TAX INCREMENT DISTRICT NUMBER THREE CITY OF VOLGA TAX INCREMENT PROJECT PLAN

Transcription

1 TAX INCREMENT DISTRICT NUMBER THREE CITY OF VOLGA *********************************** TAX INCREMENT PROJECT PLAN

2 Section 1. Introduction and Purpose 2 Section 2. General Definitions... 2 Section 3. Tax Increment District Legal Description...5 Section 4. Listing of Kind, Number, Location and Detailed Costs of Proposed... Public Works and Improvements... 7 A. Costs of Public Works or Improvements 7 Section 5. Detailed Project Costs... 8 Section 6. Fiscal Impact Statement... 9 Section 7. Method of Financing, Timing of Costs and Methods of Payment... 9 Section 8. Maximum Amount of Note, Bond or other Monetary Obligation... 9 Section 9. Duration of Tax Incremental Plan... 9 Section 10. Estimated Impact of Tax Increment Financing on Revenues of... Taxing Jurisdictions...9 Section 11. The Legal Description of the Eligible Property is Provided in... Attachment Section 12. Statement of Displacement and Relocation...10 Section 13. Changes to the City of Volga Master Plan, Map, Buildings Codes... and City Ordinances Section 14. List of Estimated Non-project Costs Section 15. Impact on School District...10 Feasibility Study...19 BLIGHT STUDY Existing Conditions Background and Definition of the Study Area Existing Land Use Vacant and Underutilized Properties...26 Public Improvements...26 CONCLUSIONS

3 Section 1. Introduction and Purpose. The purpose of this plan, to be implemented by the City of Volga, is to satisfy the requirements for a Tax Increment District Plan Number Three, City of Volga as specified in SDCL Chapter There are 11 mandated requirements of the plan, each to be addressed in this plan. The principal purpose of the plan is to define eligible property and to define a tax increment plan for funding eligible activities of a functionally obsolete and blighted area of the City. Section 2. General Definitions The following terms when found in this plan shall have the meaning set forth in this section 2 unless the context clearly indicates otherwise. Blighted means property that meets any of the following criteria: I. Any area in which the structures, buildings, or improvements, by reason of: (1) dilapidation, age, or obsolescence; (2) inadequate provisions for ventilation, light, air, sanitation, or open spaces; (3) high density of population and overcrowding; (4) the existence of conditions which endanger life or property by fire and other causes; or (5) any combination of such factors; are conducive to ill health, transmission of disease, infant mortality, juvenile delinquency, or crime, and which is detrimental to the public health, safety, morals, or welfare, is a blighted area. SDCL II. Any area which by reason of: (1) the presence of a substantial number of substandard, slum, deteriorated, or deteriorating structures; (2) predominance of defective or inadequate street layouts; (3) faulty lot layout in relation to size, adequacy, accessibility, or usefulness; (4) unsanitary or unsafe conditions; (5) deterioration of site or other improvements; (6) diversity of ownership, tax, or special assessment delinquency exceeding the fair value of the land; (7) defective or unusual conditions of title; (8) the existence of conditions which endanger life or property by fire and other causes; or (9) any combination of such factors; 3

4 City of Volga substantially impairs or arrests the sound growth of a municipality, retards the provision of housing accommodations, or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use, is a blighted area. SDCL III. Any area which is predominantly open and which because of obsolete platting, diversity of ownership, deterioration of structures or of site improvements, or otherwise, substantially impairs or arrests the sound growth of a municipality is a blighted area. SDCL City of Volga means Volga, South Dakota, a South Dakota municipal corporation with an aldermanic form of government. Council means the City Council of the City of Volga. Department of Revenue means the South Dakota Department of Revenue. Economic Development means all powers expressly granted and reasonably inferred pursuant to SDCL Fiscal year means that fiscal year of the City of Volga. Generally Applicable Taxes shall have the same meaning as set forth in 26 CFR (e). Governing Body means the City Council. Infrastructure Improvements means a street, road, sidewalk, parking facility, pedestrian mall, alley, bridge, sewer, sewage treatment plant, property designed to reduce, eliminate, or prevent the spread of identified soil or groundwater contamination, drainage system, waterway, waterline, water storage facility, rail line, utility line or pipeline, or other similar or related structure or improvement, together with necessary easements for the structure or improvement, for the benefit of or for the protection of the health, welfare, or safety of the public generally. Municipality any incorporated City in this State. Planning commission means the Volga Zoning Board. Plan means this Project Plan. 4

5 City of Volga Project Costs means any expenditure or monetary obligations by the City of Volga, whether made, estimated to be made, incurred or estimated to be incurred, which are listed in Section 4.1. Project costs will include any costs incidental thereto but decreased by any income, special assessments, or other revenues, other than tax increments, received, or reasonably expected to be received, by the City of Volga in connection with the implementation of this Plan. Project Description means the anticipated developed residential, multi-family and 1 commercial lot within the TIF District, consisting of approximately 20 single family lots. The goals of the project are to provide lots for custom homes, with the cost of residential lots under $40, In addition, a goal of the project is to start a commercial development along Caspian Avenue. Project Plan means the plan required by SDCL Public Works means the acquisition by purchase or condemnation of real and personal property within the tax incremental district and the sale, lease, or other disposition of such property to private individuals, partnerships, corporations, or other entities at a price less than the cost of such acquisition which benefit or further the health, safety, welfare and economic development of the City. Taxable property means all real taxable property located within a tax incremental district. Tax increment valuation is the total value of the tax incremental district minus the tax incremental base pursuant to Tax Incremental District a contiguous geographic area within a City defined and created by Resolution of the governing body and named City of Volga Tax Increment District Number Three. Tax Increment Law means South Dakota Codified Laws Chapter

6 City of Volga Section 3. Tax Incremental District Legal Description. The real property to be located within the Tax Increment District is shown in Diagram 1 below and legally described as: Lots Six A (6A) thru Ten (10) of Block Three (3); Lots Seven (7) thru Twelve (12) of Block Eight (8); Lots One (1) thru Eight (8) of Block Nine (9); Lot One (1) in Block Ten (10); Lots Five (5) thru Eight (8) in Block Fourteen (14); Lots One (1) thru Four (4) Block Fifteen (15) and Street Right-of-Ways in Sunrise Addition in the South One-half of the Northeast Quarter (S½NE¼) of Section Twenty-three (23), Township One Hundred Ten (110) North, Range Fifty-one (51) West of the 5 th P.M., to the City of Volga, County of Brookings, State of South Dakota. 6

7 City of Volga Diagram 1. 7

8 City of Volga Section 4. Listing of Kind, Number, Location and detailed costs of proposed public works and improvements. In order to implement the provisions of SDCL Chapter 11-9, the following are project costs and expenditures made or estimated to be made and the monetary obligations incurred or estimated to be incurred by the City. The Project costs includes capital costs, financing costs, real property assembly costs, professional fee costs, imputed administration costs, relocation costs, organizational costs and discretionary costs, plus any costs incidental thereto, diminished by any income, special assessments, or other revenues, other than tax increments, received, or reasonably expected to be received, by the City. The City is working to develop an economic and competitive base to benefit the City and the State as a whole. All the project costs are found to be necessary and convenient to the creation of the Tax Incremental District and the implementation of the Tax Increment District. The project constitutes a proper public purpose of the City. The City will enter into all contracts in accordance with South Dakota bid laws. A. Projected Costs of Public Works or Improvements In accordance with SDCL (1) & (3) the following is the kind, number, location and dollar amount of estimated project costs. PROJECT COSTS COSTS LOCATION NUMBER Capital Costs Public Works Water/Sewer Street/Curb and Gutter Electrical Public improvement Buildings Structures Permanent fixtures Demolition of existing buildings Alternation of existing buildings Remodeling of existing buildings Repair of existing buildings Acquisition of equipment Clearing, seeding and grading of land Capitalized interest $310, $318, $45, Public Right of Way Public Right of Way Public Right of Way See Schedule 1 See Schedule 1 See Schedule 1

9 City of Volga Financing Costs Interest $190, Premium Appraisal Real Property Assembly Professional Service Costs Architectural Planning Engineering $45, Legal Services (Appraisal) Imputed Administrative Costs Relocation Costs Organizational Costs Environmental impact studies Other studies Informational meetings Less: Amount to be paid by ($206,000.00) Developer TOTAL $702, Public Right of Way See Schedule 1 Any expenditure made beyond the fifth anniversary of the creation of the Tax Increment District would require an amendment of this plan under SDCL Section 5. Detailed Project Costs. Attached as Schedule 1 is a detailed list of estimated project costs. No expenditure for project costs will be incurred more than five years after the District is created. 9

10 Section 6. Fiscal Impact Statement. City of Volga Attached as Schedule 3 is the Fiscal Impact Statement on other taxing districts found within the Tax Increment District. Section 7. Method of Financing, Timing of Costs and Methods of Payment. Project costs will not be paid by the City. Project costs will initially be paid by Developer, who will finance the costs, which will then be repaid to the Developer as tax incremental revenues are received. Section 8. Maximum Amount of Monetary Obligation. The City will not advance project costs. The Developer will solely advance Project costs, which will then be repaid to the Developer using tax incremental revenues as they are received by the City. Section 9. Duration of Tax Incremental Plan The duration of the plan will extend to the number of years it will take for the retirement of indebtedness, except that the plan duration will not exceed 20 years from the date of creation of the District. Section 10. Estimated Impact of Tax Increment Financing on Revenues of Taxing Jurisdictions The site will generate taxes to the local jurisdictions at the current level of development on the property, which is as agricultural property. All taxing districts will receive that base which will be the value set for 2015 taxable payable in The new tax revenues will be available to the taxing jurisdictions 20 years after the development is 10

11 completed or earlier if the actual collections are greater than anticipated. Schedule 3 details the tax capture implications to each of the local taxing jurisdictions. City of Volga Section 11. The legal description of the eligible property is provided in Attachment 1. A general list of real property improvements subject to property tax at the site is listed in Attachment 2. Section 12. Statement of Displacement and Relocation. No residents or families will be displaced by the project. There are no families or persons residing on the premises. Therefore, no relocation plan is needed. Section 13. Changes to the City of Volga master plan, map, buildings codes and City ordinances. The City has made no changes in the master plan, map, building codes and City ordinances as indicated on Attachment 3. Section 14. List of Estimated Non-project Costs. Developer Improvements Dollar Amount of Improvements Non Project Housing Improvements $6,500,000 Section 15. Impact on School District. The school district will receive the taxes on the base value of the parcels within the District and the taxes to be raised on the tax incremental value will be used to repay the Developer for the project improvements for a maximum of a 20-year period. After the repayment of the Developer s costs, the school district will receive their proportionate share of tax dollars for the base value and the tax incremental value. 11

12 The taxing entities located within the District may be required to raise an additional levy for revenue loss from the formation of the District. ATTACHMENTS City of Volga Legal Description and map and existing uses and conditions Map of Real property improvement and uses Map of proposed changes in zoning ordinances LIST OF SCHEDULES SCHEDULE 1 Detail of Project Costs SCHEDULE 2 Revenues from Capturable Taxable Value by Local Jurisdiction SCHEDULE 3 Schedule According to Agreement 12

13 City of Volga ATTACHMENT 1 LEGAL DESCRIPTION Lots Six A (6A) thru Ten (10) of Block Three (3); Lots Seven (7) thru Twelve (12) of Block Eight (8); Lots One (1) thru Eight (8) of Block Nine (9); Lot One (1) in Block Ten (10); Lots Five (5) thru Eight (8) in Block Fourteen (14); Lots One (1) thru Four (4) Block Fifteen (15) and Street Right-of-Ways in Sunrise Addition in the South One-half of the Northeast Quarter (S½NE¼) of Section Twenty-three (23), Township One Hundred Ten (110) North, Range Fifty-one (51) West of the 5 th P.M., to the City of Volga, County of Brookings, State of South Dakota. 13

14 City of Volga MAP 14

15 City of Volga ATTACHMENT 2 (List of Real Property Improvements) The real property improvements include: Description Amount Lots with anticipated construction of $6,500, single family, multi-family and commercial structures Site Work & Improvements $702, TOTAL $7,202, The improvements shall be located in the real property described in Attachment 1 and is the highest and best use for the real property. 15

16 City of Volga ATTACHMENT 3 (ZONING CHANGES) All property located in the TIF District is currently zoned agricultural, with rezoning to residential pending. 16

17 City of Volga SCHEDULE 1 DETAIL OF PROJECT COSTS TIF PROJECT IMPROVEMENTS Water/Sewer $310, Street/Curb and Gutter $318, Electricity $45, Engineering $45, Capitalized Interest $190, Less: Developer s Share of $(206,000.00) Project Improvements Total $702,

18 Tax Increment District Number 2 Introduction City of Volga SCHEDULE 2 FISCAL IMPACT STATEMENT Fiscal Impact Statements The fiscal impact statement is intended to provide a succinct analysis of the estimated impact of the Tax Increment District to the public pursuant to SDCL (4). It is not intended to contain the level of detail required by a detailed financial analysis. Fiscal Impact Statement A fiscal impact statement shows the impact of the tax increment district, both until and after the project obligations are repaid, upon all entities levying taxes upon property in the district. Definitions Fiscal Impact means the increase or decrease in revenues and generally refers to an impact to revenues caused by the district. Revenue means ad valorem taxes. Assumptions means factors or definitions used in the fiscal analysis. Assumptions may include facts and figures identified by the District and estimates that are sometimes necessary when not all of the information is available. Assumptions are often used to extrapolate an estimate. Assumptions may include an estimate of tax levies of each taxing entity, the school aid formula contribution, the value of the real property, etc. Assumptions: 1. The property will have improvements which at completion will be valued for taxable purposes at $2 million to $4 million dollars. 18

19 2. The average tax levy of all taxing districts will be $ per thousand dollars of taxable valuation. 3. Tax increment will start to be collected in 2016 for a maximum of 18 years. City of Volga 4. This is the maximum amount of tax increment that could be derived from the district. Estimate Entity Tax Levy (Mill) 1 Year Tax Levy 1 Tax Levy 18 years 2 Sioux Valley School District $ $65, $920, City of Volga $4.364 $28, $397, Brookings County $4.536 $29, $412, TOTAL $ $123, $1,730, After the termination of the District, the taxing entities will receive all tax increment as part of their general levy tax collections. 19

20 1 Based upon improvements of $6,500, Based upon improvements of $6,500, constructed in even increments over a seven year period beginning in the second year. City of Volga SCHEDULE 3 ECONOMIC FEASIBILITY STUDY TAX INCREMENT FINANCING FEASIBILITY STUDY AND BLIGHT STUDY CITY OF VOLGA, SOUTH DAKOTA 20

21 City of Volga Feasibility Study INTRODUCTION Sunrise Development Corp. ( Developer ) has proposed a land development project (the TIF 3 ) at a site located in the northeastern portion of the City of Volga described in the tax increment financing proposal submitted by Developer to the Volga City Council. The development of TIF 3 is a development of affordable residential housing lots and a lot for commercial development, and without the City s financial participation and support, the TIF 3 could not be constructed by Developer. An essential component of the City s participation is City funding for the construction of public sewer, water, electrical, road and other infrastructure improvements ( Project Costs ) needed to support the Project. Total project costs to complete the entire project are estimated at $702, to construct the public infrastructure to serve the Development. No portion of the tax increment district revenues shall be used to construct housing units as described in SDCL The City has made it clear that City funding for these public improvements must be supported by the tax revenues generated by the Project, and not by the general revenues of the City. The vehicle through which this can be accomplished is tax increment financing under the South Dakota Tax Incremental District Law (South Dakota Codified Laws Chapter 11-9). Tax increment financing is an indispensable financing tool used throughout the United States to help local governments successfully develop and redevelop areas and encourage economic development. In tax increment financing, the current real property tax assessed value of all properties in a designated project area ( tax increment financing district ) is established as the base value. As development in the tax increment financing district increases the assessed values of the redeveloped properties, a portion of the additional tax revenue generated by the increase in assessed value over the base value is set aside and committed by the City for debt service on tax increment indebtedness, the proceeds of which would be used for the acquisition or construction of the Project Costs. Tax increment financing is permitted only in connection with a project plan duly adopted by the City. The process is set forth in the Tax Increment District Law, and is generally as follows: 21

22 Any person may request the City Council to designate a tax increment financing district. The request may be through a formal application process, or a presentation to the City Council. Upon receiving any request, the City Council determines preliminary feasibility of the project. City of Volga This preliminary feasibility determination includes fiscal, legal and political considerations. If it is determined feasible, the City Council directs staff or the zoning board (the City s planning commission) to initiate the process. The zoning board then sets a proposed hearing date and starts the notice procedure. Notice of the intent to create a tax increment district is published and sent to all taxing districts not less than 10 days prior to the hearing. The zoning board holds a hearing and allows members of the general public to comment upon the proposed creation of a tax increment district. At the end of the hearing, the planning commission may recommend the creation of the tax increment district to the City Council. The City Council places the recommendation on the agenda and at the public meeting may pass a resolution to create the tax increment district in accordance with the Tax Increment District Law. The resolution is published and becomes effective on the 21 st day after publication, unless it is referred to a vote of the electors. After the resolution becomes effective, the Department of Revenue of the State of South Dakota is sent a letter requesting that it determine the tax incremental base. Once the base is determined, a tax increment project plan is prepared by or at the direction of the zoning board, approved and forwarded to the City Council for their determination. Once the project plan is approved by the City Council, the City has five years to spend tax increment revenues or bond proceeds on or for project costs. After the project plan is approved, the City Council is authorized to incur indebtedness for the purpose of carrying out or administering a project plan. The resolution could include a pledge of the City s tax increment revenues to the debt service on the City s tax increment bonds. (See Tax Increment District Law ). 22

23 City of Volga The Developer has requested that the City create a tax increment district to cover the costs of construction of the public improvements, infrastructure and road and related financing costs (including capitalized interest), currently estimated to total approximately $702, Feasibility Study The following study indicates the project is feasible. Assumptions: Sale of residential and multi-family residential lots and one (1) commercial lot, with construction upon these lots. 1. Housing construction projections see below. 2. Dollars per thousand levy = $ per $1000 of assessed valuation. 3. Duration of TIF = not to exceed 20 years from creation of the district. 4. Tax increment collection beginning in year Sale of lots, with residential, multi- family residential and commercial construction estimated at $6,500, Total Value: $6,500, Divided by $1000= 6,500 Multiplied by mill $ Equals: $123,585 Less Base $ Equals $123,178 equals total annual increment after all construction $702,000 equals total construction costs divided by annual increment of $123,585 equals 5.7 years to recover costs based upon foregoing feasibility analysis. Build out of the project is likely to occur gradually depending on housing demand. Accordingly, it may be a number of years until all construction is completed and the tax increment reaches $123,718 per year. 23

24 1 The levy for commercial property will be $ City of Volga BLIGHT STUDY This section presents an analysis of existing buildings, or lack thereof and lot conditions within the proposed development project area (the Study Area ). The Study Area is depicted in Attachment 1 Proposed Tax Increment District Project Area Boundary. The development project proposed for the Study Area is the TIF 3, which consists of approximately 14.5 acres of potential residential development. In order to provide economic development by providing affordable residential lots, tax increment indebtedness is proposed to be incurred by the City to fund the certain public project costs and cause construction of the land preparation, infrastructure, sewer, water, electrical, road and other improvements required to sustain the TIF 3. No portion of the proceeds of the tax increment indebtedness will be used to construct or rehabilitate residential housing units. The proposed development project is being considered in accordance with the provisions of the Tax Increment District Law, which grants municipalities the power to redevelop blighted areas or cause them to be redeveloped by private parties, and fund the costs of public improvements through the issuance of tax increment bonds and/or notes. Blight is a legally defined term and is found in the Tax Increment District Law Sections through : Any area, including slum area, in which the structures, buildings, or improvements, by reason of: (1) Dilapidation, age, or obsolescence; (2) Inadequate provisions for ventilation, light, air, sanitation, or open spaces. (3) High density of population and overcrowding; (4) The existence of conditions which endanger life or property by fire and other causes; or (5) Any combination of such factors; are conducive to ill health, transmission of disease, infant mortality, juvenile delinquency, or crime, and which is detrimental to the public health, safety, morals, or welfare, is a blighted area. Any area which by reason of: 24

25 (1) The presence of a substantial number of substandard, slum, deteriorated, or deteriorating structures; (2) Predominance of defective or inadequate street layouts; (3) Faulty lot layout in relation to size, adequacy, accessibility, or usefulness; City of Volga (4) Unsanitary or unsafe conditions; (5) Deterioration of site or other improvements; (6) Diversity of ownership, tax, or special assessment delinquency exceeding the fair value of the land; (7) Defective or unusual conditions of title; (8) The existence of conditions which endanger life or property by fire and other causes; or (9) Any combination of such factors; substantially impairs or arrests the sound growth of a municipality, retards the provision of housing accommodations, or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use, is a blighted area. The site has no street layout, lacks sewer and water service and lacks storm water infrastructure which impairs sound growth and retards housing accommodations. Any area which is predominantly open and which because of obsolete platting, diversity of ownership, deterioration of structures or of site improvements, or otherwise, substantially impairs or arrests the sound growth of a municipality, is a blighted area. This study: (1) surveys and analyzes the Study Area to determine if it is blighted within the meaning of the Tax Increment District Law; and (2) assesses the feasibility of conducting a development project (which is proposed to be the TIF 3) in the Study Area in accordance with Tax Increment District Law. Field Inspections of the Study Area were conducted in In addition, aerial photographs and City land use and property data were reviewed, and building and site conditions, existing land uses, including underutilization of land, parcel sizes and configurations, and other factors which may contribute to blighting were analyzed. The following conditions were observed in the Study Area: (1) lack of water mains and fire protection; (2) faulty lot layout in relation to its size, adequacy, accessibility and usefulness; (3) inadequate streets and street access; 25

26 Existing Conditions (4) underutilized real property; and, (5) the entire lack of public infrastructure including roads, curbs, sewer systems and storm drainage. The detailed results of the survey are presented below. City of Volga Background and Definition of the Study Area The Study Area boundary, as shown in Attachment 1, Proposed Tax Increment District Project Area Boundary, was drawn to include the TIF 3 site. The boundary of the Study Area encompasses all tax parcels within the boundary described generally as follows: Lots Six A (6A) thru Ten (10) of Block Three (3); Lots Seven (7) thru Twelve (12) of Block Eight (8); Lots One (1) thru Eight (8) of Block Nine (9); Lot One (1) in Block Ten (10); Lots Five (5) thru Eight (8) in Block Fourteen (14); Lots One (1) thru Four (4) Block Fifteen (15) and Street Right-of-Ways in Sunrise Addition in the South One-half of the Northeast Quarter (S½NE¼) of Section Twenty-three (23), Township One Hundred Ten (110) North, Range Fifty-one (51) West of the 5 th P.M., to the City of Volga, County of Brookings, State of South Dakota. The boundary starts at a point which is formed by the northern, western, southern, and eastern boundaries as shown herein. Existing Land Use The Study Area comprises a total of approximately 14.5 acres, and contains bare ground. Even though the area is within the City limits, there are insubstantial city utility services and access within the T.I.F. District. Vacant and Underutilized Properties The entire T.I.F. district is underutilized. Public Improvements 26

27 The existing infrastructure systems in the Study Area, including the water mains and storm and sanitary sewer lines are inadequate for any comprehensive development program. CONCLUSIONS City of Volga The Study Area is a blighted area under the criteria set forth in the Tax Increment District Law, and the existing conditions warrant the preparation by the City of a plan for a development project in the Study Area. 27