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Date
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May 19, 2008
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Agenda
Item No. 26 Roll Call No. 08- Communication
No. 08-297
Submitted
by: Matthew A. Anderson Office
of Economic Development |
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AGENDA
HEADING:
Set date of
hearing and related actions to the creation of an urban renewal/ tax increment
finance plan for Merle Hay commercial area.
SYNOPSIS:
Recommend approval
of setting the date of public hearing for June 23, 2008 on the creation of a
new urban renewal area and tax increment district for the Merle Hay commercial
area along
This roll call
also directs that additional related actions be undertaken including the
required tax increment consultation meeting, publication of the public hearing
notice and referral to the Plan and Zoning Commission for review and
recommendation on the conformance of the proposed urban renewal plan’s land
uses with the City’s Comprehensive Plan.
The action also directs the Urban Design Review Board to review the
proposed plan and make its recommendation to the Council.
FISCAL
IMPACT:
The tax increment funding (TIF) for this area will be disbursed on a cash-available basis. All development agreements using TIF assistance will be based on annual payments and the property tax revenues produced by new development. The specific developer agreements must be approved by the City Council. (See the “Additional Information” portion of this communication for the proposed developer agreement previously approved on a preliminary basis.)
Amount: The Council has previously adopted a policy that the City may expend up to 75% of the annual aggregated tax increment revenues generated after January 1, 1996; the unexpended increment revenues will be available for distribution to the various property taxing entities. Based upon estimated TIF revenues from the Merle Hay Commercial Urban Renewal Area, an additional $105,000 for the first year to $325,000 in the final year would need to be allocated to other taxing entities from the overall TIF revenues derived from all urban renewal areas to meet this 75%/25% policy. Because the initial TIF cash flow of this urban renewal area will be used almost entirely by the annual financial grant provided to Merle Hay Mall in its first several years, a reduction in TIF use of about $75,000/annually in other urban renewal area will be required to achieve the 75%/25% policy.
Funding
Sources: Cash available from the TIF for twenty years
from FY08/09 to FY2028/2029; the estimated net annual cash available to the
City ranges from about $30,000 initially to about $1,300,000 by FY2028/2029
after payments for the Merle Hay Mall property developments are made.
The creation of an urban renewal area and TIF plan for the commercial
development in and around Merle Hay Mall can provide a source of funding for
public and private improvements. Public
improvements typically include street and sidewalk areas. Financial assistance to commercial properties
will be based on improvements that increase the taxable value of the
properties.
The Merle Hay Mall owners have requested a $5.6 million TIF assistance
grant which uses 100% of the increment generated by the mall properties for a 15
year period (or about $400,000/year for 15 years) based on an additional
increase of $10+ million or more in the property assessment.
Based on 2007 assessments, the base (the “frozen”) value of the proposed
TIF area will be about $87 million. The Merle Hay Mall properties comprise
about 20% of the assessed value in the proposed TIF district with another three
properties totaling an additional 30% of the district’s assessed value. Using some very general estimates, the annual
tax increment revenues for this area will be about $100,000/year using an
increase in value of about 3% every two years.
However, if one
or more of the larger properties in the TIF area has a significant assessment
decrease, this area could go “negative” in which the overall district drops
below its “frozen” assessment base in its early years which could lead to
having no increment available for any public or private project.
ADDITIONAL
INFORMATION:
The proposed
area for the urban renewal plan and tax increment finance district is shown on
this map with the proposed boundary generally following the C-2 and C-4
commercial zoning in the area.
As part of the
strategy to revive the Merle Hay area, the City believes TIF funding of some
general streetscape improvements (replacement of streetlight poles with street,
curb and sidewalk improvements) will help to improve the overall appearance and
benefit the public in accessing the area in addition to the proposed assistance
to Merle Hay Mall property. These public
improvements will occur over time on an extended basis given the cash-available
basis of the area and the use of the TIF for Merle Hay Mall. Other funding sources for these public
improvements will also be sought.
Clearly,
the economic health of Merle Hay Mall impacts
Due
to its age and changing market and shopping patterns, the assessed value of the
Merle Hay Mall in
Other adjacent
smaller commercial developments followed as the mall grew in the 1960s and 1970s. Today, many of these developments are nearing
the end of their economic viability which is reflected in the increasing
vacancies and frequent tenant changes.
Proposed
Urban Renewal Area:
Duration
The urban renewal plan and tax increment designation will extend for a period of twenty years following the initial TIF certification. The purpose of designating this retail/commercial corridor as an urban renewal area is to encourage retail and commercial development. The concurrent TIF designation provides a funding source to assist public and private projects.
Development Requirements in the Urban
Renewal Plan
The Merle Hay Urban
Renewal Plan contains several development requirements that must be met by
projects in order to qualify for use of TIF. These conditions are contained in
Section II.C (General Development Requirements) of the Plan. In addition, all development projects in this urban renewal area
requesting TIF assistance are required to undergo review and recommendation
from the Urban Design Review Board.
Development Agreements
On March 10, 2008, the Council approved the preliminary terms of agreement with the owners of Merle Hay Mall for a development grant of 100% of the project’s net tax increment generation, up to $400,000 annually for up to a total of $5,600,000, is requested on a cash-available basis; the value of the grant is based on a minimum assessment agreement of an additional $10,000,000. The payments may extend slightly over 15 tax years due to timing of the TIF receipts. The Council also directed that the agreement, in addition to the standard terms and conditions, shall also require the following:
1. The developer
shall enter into a binding agreement for a minimum $10 million increase in
property assessment for at least 15 years.
2. This project
design reviewed as early as possible by the Urban Design Review Board before
undertaking exterior renovations. The developer shall address the
3. The developer
shall provide written evidence of permanent financing.
4. Verification of
at least $14.1 million in expenditures for the capital and tenant improvements
and tenant allowances (from January 1, 2007 to December 31, 2009) by the
developer.
PREVIOUS
COUNCIL ACTION(S):
Date: March
10, 2008
Roll Call
Number: 08- 431
Action: Regarding preliminary terms of agreement with Merle Hay Mall for
proposed redevelopment for use of proposed tax increment revenues. (Council Communication No.
08-135) Moved by Vlassis to
receive and file the communication and to authorize the City Manager to
negotiate a final development agreement with the owners of the Merle Hay Mall
in general accordance with the communication.
Motion Carried 7-0.
Date: February
11, 2008
Roll Call
Number: 08- 245
Action: From William
Lillis and Daniel Manning, regarding proposed Merle Hay Mall Redevelopment and
Tax Increment Financing (TIF) District.
(Council
Communication No. 08-075) Moved by Vlassis to receive and file the
communication, direct staff to prepare a proposed urban renewal and tax
increment financing plan for the Merle Hay area; and authorize the City Manager
to negotiate a development agreement with the owners of Merle Hay Mall property
for future City Council action. Motion
Carried 7-0.
Date: January
22, 2007
Roll Call
Number: 07- 144
Action: From William
J. Lillis, representing Merle Hay Mall and Bankers Trust, regarding a Tax
Increment Financing (TIF) District in the Merle Hay and Douglas Avenue area. Moved by Vlassis to receive and file
comments and refer to the City Manager for review and recommendation.
Motion Carried 7-0.
BOARD/COMMISSION
ACTION(S):
Date: April 29, 2008
Roll Call Number: N/A
Action: The Urban Design Review Board
reviewed and recommended approval of the proposed exterior improvements to
Merle Hay Mall (
(The Merle Hay Neighborhood Association has also reviewed the proposed
improvements and indicated their concurrence with the proposed changes.)
ANTICIPATED
ACTIONS AND FUTURE COMMITMENTS:
Urban Design Review Board to review and make recommendation on the proposed
urban renewal plan. (6/17/08)
Plan and Zoning Commission to review and make recommendation on the urban
renewal plan’s conformance with the City’s Comprehensive Plan. (6-19-08)
The City Council to open Public Hearing on Merle Hay Commercial Area Urban Renewal Plan (6-23-08)
For more information on this and other agenda items,
please call the City Clerk’s Office at 515-283-4209 or visit the Clerk’s Office
on the second floor of City Hall,