Minutes - Council Work Session - 05/19/1998

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development agreements. If an agreement is deficient in payment, it is due by the developer - that should be brought before Council for a motion and the motion should be dated. (All of this is handled intemally.) City staff and legal counsel should further examine the completeness of the budgets and make TIF plan amendments as deemed necessary. Annual reporting to the State Auditor's Office is required for all tax increment financing districts in order to ensure compliance with State law. The City must maintain complete and accurate records on expenditures fi:om all of its T1F districts. Should there be an audit in the future, City staff must be prepared to produce all necessary documentation and facts surrounding the City's use of tax increment. Mr. Winkelhake touched on "pooling" which is the expenditure of tax increment outside of the boundaries of a TIF district. This has not been a common practice of the City in the past, but it is an option where interest was expressed. Depending on the tax increment law at the time the district was established, pooling may be generally permitted or severely restricted. Mr. Winkelhake stated that a preliminary analysis indicates that pooling fi:om TIF Districts No. 1 (Rivers Bend), No. 2 (Gateway), No. 4 (Front Street), and No. 5 (Wood Ponds( is possible providing that their TIF plans are properly amended. Pooling from TIF District No. 6 (AEC) is possible but more restricted. The City should consult legal counsel for specific guidance in this area. Mr. Winkelhake continued with cash flow assumptions. City staff provided fund balances for each TIF district as of December 31, 1997, excluding interest allocation which was not available. Such balances were then adjusted to reflect the estimated fund balance on February 1, 1998, based on known expenditures in the first two months of the year. The fund balances are not equivalent to cash balances, as fund balances include not only cash but other items such as accounts receivable and accounts payable which may or may not be collected/paid. He pointed out that no interest earnings have been shown on accumulated TIF balances. What is shown is a conservative assumption which assumes that most TIF balances will be either spent by the City or returned to Anoka County for redistribution. Interest eamings on TIF balances are now considered tax increment by State Statute and such funds must be spent on TIF eligible costs. Mr. Winkelhake proceeded to summarize each district. TIF District No. 1 (River's Bend) was approved in August of 1985, as a "redevelopment" TIF District. It may remain in existence through the year 2010 at which time it must be decertified. The district contains 339 parcels of property, most of which are residential but a number of which contain commercial/retail establishments. Because certification occurred prior to May 1, 1988, the district does not have a frozen total tax rate. For projections purposes, a rate of 107% has been used for this district. The projected cash flow schedule for the district, and projected annual tax increment is approximately $604,000 for taxes payable in 1999 and beyond. Other revenues include projected tax increment deficiency payments fi:om the Rivers Bend Plaza Project through the year 2006. Additional deficiency payments would have also been required fi:om the Rivers Bend Apartments; however, legal documents associated with the contract between the City and the developer/owner were apparently not properly filed with Anoka County. A subsequent change of ownership has left the enforceability of the original agreement in question. No deficiency payments have been shown from this project. Current obligations of the district include debt Council Work Session/May 19, 1998 Page 2 of 10