A recent Ramsey City Council decision results in fewer properties being in a tax increment finance district, which means more immediate property tax revenue for the city once it sells these parcels.
The council May 27 on a 6-0 vote removed 242 parcels from what is known as TIF District 14. Councilmember Jill Johns was absent.
The remaining 91 parcels are within the area known as The COR, bordered by Highway 10 to the south, Bunker Lake Boulevard to the north, Ramsey Boulevard to the east and just west of Armstrong Boulevard on the west side. The new TIF District 14 is 239 acres. The original 400-acre district included parcels lining Highway 10 between Llama and Traprock streets.
The city in 2010 received approval from the Minnesota Legislature to create TIF District 14.
Stacie Kvilvang of Ehlers, the city’s financial consultant, said there is a base value when a TIF district is created. As values increase, the additional taxes created by the new development reimburse the city for investments it made.
Councilmember Chris Riley said the city several months ago “received a bleak report on the health of our TIF district.”
Only three parcels have shown any increase in value, according to Kvilvang. This includes The Residence at The COR, Allina clinic and VA clinic. The 2014 value of all other parcels is approximately 13 percent less than 2010 values. No TIF increment has been received to date and none is expected in 2014 because most of the 333 properties within the original TIF District 14 were losing value.
To date, the city and its Housing and Redevelopment Authority has invested approximately $32.7 million in TIF District 14 for land acquisition, the Northstar Commuter Rail transit station, new roads, The Residence at The COR and the parking ramp, for example. It will also be using $10 million of tax increment created from The COR for future improvements to Bunker Lake Boulevard and the Armstrong Boulevard interchange at Highway 10.
The city paid Ehlers $10,000 to figure out what would need to happen for TIF District 14 to generate positive revenue to meet these city obligations.
By decertifying 242 of the 333 parcels of TIF District 14, Riley said they are basically resetting the district to 2014 values instead of 2010 values. The gross estimated value of the revised TIF District 14 is $70.2 million.
Kvilvang showed the council during a May 13 workshop that the first positive increment could come in 2015 and that the city could meet its current and future obligations even with fewer parcels contributing to the TIF district. The study showed there could even be a positive balance of $10.7 million, but that still includes a number of assumptions, such as that the city will earn $30.8 million from selling land in The COR.
Councilmember Mark Kuzma said this was the best course to take, noting that he defers back to staff for its advice because of the complexities of TIF districts. Kuzma believes TIF will be a good tool for finishing off The COR.
One reason Councilmember Jason Tossey opposes TIF districts is because it is difficult to comprehend and explain to Ramsey taxpayers who want to know how this impacts them.
Tossey said he feels removing these additional properties from TIF District 14 will benefit Ramsey citizens.
“When we get development, we’ll receive more tax revenue for the general fund,” he said. Tossey anticipates development to pick up as the Armstrong Boulevard interchange at Highway 10 is constructed.
The 25-year life of the TIF district that the state Legislature approved in 2010 does not start ticking until the first positive increment is generated, according to City Administrator Kurt Ulrich.
The Residence at the COR
Councilmembers said their first priority is covering the city’s obligations for The Residence at the COR, which is a 230-unit luxury apartment development next to the municipal center, the parking ramp and the rail station.
Patrick Brama, assistant to the city administrator, said Ramsey has expended about $11.2 million in The Residence At The COR apartments. There were two separate loans to Flaherty and Collins totalling $8.336 million, city fees of $2.47 million and development management fees of $401,000.
However, the net cost to the city will be just over $2 million considering Flaherty and Collins will need to repay the two loans and Flaherty paid $750,000 for the land. The city will get this $2 million back through TIF reimbursements.
The city had issued $7.32 million in general obligation bonds to cover the second loan in 2012. Brama said the city’s 2012 development agreement with Flaherty and Collins indicated the principal amount of the loan would be $6.916 million. The city issued a higher priced bond to capitalize interest for three years and avoid having to start paying principal on the debt until 2015.
Flaherty and Collins had also received $20.45 million in private financing from PNC Bank.
A property manager at The COR told ABC Newspapers July 15 that 184 of the 230 units have been leased.
Eric Hagen is at [email protected]