authorized for 15 years, the time period may be extended to coincide with the term of a tax increment bond. The guidelines contained in Appendix A pertain to the issuance of Tax Increment Bonds. Private Infrastructure Improvements 7-15-4288 (11), M.C.A. provides for the following item as a cost which may be paid by tax increment financing: the provision of direct assistance, through industrial infrastructure development projects, to secondary, value-adding industries to assist in meeting their infrastructure and land needs within the industrial district. Direct Financial Assistance - The City of Bozeman may provide an applicant with direct assistance in meeting its land needs(land and land improvements) and its industrial infrastructure needs (buildings, equipment, processing facilities and other private infrastructure). The availability of funds will be determined by annual tax increment 3 . receipts less any prior commitments. Funds may not be used for the purchase of inventory or for operating capital. Direct assistance will fall into a number of specific programs: Loans- The City of Bozeman may provide debt financing to qualifying private concerns for a period not to exceed the authorized life of the TIFID. The specific loan terms will be negotiated by the applicant and the City of Bozeman. Interest Write-Down Program - The City of Bozeman may pay a portion of the interest costs on a conventional loan in order to reduce the cost of borrowing for qualifying applicants. The amount of interest reduction will be determined by the size of the project and the availability of increment. Interest payments would be paid directly to the commercial lender. Industrial Revenue Bonds- Under certain circumstances the City of Bozeman will issue industrial revenue bonds for private infrastructure development. While the applicant would be the obligor in this program, the City of Bozeman may enter into an agreement to assist the applicant with portions of the annual debt service costs. Funding Limits (Public and Private) No more than 80% of the increment due the local government in anyone fiscal year will be available through industrial infrastructure programs to the development which generated the increment. Remaining funds may be used to help existing companies within the district (Le., companies which were present while the tax increment district was created); to administer the TIFID program; to construct commonly-used public infrastructure; to support other TIFID programs within the district; and for the potential allocation to other affected taxing bodies (school district, local government, the state of Montana, etc.) DEVELOPMENT AGREEMENT The project and the City of Bozeman's participation will be memorialized in a legally binding development agreement which finalizes the terms and conditions of the TIF assistance. The agreement, at a minimum, specifies the time frame for the start and completion of the project and requires the applicant to guarantee repayment of any TIF assistance if the terms of the agreement are violated. The development agreement must be executed prior to the commencement of work under this program. EXPENDITURES. AGREEMENTS AND CONTRACTS The City Commission will receive regular reports from the TIFID Board and staff regarding all expenditures. Final agreements and contracts will be signed by the City Manager of the City of Bozeman with the approval of the City Commission. The City of Bozeman's finance office will provide financial management and auditing as required. 4 --... .-.----..-".--- --.----.-.-- ELIGIBILITY REQUIREMENTS In order to be eligible for assistance under the City of Bozeman TIFID program, the following criteria must be met: The applicant must plan to locate within an authorized TIFID area (maps attached). All special improvement districts and property taxes levied against the property in question must be paid to date. Any applicant who wishes to apply for tax increment assistance must enter into an assessment agreement with the local government. An assessment agreement is a document which obligates the applicant to pay and remain current on all property tax obligations for the period during which the increment is being used to assist the applicant, but no longer than the authorized life of the TIFID in which the development is located. This obligation remains in effect, even in the event that the applicant closes or moves its facilities. Further, for the duration of the agreement, the applicant must agree to continue to pay taxes at least at a rate which was in effect at the time the agreement is executed, regardless of changes in the tax rate. Eligibility is extended to property owners of record and tenant businesses. Tenant businesses financing the private portion of the project using a private lender must document a lease period equal to or in excess of the term of any loan used to finance the project. All tenants must provide notarized written approval of the property owner and evidence of their leasehold interest. All plans, materials, construction techniques, and the completed project are subject to all applicable development review procedures. Public funds will not be released until the City has received written verification from the Official(s) (or their designees) responsible for determining such compliance. 5 --- ......_.__ __.._.._n_ .. APPlICA TION PROCESS Applications will be reviewed initially by the TIFID staff which will in turn make its recommendation to the TIFID Board. The Board will review the staff reports and the applications and make recommendations to the City Commission. The City Commission has final authority to approve/amend/deny all applications. An applicant must submit a written application for each TIF assisted project. The following procedure has been developed to expedite the review of TIF funding requests. 1. Contact the Gallatin Development Corporation (GDC), to discuss the project and determine eligibility for TIF assistance. 2. Prepare a Written Application. The applicant must prepare a written application for each project. The GDC staff will assist the applicant in preparing a formal application. The applicant must also complete an "Applicant's Statement of Qualification and Financial Responsibility" which includes submittal of personal financial statements. 3. Staff Review. Upon submittal of all necessary information, the staff will review the project and make recommendations to the TIFID Board. At any point in the review process the TIFID staff, TIFID Board, or City Commission may request more information of the applicant. 4. Board Review. The TIFID Board will review the project and staff recommendation, and advocate approval/disapproval of the funding request and any special terms of TIF assistance to the City Commission. 5. City Commission Review and Approval. The City Commission will review the project and all recommendations and take final action. 6. Development Agreement. The City of Bozeman and the applicant must execute a legally binding development agreement which finalizes the terms and conditions of the TIF assistance. The agreement specifies the time frame for the start and completion of the project and requires the applicant to guarantee repayment of TIF assistance if the terms of the agreement are violated. The development agreement must be executed prior to the commencement of work under this program. IMPORTANT NOTE: Applicant costs which may be eligible to be paid from TIF monies but which are incurred by the applicant before the effective .date of funding approval will be reimbursed only when a Development Agreement specifically includes those costs. The City of Bozeman will be responsible for bidding or obtaining cost estimates and for selecting a contractor for public activities funded with tax increment unless specified otherwise in the development agreement. The City of Bozeman will follow public bidding procedures for contracts over $10,000. 6 . APPLICANT RESPONSIBILITIES The successful applicant for TIFID assistance must undertake the following responsibilities. 1. Applicant completes TIFID application material and complies with all program requirements. This material is provided to the GDC staff for review and approval. The GDC staff will assist the Applicant in completing the necessary program forms and in developing a project design which is in compliance with program objectives. 2. Applicant is responsible for meeting all deadlines. 3. Applicant must show ability to fund the private portion of the project. If financed by a lending institution, a letter of commitment or line of credit must accompany the application. If financing is to be internally generated by the owner or tenant business, proof of ability to finance the private portion of the project may be required. TIFID program financing and private financing may be developed concurrently. 4. If so specified in the Development Agreement, the Applicant will select the architect, engineer, and contractors who will participate in the project, and will obtain all permits and approvals associated with the project. 5. A Certificate of Occupancy or other official documentation stating the work has been completed satisfactorily must be received by GDC staff upon project completion. 6. If the Applicant financed all or part of the private portion of the project using a lending institution, he/she/they will be solely responsible for all loan repayments and for compliance with all requirements established by the lender. 7. If so specified in the Development Agreement, the Applicant is solely responsible for the full payment of all material, laborers, and subcontractors employed in the project. 8. Unless the contractor is retained by the City of Bozeman, it is the Applicant's responsibility to ensure that the Applicant and all of the Applicant's contractors or subcontractors have adequate liability and workers compensation insurance for the project. 7 -.- .---.--...-----.--- -. -..--. . . CRITERIA FOR REVIEW Materials contained in the application are used to assess the merits of the project in relation to the goals of the TIFID program. The City of Bozeman evaluates a project based on the following criteria. Economic Stimulus - The amount of economic activity to be generated by the project is assessed as well as the leverage ratio of public to private investment. Tax Generation - The increase in taxable value due to new construction/rehabilitation is estimated by the county appraiser's office to determine tax increment generation. Employment Generation - Total employment generated by the project including construction and new permanent jobs is considered. Special or Uniaue Oooortunities - The project is evaluated on the extent to which it represents a special or unique opportunity to meet Community goals. - Cleanup or Revitalization of Property - Impact Assessment - This review will be based on environmental impacts, project design and dislocation of existing businesses or residents. Financial Assistance - Other forms of financing available including lender participation, industrial development revenue bonds and state and federal grant monies. _ Aoolicant's Past Performance - The applicant's performance in implementing similar projects is considered, including compliance with federal, state, and local regulations, and record of violations. _ Timely Completion - The feasibility of completing the project according to the project schedule and the time frame specified in the development agreement. _ Value-addinQ - Use of Montana's mineral, agricultural, timber, and_other value- adding resources is assessed. 8 --- , ~ . .' \, '1'1' , Appendix A Tax Increment Bond Guidelines This financing method can be used only for those improvements which will be substantially publicly owned. Without exception, underwriters refuse to accept the risk of the development project. The development agreement provides the underwriter and ultimately the bond holder with another source of revenue in the event the taxes are not paid or the taxes paid are not sufficient to meet the bond obligations. Industrial district bond issues are normally negotiated sales. Each issue is project specific, allowing the underwriter to participate in establishing requirements, including credit enhancements, of the development agreement prior to the bond sale. Tax Increment Bonds shall be structured to meet the restrictions imposed on tax exempt bonds under the 1986 Tax Reform Act. Broad based projects with multiple ownership shall be preferred to single- facility districts for the issuance of bonds. One-hundred-twenty-five to one-hundred-fifty percent projected bond coverage is likely. 9