HomeMy WebLinkAboutIV.A Draft TIF Plan for Public Hearing_Hastings TIF 9 3Feb2022DRAFT
MODIFIED REDEVELOPMENT PLAN FOR
DEVELOPMENT DISTRICT NO. 1
(HASTINGS DOWNTOWN REDEVELOPMENT AREA)
AND
TAX INCREMENT FINANCING PLAN FOR
TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
(FLATS ON 3RD)
WITHIN
DEVELOPMENT DISTRICT NO. 1
(HASTINGS DOWNTOWN REDEVELOPMENT AREA)
PUBLIC HEARING DATE: FEBRUARY 22, 2022
PLAN APPROVED BY HEDRA DATE: ___________
PLAN APPROVED BY CITY COUNCIL DATE: __________
Northland Securities, Inc.
150 South Fifth Street, Suite 3300
Minneapolis, MN 55402
(800) 851-2920
Member NASD and SIPC
Registered with SEC and MSRB
TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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TABLE OF CONTENTS
ARTICLE I ȃ INTRODUCTION AND DEFINITIONS .........................................................1
Section 1.01 Introduction ......................................................................................1
Section 1.02 Defi nitions .........................................................................................2
Section 1.03 Plan Preparation ...............................................................................3
ARTICLE II ǧ STATEMENT OF PUBLIC PURPOSE AND AUTHORITY ..........................4
Section 2.01 Enabling Act; Statutory Authority .................................................4
Section 2.02 Statement and Finding of Public Purpose ....................................4
Section 2.03 Boundaries of Project Area ..............................................................4
ARTICLE III ǧ REDEVELOPMENT PLAN .........................................................................6
Section 3.01 Statement of Objectives ...................................................................6
Section 3.02 Development Activities ...................................................................7
Section 3.03 Payment of Project Costs .................................................................7Section 3.04 Environmental Controls; Land Use Regulations .........................7
Section 3.05 Park and Open Space to be Created ..............................................8
Section 3.06 Proposed Reuse of Property ...........................................................8
Section 3.07 Administration and Maintenance of Project Area .......................8
Section 3.08 Amendments .....................................................................................8Section 3.09 Findings and Declaration ................................................................8
ARTICLE IV ǧ TAX INCREMENT FINANCING PLAN ......................................................9Section 4.01 Statutory Authority ..........................................................................9
Section 4.02 Planned Development .....................................................................9
4.02.1 Project Description ......................................................................................9
4.02.2 City Plans and Development Program ....................................................9
4.02.3 Land Acquisition .........................................................................................9
4.02.4 Development Activities ..............................................................................9
4.02.5 Need for Tax Increment Financing ...........................................................9
Section 4.03 Tax Increment Financing District .................................................10
4.03.1 Designation ................................................................................................10
4.03.2 Boundaries of TIF District ........................................................................10
4.03.3 Type of District ..........................................................................................10
Section 4.04 Plan for Use of Tax Increment ......................................................11
4.04.1 Estimated Tax Increment..........................................................................11
4.04.2 Project Costs ...............................................................................................11
4.04.3 Estimated Sources and Uses of Funds ...................................................12
Figure 4.1 ....................................................................................................12
4.04.4 Administrative Expense ...........................................................................12
4.04.5 County Road Costs ...................................................................................13
4.04.6 Bonded Indebtedness ...............................................................................13
4.04.7 Election of First Year of Increment, Duration of TIF District ..............13
4.04.8 Estimated Impact on Other Taxing Jurisdictions .................................13
4.04.9 Prior Planned Improvements ..................................................................14
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ARTICLE V ȃ ADMINISTERING THE TIF DISTRICT ......................................................15Section 5.01 Filing and Certifi cation ..................................................................15
Section 5.02 Modifi cations of the Tax Increment Financing Plan ..................15
Section 5.03 4-Year Knockdown Rule ................................................................15
Section 5.04 Pooling/5-Year Rule........................................................................16
Section 5.05 Financial Reporting and Disclosure Requirements ...................16Section 5.06 Business Subsidy Compliance ......................................................16
EXHIBITS..........................................................................................................................17Exhibit I Present Value Analysis ..................................................................17
Exhibit II Projected Tax Increment ................................................................18
Exhibit III Impact on Other Taxing Jurisdictions..........................................19
Exhibit IV Estimated Tax Increment Over Life of District ..........................20
Exhibit V Maps of Project Area and TIF District .........................................21Exhibit VI Parcels within Project Area ...........................................................22
Exhibit VII LHB, Inc. Report for Redevelopment Findings..........................23
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ARTICLE I – INTRODUCTION AND DEFINITIONS
SECTION 1.01 INTRODUCTION
This Redevelopment Plan for Development District No. 1 (Hastings Downtown Redevelopment Area) of the Hastings Economic Development and Redevelopment Authority of the City of Hastings is intended to supersede and restate the activities described in the Redevelopment Plan for Development District No. 1 (Hastings Downtown Redevelopment Area) as originally adopted on December 3, 1974 and last modifi ed on October 5, 2015.
Tax Increment Financing District No. 3 and Tax Increment Financing District No. 7 and the Tax Increment Financing Plans related thereto, within Development District No. 1, remain in full force and eff ect and are not modifi ed.
The City of Hastings and the Hastings Economic Development and Redevelopment Authority (HEDRA) propose to provide tax increment fi nancing assistance through the establishment of Tax Increment Financing (Redevelopment) District No. 9 within the Development District No. 1 to assist with the fi nancing of certain project costs for the construction of an approximate 87-unit rental housing facility, an apartment building, by a private developer, among other development that is anticipated to occur in the future.
The Development District serves as the “project area” for tax increment fi nancing districts established within its boundaries. The Redevelopment Plan describes the City’s objectives for the development of the area within the Development District and the use of tax increment fi nancing. This document contains the Modifi ed Redevelopment Plan for achieving the objectives of Development District No. 1 through the establishment of a Tax Increment Financing Plan and use of Tax Increment Financing (Redevelopment) District No. 9.
Below is a summary of the municipal action that has been taken in connection with Development District No. 1 to date and as proposed:
Development District No. 1 (Hastings Downtown Redevelopment Area):
December 3, 1974: The Hastings Downtown Area Redevelopment Plan for the Hastings Downtown Redevelopment Area was adopted by the City Council in and for the City of Hastings. The document is dated December 3, 1974.
February 4,1985: The Hastings Downtown Area Redevelopment Plan for the Hastings Downtown Redevelopment Area was modifi ed by the City Council in and for the City of Hastings. The document is dated February 4,1985.
June 15, 1987: The Hastings Downtown Area Redevelopment Plan for the Hastings Downtown Redevelopment Area was modifi ed by the City Council in and for the City of Hastings. The document is dated June 15, 1987.
October 21, 1996: The Hastings Downtown Area Redevelopment Plan for the Hastings Downtown Redevelopment Area was modifi ed by the City Council in and for the City of Hastings. The document is dated October 21, 1996. A formal Tax Increment Plan for the Hasting Downtown Area Redevelopment Area was also adopted.
November 20, 2000: The Hastings Downtown Area Redevelopment Plan for the Hastings Downtown Redevelopment Area was modifi ed by the City Council in and for the City of Hastings. The document is dated November 20, 2000. A formal Tax Increment Plan for TIF District No. 3 was also adopted.
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October 5, 2015: The Hastings Downtown Area Redevelopment Plan for the Hastings Downtown Redevelopment Area was modifi ed by the City Council in and for the City of Hastings. The document is dated October 5, 2015. A formal Tax Increment Plan for TIF District No. 7 was also adopted.
January 24, 2022: The Planning Commission is proposed to fi nd that the Modifi ed Redevelopment Plan and the proposed Tax Increment Financing Plan for Tax Increment Financing District No. 9 confi rm to the general plan for the development or redevelopment of the City as a whole.
February 10, 2022: The Modifi ed Redevelopment Plan for the Project Area is proposed to be adopted by the HEDRA. It is proposed the HEDRA will approve the Tax Increment Financing Plan for Tax Increment Financing District No. 9, subject to City approval.
February 22, 2022: The Modifi ed Redevelopment Plan for the Project Area is proposed to be adopted by the City. It is proposed the City will approve the Tax Increment Financing Plan for Tax Increment Financing District No. 9.
SECTION 1.02 DEFINITIONS
For the purposes of this document, the terms below have the meanings given in this section, unless the context in which they are used indicates a diff erent meaning:
1. “Authority” means the Hastings Economic Development and Redevelopment Authority of the City.
2. “City” means the City of Hastings, Minnesota.
3. “City Council” means the City Council of the City.
4. “County” means Dakota County, Minnesota.
5. “Developer” means a private party undertaking construction within the TIF District.
6. “Enabling Act” means Minnesota Statutes, Sections 469.001 through 469.047, as amended and supplemented from time to time.
7. “HEDRA” means the Hastings Economic Development and Redevelopment Authority of the City of Hastings.
8. “Land Use Regulations” means all federal, state and local laws, rules, regulations, ordinances, and plans relating to or governing the use of development of land in the City, including but not limited to environmental, zoning and building code laws and regulations.
9. “Project Costs” means the public development cost of the development activities that will or are expected to occur within the Project Area or TIF District
10. “Redevelopment Plan” means the Redevelopment Plan for the Redevelopment Project, as the same may, from time to time, be amended or supplemented.
11. “Redevelopment Project” means Development District No. 1 (Hastings Downtown Redevelopment Area) of the Authority, as the same may, from time to time, be amended or supplemented.
12. “School District” means Independent School District No. 200 (Hastings Public Schools).
13. “State” means the State of Minnesota.
14. “Tax Increment Financing Bonds” means general obligation tax increment fi nancing bonds; and other tax increment fi nancing bonds, including pay-as-you-go contracts, interfund loans, and notes.
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15. “Tax Increment Financing District” means any tax increment fi nancing district to be established in the future within the Project Area.
16. “Tax Increment Financing Plan” or “Plan” means the plans adopted by the HEDRA or the City for any Tax Increment Financing District.
17. “TIF Act” means Minnesota Statutes, Sections 469.174 through 469.1794, as amended, both inclusive.
18. “TIF District” means Tax Increment Financing (Redevelopment) District No. 9 (Flats on 3rd).
19. “TIF Plan” means the tax increment fi nancing plan for the TIF District (this document).
SECTION 1.03 PLAN PREPARATION
The document was prepared for the City and the Authority by Northland Securities, Inc.
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ARTICLE II – STATEMENT OF PUBLIC PURPOSE AND AUTHORITY
SECTION 2.01 ENABLING ACT; STATUTORY AUTHORITY
The Enabling Act authorizes the Authority, upon certain public purpose fi ndings by the Authority and the City, to establish and designate redevelopment projects within the City and to establish, develop and the administer redevelopment plans therefor to meet the needs and accomplish the public purposes specifi ed in Statement and Finding of Public Purpose.
In accordance with the purposes set forth in the Enabling Act, the Authority and the City have established the Redevelopment Project comprised of the parcels listed in Exhibit VI and have adopted the Modifi ed Redevelopment Plan therefor.
The Enabling Act and the approval of the Redevelopment Plan by the City authorizes the Authority to undertake redevelopment activities within the Project Area and, at a date subsequent to the adoption of the Modifi ed Redevelopment Plan and with the City Council approval, to establish and designate Tax Increment Financing Districts within the Project Area and to adopt and implement Tax Increment Financing Plans to accomplish the objective of the Redevelopment Plan.
SECTION 2.02 STATEMENT AND FINDING OF PUBLIC PURPOSE
The Authority has determined that there is a need to take certain actions designed to encourage, ensure and facilitate development and redevelopment of under-utilized and unused land located within the corporate limits of the City. These actions will provide additional employment opportunities for residents of the City and the surrounding area, and improve the tax base, thereby enabling beĴ er utilization of existing public facilities and provide needed public services, and improve the general economy of the City, the County, and the State.
The Authority has determined that the property within the Project Area is either under-utilized or unused due to a variety of factors, including inadequate public parking to serve the property, small parcels, non-conforming uses, vacant or under-utilized property, possible environmental conditions, obsolete building design and site layout, poor access and parking, and lack of streetscaping and visual appeal that is needed to make this a viable business district. These factors have resulted in a lack of private investment. As a result, the property within the Project Area is not providing adequate employment opportunities, and is not contributing, to its full potential. Therefore, it is necessary for the Authority to exercise its authority under the Enabling Act to develop and implement a program designed to encourage, ensure and facilitate the commercial and mixed use development and redevelopment of the property located in the Project Area, to further and accomplish the desired public purposes for the Project Area as specifi ed within the Redevelopment Plan for the Project Area.
The land in the Project Area would not be developed or redeveloped solely through private investment in the foreseeable future.
The welfare of the City, County, and the State of Minnesota requires active promotion, aĴ raction, encouragement and development of economically sound commerce by the HEDRA.
SECTION 2.03 BOUNDARIES OF PROJECT AREA
The area within the Project Area is described in Exhibit V. The parcels included in the Project Area are listed in Exhibit VI. The Project Area of the Development District is generally described as follows:
• Development District No. 1 (Hastings Downtown Redevelopment Area) is the area generally described as those properties which are located south of the Mississippi River,
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east of Spring Street, north of 5th Street, and west of Baily Street and also including those properties which are generally east of Baily Street, north of 2nd Street E, west of Lea St, and south of the Mississippi River.
The Project Area is inclusive of all immediate adjacent roadways, rights-of-way and other areas wherein will be installed or upgraded the various public improvements necessary for and part of the overall project.
The Authority and the City fi nds that the Project Area, together with the objectives which the Authority and the City seek to accomplish or encourage with respect to such property, constitutes a “redevelopment project” and a “redevelopment plan” within the meaning of Section 469.002, Subd. 14 and 16 of the Enabling Act.
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ARTICLE III - REDEVELOPMENT PLAN
SECTION 3.01 STATEMENT OF OBJECTIVES
The modifi cation of the established Project Area in the City pursuant to the Enabling Act is necessary and in the best interests of the City and its residents and is necessary to give the Authority and the City the ability to meet certain public purpose objectives that would not be obtainable in the foreseeable future without intervention by the Authority in the normal development process.
The Authority intends, to the extent permiĴ ed by law, to accomplish the following objectives through the implementation of the Redevelopment Plan:
1. Promote and secure the development and redevelopment of property in the Project Area in a manner consistent with the City’s planning, and with a minimal adverse impact on the environment, which property is less productive because of the lack of proper utilization and lack of investment, and thereby promoting and securing the development of other land in the City;
2. Promote and secure additional employment opportunities within the Project Area and the City for residents of the City and the surrounding area, thereby improving living standards and preventing unemployment and the loss of skilled and unskilled labor and other human resources in the City;
3. Secure the increase in value of property subject to taxation by the City, School District, County, and any other taxing jurisdictions in order to beĴ er enable such entities to pay for public improvements and governmental services and programs required to be provided by them;
4. Secure the construction and providing moneys for the payment of the cost of public improvements in the Project Area, which are necessary for the completion of the Redevelopment Project and the orderly and benefi cial development of the Project Area.
5. Promote a compatible mix of commercial, institutional, and residential land uses.
6. Encourage the expansion and improvement of local business, and enhancing the economic vitality of existing and new businesses.
7. Eliminate blighting infl uences that impede development in the area.
8. Provide for adequate streets, utilities, and other public improvements and facilities to enhance the area for both new and existing development.
9. Create a desirable and unique character within the Project Area through quality land use alternatives and design quality in new buildings that create a safe environment for pedestrians, that can be maintained for the long run.
10. Support the physical connection to local trails, open space, and other community institutions.
11. Enhance the integrity of residential neighborhoods adjacent to the Project Area.
12. Provide and secure the development of increased opportunities for families to reside in quality owner-occupied housing, for citizens to choose from housing options which off er a wide array of services without regard to income, and for residents looking for a wide range of multi-family units.
13. Enhance the long term viability of the Project Area by facilitating:
• Land uses that complement and support existing businesses;
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• New businesses that enhance the commercial market;
• Visual quality of the streetscape, landscape, site plan and building types of new developments;
• Mixed use housing development where appropriate; and
• Safe access and convenient parking.
SECTION 3.02 DEVELOPMENT ACTIVITIES
The Authority will perform or cause to be performed, to the extent permiĴ ed by law, all project activities pursuant to the Enabling Act, the TIF Act and other applicable state laws, and in doing so anticipates that the following may, but are not required, to be undertaken by the Authority:
(a) The making of studies, planning, and other formal and informal activities relating to the Redevelopment Plan.
(b) The implementation and administration of the Redevelopment Plan.
(c) The rezoning of land within the Project Area.
(d) The acquisition of property, or interests in property, by purchase or condemnation, which acquisition is consistent with the objectives of the Redevelopment Plan,
(e) The preparation of property for use and development in accordance with applicable Land Use Regulations and any development agreements, including demolition of structures, clearance of sites, placement of fi ll and grading.
(f) The resale of property to private parties.
(g) The construction or reconstruction of improvements as described in the Tax Increment Financing Plans for the Tax Increment Financing Districts within the Project Area.
(h) The issuance of Tax Increment Financing Bonds to fi nance the Project Costs of the Redevelopment Plan, and the use of tax increments or other funds available to the City and the Authority to pay or fi nance the Project Costs of the Redevelopment Plan incurred or to be incurred by it.
(i) The use of tax increments to pay debt service on the Tax Increment Financing Bonds or otherwise pay or reimburse with interest the Project Costs of the Redevelopment Plan.
SECTION 3.03 PAYMENT OF PROJECT COSTS
It is anticipated that the Project Costs of the Redevelopment Plan will be paid primarily from proceeds of Tax Increment Financing Bonds or from tax increments from the Tax Increment Financing Districts with the Project Area. The Authority reserves the right to utilize other available sources of revenue, including but not limited to lease payments, special assessments and user charges, which the Authority may apply to pay a portion of the Project Costs.
SECTION 3.04 ENVIRONMENTAL CONTROLS; LAND USE REGULATIONS
All municipal actions, public improvements and private development shall be carried out in a manner consistent with existing environmental controls and all applicable Land Use Regulations.
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SECTION 3.05 PARK AND OPEN SPACE TO BE CREATED
Park and open space within the Project Area, if created, will be created in accordance with the zoning and plaĴ ing ordinances of the City.
SECTION 3.06 PROPOSED REUSE OF PROPERTY
The Redevelopment Plan contemplates that the Authority may acquire property and reconvey the same to another entity. Prior to formal consideration of the acquisition of any property, the Authority will require the execution of a binding development agreement with respect thereto and evidence that tax increments or other funds will be available to repay the Project Costs associated with the proposed acquisition. It is the intent of the Authority to negotiate the acquisition of property whenever possible. Appropriate restrictions regarding the reuse and redevelopment of property shall be incorporated into any development agreement to which the Authority is a party.
SECTION 3.07 ADMINISTRATION AND MAINTENANCE OF PROJECT AREA
Maintenance and operation of the Project Area will be the responsibility of the Director of the Authority, who shall serve as administrator of the Project Area. Each year the administrator of the Project Area will submit to the Authority the maintenance and operation budget for the following year.
The administrator will administer the Project Area pursuant to the Enabling Act; provided, however, that such powers may only be exercised at the direction of the Authority. No action taken by the administrator pursuant to the above-mentioned powers shall be eff ective without authorization by the Authority.
SECTION 3.08 AMENDMENTS
The Authority reserves the right to alter and amend the Redevelopment Plan, subject to the provisions of state law regulating such action. The Authority specifi cally reserves the right to enlarge or reduce the size of the Project Area.
SECTION 3.09 FINDINGS AND DECLARATION
The Authority makes the following fi ndings:
(a) The land in the Project Area would not be made available for redevelopment without the fi nancial aid sought.
(b) The Redevelopment Plan for the Project Area in the City will aff ord maximum opportunity consistent with the needs of the locality as a whole, for the redevelopment of the area by private enterprise.
(c) The Redevelopment Plan conforms to the general plan for development of the City as a whole.
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ARTICLE IV - TAX INCREMENT FINANCING PLAN
SECTION 4.01 STATUTORY AUTHORITY
The TIF District and the TIF Plan are established under the authority of the TIF Act.
SECTION 4.02 PLANNED DEVELOPMENT
4.02.1 Project Description
The Authority anticipates development of multiple projects within the TIF District. The fi rst project to be built is proposed by a Developer to include an approximate 89-unit market-rate rental housing facility, an apartment building, consisting of studio, one and two-bedroom units located at 404 3rd Street East. The project intends to off er fi tness rooms, enclosed climate-controlled parking, a dog park and a sky lounge.
The Authority anticipates redevelopment to occur on other parcels within the TIF District that will not be included as part of the fi rst project. Future redevelopment of other property within the TIF District may include a mix of housing units and commercial development. The Authority may consider a modifi cation to the TIF Plan at a future date to incorporate any changes that may be needed related to future development within the TIF District.
For the purpose of Estimated Tax Increment in Section 4.04.1, the TIF Plan includes estimated
market value for the fi rst project only.
4.02.2 City Plans and Development Program
In addition to achieving the objectives of the Redevelopment Plan, the development is consistent with and works to achieve the development objectives of the Authority and the City. The TIF Plan for the TIF District conforms to the general plan for development or redevelopment of the City as a whole.
The proposed development plan for the project in the TIF District has been reviewed by the Planning Commission and the City Council.
4.02.3 Land Acquisition
The Authority or the City do not plan to acquire property within the TIF District.
4.02.4 Development Activities
As of the date of approval of the TIF Plan, there are no development activities proposed in this TIF Plan that are subject to contracts.
4.02.5 Need for Tax Increment Financing
In the opinion of the City, the Development would not reasonably be expected to occur solely through private investment within the foreseeable future and the increased market value of the site that could reasonably be expected to occur without the use of tax increment fi nancing would be less than the increase in the market value estimated to result from the Development after subtracting the present value of the projected tax increments for the maximum duration of the TIF District permiĴ ed by the TIF Plan.
The reasons and facts supporting this fi nding include the following:
- The Development requires public fi nancial assistance to off set land and building acquisition and site improvement and preparation costs to allow for the Developer to proceed with construction of the Development.
- A comparative analysis of estimated market values both with and without establishment of the TIF District and the use of tax increments has been performed as described above and
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is shown in Exhibit I. This analysis indicates that the increase in estimated market value of the Development (less the present value of the projected tax increments for the maximum duration permiĴ ed by the TIF Plan) exceeds the estimated market value of the site prior to the establishment of the TIF District.
SECTION 4.03 TAX INCREMENT FINANCING DISTRICT
4.03.1 Designation
This TIF District is designated Tax Increment Financing (Redevelopment) District No. 9 (Flats on 3rd).
4.03.2 Boundaries of TIF District
The boundaries of the TIF District are depicted in Exhibit V. The TIF District is generally bordered north to south between East 1st Street and East 4th Street and east to west between the train tracks and Tyler Street.
The legal description of the property within the TIF District is as follows:
• Outlot A and B, RIVERFRONT ADDITION, Dakota County, Minnesota; except that portion of said Outlot B plaĴ ed as RIVERFRONT 2ND ADDITION; AND Lot 1, Block 1, RIVERFRONT 2ND ADDITION, Dakota County, Minnesota; AND Lots 1 through 8, Block 16, TOWN OF HASTINGS, Dakota County, Minnesota; AND Lots 1,2,3,7, and 8, Block 17, TOWN OF HASTINGS, Dakota County, Minnesota; AND The 20.00 foot wide alley dedicated in Block 17, TOWN OF HASTINGS, Dakota County, Minnesota, lying east of the northerly extension of the west line of Lot 7, said Block 17 and west of a line drawn from the southeast corner of Lot 1 to the northeast corner of Lot 8, said Block 17.
The boundaries of the TIF District include the following ten (10) parcels listed below, in addition to three (3) right of way parcels, along with the adjacent roads and right of way.
1. 19-63950-00-010
2. 19-63950-00-021
3. 19-63951-01-010
4. 19-32150-16-011
5. 19-32150-16-010
6. 19-32150-16-012
7. 19-32150-17-030
8. 19-32150-17-021
9. 19-32150-17-020
10. 19-32150-17-080
4.03.3 Type of District
The TIF District is established as a “redevelopment” district pursuant to Section 469.174, Subd. 10 of the TIF Act. The property within the TIF District meets the statutory criteria for establishing a redevelopment tax increment fi nancing district.
LHB, Inc. was hired by the City to inspect and evaluate the properties within the TIF District. As summarized in the table below, the TIF District has a coverage calculation of 100%, which is above the 70% requirement as defi ned in Section 469.174, Subd. 10 of the TIF Act. More than 50% of the buildings, not including outbuildings, are structurally substandard, pursuant to the defi nition of structurally substandard in Section 469.174, Subd. 10(b) of the TIF Act. The substandard buildings are reasonably distributed.
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Exhibit VII includes the “The Report of Inspection Procedures and Results for Determining Qualifi cation of a Tax Increment Financing District as a Redevelopment District” prepared by LHB, Inc. The fi ndings in the Report are summarized as follows:
Number of Parcels...........................................................................................................10
Site Area Included (square feet) ...........................................................................289,664
Area of Improved Parcels (square feet) ..............................................................289,664
Percent of Area Improved ........................................................................................100%
Number of Parcels with Buildings .................................................................................3
Number of Buildings found Substandard .....................................................................2
Percent of Buildings found Substandard ..............................................................66.7%
SECTION 4.04 PLAN FOR USE OF TAX INCREMENT
4.04.1 Estimated Tax Increment
The original net tax capacity of value of the TIF District will be set by the County upon request for certifi cation. For the purposes of this Plan, the estimated original net tax capacity is $97,210. This amount is estimated based on the most recent published estimated market value of $7,776,800 for property within the TIF District.
The estimated net tax capacity of the property after completion of the project (for taxes payable in 2025, or year one of the TIF District) is $313,960. This amount is based on a total estimated market value of $25,116,781 for the project as described in section 4.02.1. The diff erence between the net tax capacity and the original net tax capacity is $216,750 (for taxes payable in 2025), which is the captured tax capacity for the creation of tax increment.
The total local tax rate for taxes payable in 2021 is 101.06%. The TIF Plan assumes that this rate will be set as the original local tax rate for the TIF District. At the time of the certifi cation of the original net tax capacity for the TIF District, the county auditor will certify the original local tax rate that applies to the TIF District. The original local tax rate is the sum of all the local tax rates, excluding that portion of the school rate aĴ ributable to the general education levy under Minnesota Statutes section 126C.13, that apply to a property in the TIF District. The local tax rate to be certifi ed is the rate in eff ect for the same taxes payable year applicable to the tax capacity values certifi ed as the TIF District’s original tax capacity. The resulting tax capacity rate is the original local tax rate for the life of the TIF District.
Under these assumptions, the estimated annual tax increment is $218,258 after development completion (for taxes payable 2025). The actual tax increment will vary according to the certifi ed original net tax capacity and original tax rate, the actual property value produced by the proposed development and the changes in property value and state tax policy over the life of the TIF District.
The City and the Authority elect to retain 100% of the captured tax capacity value for the duration of the TIF district. Exhibit II contains the projected tax increment over the life of the TIF District, including present value of the future tax increments.
4.04.2 Project Costs
The Authority will use tax increment to pay Project Costs. The Authority anticipates the use of tax increment to pay administrative expenses for the TIF District and to reimburse the Developer on a pay-go basis for certain Project Costs. A contract between the Authority and the Developer will defi ne the means for verifying Developer costs eligible for reimbursement and the means of disbursing tax increments collected by the Authority to the Developer, including terms for payment.
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The Authority may also use tax increments to pay fi nancing costs. The interest rate payable on bonds, the defi nition of bonds includes tax increment fi nancing revenue notes, to be issued will be set pursuant to a contract with the Developer. The Authority reserves the right to use any other legally available revenues to fi nance or pay for Project Costs associated with the development in the TIF District.
4.04.3 Estimated Sources and Uses of Funds
The estimated sources of revenue, along with the estimated Project Costs of the TIF District, are itemized in Figure 4.1.
The City and the Authority reserve the right to administratively adjust the amount of any of the Project Cost items listed in Figure 4.1, so long as the total Project Costs amount, not including fi nancing costs, is not increased.
FIGURE 4.1ESTIMATED SOURCES AND USES OF FUNDS
4.04.4 Administrative Expense
The Authority reserves the right to retain up to ten percent (10%) of annual tax increment revenues distributed from the County, net of any required fees paid to the State and County. The Authority may use these monies to pay for and reimburse the Authority for costs of administering the TIF district as allowed by the TIF Act.
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The maximum amount of tax increment revenue planned to pay administrative expense is shown in Figure 4.1. Anticipated administrative expenses of the TIF District include annual audit of the fund for TIF District, preparation of annual reporting, legal publication of annual report, and administration of the development agreement.
4.04.5 County Road Costs
The proposed development will not substantially increase the use of county roads and necessitate the need to use tax increments to pay for county road improvements.
4.04.6 Bonded Indebtedness
The total amount of bonds estimated to be issued is shown in Figure 4.1. The City will not issue any general obligation bonded indebtedness as a result of the TIF Plan.
The Authority intends to use tax increment fi nancing to reimburse the Developer on a pay-as-you-go basis for certain Project Costs pursuant to a contract with the Developer.
The City or the Authority may advance or loan money to fi nance expenditures under Section 469.176, Subd. 4 of the TIF Act, from the general funds of the City or the Authority or any other fund under which there is legal authority to do so, subject to the following provisions:
(a) Not later than 60 days after money is transferred, advanced, or spent, whichever is earliest, the loan or advance must be authorized by resolution of the City or of the Authority, whichever has jurisdiction over the fund from which the advance or loan is authorized.
(b) The resolution may generally grant to the City or the Authority the power to make interfund loans under one or more tax increment fi nancing plans or for one or more districts. The resolution may be adopted before or after the adoption of the tax increment fi nancing plan or the creation of the tax increment fi nancing district from which the advance or loan is to be repaid.
(c) The terms and conditions for repayment of the loan must be provided in writing. The wriĴ en terms and conditions may be in any form, but must include, at a minimum, the principal amount, the interest rate, and maximum term. WriĴ en terms may be modifi ed or amended in writing by the City or the Authority before the latest decertifi cation of any tax increment fi nancing district from which the interfund loan is to be repaid. The maximum rate of interest permiĴ ed to be charged is limited to the greater of the rates specifi ed under Minnesota Statutes, Section 270C.40 or 549.09 as of the date the loan or advance is authorized, unless the wriĴ en agreement states that the maximum interest rate will fl uctuate as the interest rates specifi ed under Minnesota Statutes, Section 270C.40 or 549.09 are from time to time adjusted. Loans or advances may be structured as draw-down or line-of-credit obligations of the lending fund.
(d) The Authority shall report in the annual report submiĴ ed under Section 469.175, Subd. 6 of the TIF Act:
(1) the amount of any interfund loan or advance made in a calendar year; and
(2) any amendment of an interfund loan or advance made in a calendar year.
4.04.7 Duration of TIF District
The duration to collect and spend tax increments on eligible purposes is set at the duration of 25 years after the date of receipt of the fi rst tax increment for a total of 26 years of tax increment collection. The Authority and City elect the fi rst year of tax increment collection to be year 2025. Based on the elected fi rst year of tax increment, the estimated decertifi cation date is 12/31/2050.
4.04.8 Estimated Impact on Other Taxing Jurisdictions
Exhibits III and IV show the estimated impact on other taxing jurisdictions if the maximum
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projected retained captured net tax capacity of the TIF District was hypothetically available to the other taxing jurisdictions.
The City and the Authority believe that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have occurred without the establishment of the TIF District and the provision of public assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertifi ed and the development therein becomes part of the general tax base.
The City and the Authority anticipate minimal impact of the proposed development on city-provided services. There will be no borrowing costs to the City or the Authority for the Project. A manageable increase in water and sewer usage is expected. It is anticipated that there may be a slight but manageable increase in police and fi re protection duties due to the development.
4.04.9 Prior Planned Improvements
There have been no building permits issued in the last 18 months in conjunction with any of the properties within the TIF District. The Authority will include this statement with the request for certifi cation to the County Auditor.
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ARTICLE V – ADMINISTERING THE TIF DISTRICT
SECTION 5.01 FILING AND CERTIFICATION
The fi ling and certifi cation of the TIF Plan consists of the following steps:
1. Upon adoption of the TIF Plan by the City and the Authority, the Authority, or its designee, shall submit a copy of the TIF Plan to the Minnesota Department of Revenue and the Offi ce of the State Auditor.
2. The Authority, or its designee, shall request that the County Auditor certify the original net tax capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this process, the Authority, or its designee, shall submit copies of the TIF Plan, the resolutions of the City and the Authority establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned improvements.
SECTION 5.02 MODIFICATIONS OF THE TAX INCREMENT FINANCING PLAN
The City and the Authority reserve the right to modify the TIF District and the TIF Plan. Under the TIF Act, the following actions can only be approved after satisfying all the necessary requirements for approval of the original TIF Plan (including notifi cations and public hearing):
Reduction or enlargement in the geographic area of the Development District or the TIF District.
Increase in the amount of bonded indebtedness to be incurred.
Increase in the amount of capitalized interest.
Increase in that portion of the captured net tax capacity to be retained by the Authority.
Increase in the total estimated Project Costs, not including cost of fi nancing.
Designation of additional property to be acquired by the City or the Authority.
Other modifi cations can be made by resolution of the Authority. In addition, the original approval process does not apply if (1) the only modifi cation is elimination of parcels from the TIF District and (2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of those parcels in the TIF District’s original net tax capacity, or the City and the Authority agree that the TIF District’s original net tax capacity will be reduced by no more than the current net tax capacity of the parcels eliminated.
Upon approval by the City, the Authority must notify the County Auditor of any modifi cation that reduces or enlarges the geographic area of the TIF District. The geographic area of the TIF District may be reduced but not enlarged after fi ve years following the date of certifi cation of the TIF District.
SECTION 5.03 4-YEAR KNOCKDOWN RULE
The 4-Year Knockdown Rule requires that if after four years from certifi cation of the TIF District no demolition, rehabilitation, renovation or site improvement, including a qualifi ed improvement of an adjacent street, has commenced on a parcel located within the TIF District, then that parcel shall be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualifi ed improvements of a street are limited to construction or opening
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of a new street, relocation of a street, or substantial reconstruction or rebuilding of an existing street. The Authority must submit to the County Auditor, by February 1 of the fi fth year, evidence that the required activity has taken place for each parcel in the TIF District.
If a parcel is excluded from the TIF District and the City, Authority, or owner of the parcel subsequently commences any of the above activities, the Authority shall certify to the County Auditor that such activity has commenced and the parcel shall once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most recently certifi ed by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF District.
SECTION 5.04 POOLING/5-YEAR RULE
It is not anticipated that tax increments will be spent outside the TIF District (except allowable administrative expenses), but such expenditures are expressly authorized in the TIF Plan.
SECTION 5.05 FINANCIAL REPORTING AND DISCLOSURE REQUIREMENTS
The Authority will comply with the annual reporting requirements of State Law pursuant to the guidelines of the Offi ce of the State Auditor. Under current law, the Authority must prepare and submit a report on the TIF district on or before August 1 of each year. The Authority must also annually publish in a newspaper of general circulation in the City an annual statement for each tax increment fi nancing district.
The reporting and disclosure requirements outlined in this section begin with the year the district was certifi ed, and shall end in the year in which both the district has been decertifi ed and all tax increments have been spent or returned to the county for redistribution. Failure to meet these requirements, as determined by the State Auditors Offi ce, may result in suspension of distribution of tax increment.
SECTION 5.06 BUSINESS SUBSIDY COMPLIANCE
The Authority will comply with the business subsidy requirements specifi ed in Minnesota Statutes, Sections 116J.993 to 116J.995, as amended.
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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EXHIBIT V
Boundaries of Tax Increment Financing District No. 9
within Development District No. 1
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EXHIBIT VI
Parcels within Project Area
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EXHIBIT VIIReport for Redevelopment Findings
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REPORT OF INSPECTION PROCEDURES AND RESULTS FOR
DETERMINING QUALIFICATIONS OF A
TAX INCREMENT FINANCING DISTRICT AS A REDEVELOPMENT DISTRICT
TIF DISTRICT 9 – FLATS ON THIRD
HASTINGS, MINNESOTA
December 27, 2021
Prepared for the
CITY OF HASTINGS
Prepared by:
LHB, Inc.
701 Washington Avenue North, Suite 200
Minneapolis, Minnesota 55401
LHB Project No. 210774
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Table of Contents
Part 1: Executive Summary ...................................................................................................................................... 2
Purpose of the Evaluation ........................................................................................................................................................ 2
Scope of Work ......................................................................................................................................................................... 2
Conclusion ............................................................................................................................................................................... 3
Part 2: Minnesota Statute 469.174, Subdivision 10 Requirements ....................................................................... 3
Interior Inspection .................................................................................................................................................................... 3
Exterior Inspection and Other Means ...................................................................................................................................... 3
Documentation ......................................................................................................................................................................... 3
Qualification Requirements ...................................................................................................................................................... 3
1. Coverage Test .................................................................................................................................................................... 3
2. Condition of Buildings Test ................................................................................................................................................. 4
3. Distribution of Substandard Buildings ................................................................................................................................. 4
Part 3: Procedures Followed .................................................................................................................................... 5
Part 4: Findings ......................................................................................................................................................... 5
1. Coverage Test ..................................................................................................................................................................... 5
2. Condition of Building Test .................................................................................................................................................... 6
3. Distribution of Substandard Structures ................................................................................................................................ 8
Part 5: Team Credentials .......................................................................................................................................... 9
Appendices ................................................................................................................................................................ 9
APPENDIX A Property Condition Assessment Summary Sheet
APPENDIX B Building Code, Condition Deficiency and Context Analysis Reports
APPENDIX C Building Replacement Cost Reports
Code Deficiency Cost Reports
Photographs
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Part 1: Executive Summary
Purpose of the Evaluation
LHB was hired by the City of Hastings to inspect and evaluate the properties within a Tax Increment Financing
Redevelopment District (“TIF District”) proposed to be established by the City. The proposed TIF District is generally bordered
north to south between East 1st Street and East 4th Street and east to west between the train tracks and Tyler Street.
(Diagram 1). The purpose of LHB’s work is to determine whether the proposed TIF District meets the statutory requirements
for coverage, and whether three (3) buildings on ten (10) parcels plus three (3) right of way parcels, located within the
proposed TIF District, meet the qualifications required for a Redevelopment District.
Diagram 1: Proposed TIF District
Scope of Work
The proposed TIF District consists of en (10) parcels plus three (3) right of way parcels with three (3) buildings, and one (1)
metal cold storage structure. The three buildings and metal cold storage structure were inspected on November 15, 2021. The
building on map Parcel C was found not to be substandard. Building Code and Condition Deficiency reports for the buildings
that were inspected and found substandard are located in Appendix B.
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Conclusion
After inspecting and evaluating the properties within the proposed TIF District and applying current statutory criteria for a
Redevelopment District under Minnesota Statutes, Section 469.174, Subdivision 10, it is our professional opinion that the
proposed TIF District qualifies as a Redevelopment District because:
The proposed TIF District has a coverage calculation of 100 percent which is above the 70 percent requirement.
66.7 percent of the buildings are structurally substandard which is above the 50 percent requirement.
The substandard buildings are reasonably distributed.
The remainder of this report describes our process and findings in detail.
Part 2: Minnesota Statute 469.174, Subdivision 10
Requirements
The properties were inspected in accordance with the following requirements under Minnesota Statutes, Section 469.174,
Subdivision 10(c), which states:
Interior Inspection
“The municipality may not make such determination [that the building is structurally substandard] without an interior
inspection of the property...”
Exterior Inspection and Other Means
“An interior inspection of the property is not required, if the municipality finds that
(1) the municipality or authority is unable to gain access to the property after using its best efforts to obtain
permission from the party that owns or controls the property; and
(2) the evidence otherwise supports a reasonable conclusion that the building is structurally substandard.”
Documentation
“Written documentation of the findings and reasons why an interior inspection was not conducted must be made and
retained under section 469.175, subdivision 3(1).”
Qualification Requirements
Minnesota Statutes, Section 469.174, Subdivision 10 (a) (1) requires three tests for occupied parcels:
1. COVERAGE TEST
a. Minnesota Statutes, Section 469.174, Subdivision 10(a)(1) states:
“parcels consisting of 70 percent of the area of the district are occupied by buildings, streets, utilities, or paved or
gravel parking lots…”
b. The coverage required by the parcel to be considered occupied is defined under Minnesota Statutes, Section
469.174, Subdivision 10(e), which states:
“For purposes of this subdivision, a parcel is not occupied by buildings, streets, utilities, paved or gravel parking lots,
or other similar structures unless 15 percent of the area of the parcel contains buildings, streets, utilities, paved or
gravel parking lots, or other similar structures.”
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2. CONDITION OF BUILDINGS TEST
a. Minnesota Statutes, Section 469.174, Subdivision 10(a) states:
“…and more than 50 percent of the buildings, not including outbuildings, are structurally substandard to a degree
requiring substantial renovation or clearance;”
b. Structurally substandard is defined under Minnesota Statutes, Section 469.174, Subdivision 10(b), which states:
“For purposes of this subdivision, ‘structurally substandard’ shall mean containing defects in structural elements or a
combination of deficiencies in essential utilities and facilities, light and ventilation, fire protection including adequate
egress, layout and condition of interior partitions, or similar factors, which defects or deficiencies are of sufficient total
significance to justify substantial renovation or clearance.”
i. We do not count energy code deficiencies toward the thresholds required by Minnesota Statutes, Section
469.174, Subdivision 10(b) defined as “structurally substandard”, due to concerns expressed by the State of
Minnesota Court of Appeals in the Walser Auto Sales, Inc. vs. City of Richfield case filed November 13, 2001.
c. Buildings are not eligible to be considered structurally substandard unless they meet certain additional criteria, as set
forth in Subdivision 10(c) which states:
“A building is not structurally substandard if it is in compliance with the building code applicable to new buildings or
could be modified to satisfy the building code at a cost of less than 15 percent of the cost of constructing a new
structure of the same square footage and type on the site. The municipality may find that a building is not disqualified
as structurally substandard under the preceding sentence on the basis of reasonably available evidence, such as the
size, type, and age of the building, the average cost of plumbing, electrical, or structural repairs, or other similar
reliable evidence.”
“Items of evidence that support such a conclusion [that the building is not disqualified] include recent fire or police
inspections, on-site property tax appraisals or housing inspections, exterior evidence of deterioration, or other similar
reliable evidence.”
i. LHB counts energy code deficiencies toward the 15 percent code threshold required by Minnesota Statutes,
Section 469.174, Subdivision 10(c)) for the following reasons:
1) The Minnesota energy code is one of ten building code areas highlighted by the Minnesota Department of
Labor and Industry website where minimum construction standards are required by law.
2) Chapter 13 of the 2015 Minnesota Building Code states, “Buildings shall be designed and constructed in
accordance with the International Energy Conservation Code.” Furthermore, Minnesota Rules, Chapter
1305.0021 Subpart 9 states, “References to the International Energy Conservation Code in this code mean
the Minnesota Energy Code…”
3) Chapter 11 of the 2015 Minnesota Residential Code incorporates Minnesota Rules, Chapters, 1322 and
1323 Minnesota Energy Code. The Senior Building Code Representative for the Construction Codes and
Licensing Division of the Minnesota Department of Labor and Industry confirmed that the Minnesota Energy
Code is being enforced throughout the State of Minnesota.
4) In a January 2002 report to the Minnesota Legislature, the Management Analysis Division of the Minnesota
Department of Administration confirmed that the construction cost of new buildings complying with the
Minnesota Energy Code is higher than buildings built prior to the enactment of the code.
5) Proper TIF analysis requires a comparison between the replacement value of a new building built under
current code standards with the repairs that would be necessary to bring the existing building up to current
code standards. In order for an equal comparison to be made, all applicable code chapters should be
applied to both scenarios. Since current construction estimating software automatically applies the
construction cost of complying with the Minnesota Energy Code, energy code deficiencies should also be
identified in the existing structures.
3. DISTRIBUTION OF SUBSTANDARD BUILDINGS
a. Minnesota Statutes, Section 469.174, Subdivision 10, defines a Redevelopment District and requires one or more of
the following conditions “reasonably distributed throughout the district.”:
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“(1) Parcels consisting of 70 percent of the area of the district are occupied by buildings, streets, utilities, paved
or gravel parking lots, or other similar structures and more than 50 percent of the buildings, not including
outbuildings, are structurally substandard to a degree requiring substantial renovation or clearance;
(2) the property consists of vacant, unused, underused, inappropriately used, or infrequently used rail yards, rail
storage facilities, or excessive or vacated railroad rights-of-way;
(3) tank facilities, or property whose immediately previous use was for tank facilities…”
b. Our interpretation of the distribution requirement is that the substandard buildings must be reasonably distributed
throughout the district as compared to the location of all buildings in the district. For example, if all of the buildings in
a district are located on one half of the area of the district, with the other half occupied by parking lots (meeting the
required 70 percent coverage for the district), we would evaluate the distribution of the substandard buildings
compared with only the half of the district where the buildings are located. If all of the buildings in a district are
located evenly throughout the entire area of the district, the substandard buildings must be reasonably distributed
throughout the entire area of the district. We believe this is consistent with the opinion expressed by the State of
Minnesota Court of Appeals in the Walser Auto Sales, Inc. vs. City of Richfield case filed November 13, 2001.
Part 3: Procedures Followed
LHB inspected three (3) of the three (3) buildings during the day of November 15, 2021. The building in parcel C was found to
be not substandard based on external inspection. Parcel J has a metal structure used for cold storage and will be
as an outbuilding since the structure does not meet the definition of a building.
Barns and outbuildings:
For the purposes of our work, we are defining buildings as those structures inhabited by human beings. These structures
would typically include water, sewer and electricity. Barns and small storage facilities are considered “outbuildings” which are
not typically considered in TIF analysis because they have very few code requirements and are not intended for human
occupation.
Part 4: Findings
1. Coverage Test
a. The total square foot area of the parcel in the proposed TIF District was obtained from City records, GIS mapping
and site verification.
b. The total square foot area of buildings and site improvements on the parcels in the proposed TIF District was
obtained from City records, GIS mapping and site verification.
c. The percentage of coverage for each parcel in the proposed TIF District was computed to determine if the 15 percent
minimum requirement was met. The total square footage of parcels meeting the 15 percent requirement was divided
into the total square footage of the entire district to determine if the 70 percent requirement was met.
FINDING
The proposed TIF District met the coverage test under Minnesota Statutes, Section 469.174, Subdivision 10(e),
which resulted in parcels consisting of 66.7 percent of the area of the proposed TIF District being occupied by
buildings, streets, utilities, paved or gravel parking lots, or other similar structures (Diagram 2). This exceeds the 70
percent area coverage requirement for the proposed TIF District under Minnesota Statutes, Section 469.174,
Subdivision (a) (1).
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Diagram 2 – Coverage Diagram
Shaded area depicts a parcel more than 15 percent occupied by buildings, streets, utilities,
paved or gravel parking lots or other similar structures
2. Condition of Building Test
a. BUILDING INSPECTION
i. The first step in the evaluation process is the building inspection. After an initial walk-thru, the inspector makes a
judgment whether or not a building “appears” to have enough defects or deficiencies of sufficient total
significance to justify substantial renovation or clearance. If it does, the inspector documents with notes and
photographs code and non-code deficiencies in the building.
b. REPLACEMENT COST
i. The second step in evaluating a building to determine if it is substandard to a degree requiring substantial
renovation or clearance is to determine its replacement cost. This is the cost of constructing a new structure of
the same square footage and type on site. Replacement costs were researched using R.S. Means Cost Works
square foot models for 2021.
ii. A replacement cost was calculated by first establishing building use (office, retail, residential, etc.), building
construction type (wood, concrete, masonry, etc.), and building size to obtain the appropriate median
replacement cost, which factors in the costs of construction in Hastings, Minnesota.
iii. Replacement cost includes labor, materials, and the contractor’s overhead and profit. Replacement costs do not
include architectural fees, legal fees or other “soft” costs not directly related to construction activities.
Replacement cost for each building is tabulated in Appendix A.
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c. CODE DEFICIENCIES
i. The next step in evaluating a building is to determine what code deficiencies exist with respect to such building.
Code deficiencies are those conditions for a building which are not in compliance with current building codes
applicable to new buildings in the State of Minnesota.
ii. Minnesota Statutes, Section 469.174, Subdivision 10(c), specifically provides that a building cannot be
considered structurally substandard if its code deficiencies are not at least 15 percent of the replacement cost of
the building. As a result, it was necessary to determine the extent of code deficiencies for each building in the
proposed TIF District.
iii. The evaluation was made by reviewing all available information with respect to such buildings contained in City
Building Inspection records and making interior and exterior inspections of the buildings. LHB utilizes the current
Minnesota State Building Code as the official code for our evaluations. The Minnesota State Building Code is
actually a series of provisional codes written specifically for Minnesota only requirements, adoption of several
international codes, and amendments to the adopted international codes.
iv. After identifying the code deficiencies in each building, we used R.S. Means Cost Works 2021; Unit and
Assembly Costs to determine the cost of correcting the identified deficiencies. We were then able to compare
the correction costs with the replacement cost of each building to determine if the costs for correcting code
deficiencies meet the required 15 percent threshold.
FINDING
Two (2) out of three (3) buildings (66.7percent) in the proposed TIF District contained code deficiencies exceeding
the 15 percent threshold required by Minnesota Statutes, Section 469.174, Subdivision 10(c). Building Code,
Condition Deficiency and Context Analysis reports for the buildings in the proposed TIF District can be found in
Appendix B of this report.
d. SYSTEM CONDITION DEFICIENCIES
i. If a building meets the minimum code deficiency threshold under Minnesota Statutes, Section 469.174,
Subdivision 10(c), then in order for such building to be “structurally substandard” under Minnesota Statutes,
Section 469.174, Subdivision 10(b), the building’s defects or deficiencies should be of sufficient total significance
to justify “substantial renovation or clearance.” Based on this definition, LHB re-evaluated each of the buildings
that met the code deficiency threshold under Minnesota Statutes, Section 469.174, Subdivision 10(c), to
determine if the total deficiencies warranted “substantial renovation or clearance” based on the criteria we
outlined above.
ii. System condition deficiencies are a measurement of defects or substantial deterioration in site elements,
structure, exterior envelope, mechanical and electrical components, fire protection and emergency systems,
interior partitions, ceilings, floors and doors.
iii. The evaluation of system condition deficiencies was made by reviewing all available information contained in
City records, and making interior and exterior inspections of the buildings. LHB only identified system condition
deficiencies that were visible upon our inspection of the building or contained in City records. We did not
consider the amount of “service life” used up for a particular component unless it was an obvious part of that
component’s deficiencies.
iv. After identifying the system condition deficiencies in each building, we used our professional judgment to
determine if the list of defects or deficiencies is of sufficient total significance to justify “substantial renovation or
clearance.”
FINDING
In our professional opinion, two (2) out of three (3) buildings (66.7 percent) in the proposed TIF District are
structurally substandard to a degree requiring substantial renovation or clearance, because of defects in structural
elements or a combination of deficiencies in essential utilities and facilities, light and ventilation, fire protection
including adequate egress, layout and condition of interior partitions, or similar factors which defects or deficiencies
are of sufficient total significance to justify substantial renovation or clearance. This exceeds the 50 percent
requirement of Subdivision 10a(1).
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3. Distribution of Substandard Structures
e. Much of this report has focused on the condition of individual buildings as they relate to requirements identified by
Minnesota Statutes, Section 469.174, Subdivision 10. It is also important to look at the distribution of substandard
buildings throughout the geographic area of the proposed TIF District (Diagram 3).
FINDING
The parcels with substandard buildings are reasonably distributed compared to all parcels that contain buildings.
Diagram 3 – Substandard Buildings
Shaded green area depicts parcels with buildings.
Shaded orange area depicts substandard buildings.
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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TIF District 9 – Flats on Third
LHB Project No. 210774 Page 9 of 9 Final Report
Part 5: Team Credentials
Michael A. Fischer, AIA, LEED AP - Project Principal/TIF Analyst
Michael has 33 years of experience as project principal, project manager, project designer and project architect on planning,
urban design, educational, commercial, and governmental projects. He has become an expert on Tax Increment Finance
District analysis assisting over 100 cities with strategic planning for TIF Districts. He is an Architectural Principal at LHB and
currently leads the Minneapolis office.
Michael completed a two-year Bush Fellowship, studying at MIT and Harvard in 1999, earning master’s degrees in City
Planning and Real Estate Development from MIT. He has served on more than 50 committees, boards, and community task
forces, including a term as a City Council President, Chair of a Metropolitan Planning Organization, and Chair of the Edina
Planning Commission. Most recently, he served as a member of the Edina city council and Secretary of the Edina HRA.
Michael has also managed and designed several award-winning architectural projects and was one of four architects in the
Country to receive the AIA Young Architects Citation in 1997.
Phil Fisher – Inspector
For 35 years, Phil Fisher worked in the field of Building Operations in Minnesota including White Bear Lake Area Schools. At
the University of Minnesota, he earned his Bachelor of Science in Industrial Technology. He is a Certified Playground Safety
Inspector, Certified Plant Engineer, and is trained in Minnesota Enterprise Real Properties (MERP) Facility Condition
Assessment (FCA). His FCA training was recently applied to the Minnesota Department of Natural Resources Facilities
Condition Assessment project involving over 2,000 buildings.
Appendices
APPENDIX A Property Condition Assessment Summary Sheet
APPENDIX B Building Code, Condition Deficiency and Context Analysis Reports
APPENDIX C Building Replacement Cost Reports
Code Deficiency Cost Reports
Photographs
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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APPENDIX A
Property Condition Assessment Summary Sheet
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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APPENDIX B
Building Code, Condition Deficiency and Context Analysis Reports
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TIF District 9 – Flats on Third Page 1 of 2 Building Report
LHB Project No. 210774 Parcel G1– 404 3rd Street East, Hastings, MN 55033
TIF District 9 – Flats on Third
Building Code, Condition Deficiency and Context Analysis Report
Parcel G1 Single Unit Apartment
Address: 404 3rd Street East, Hastings, Minnesota 55033
Parcel ID: 19-32150-17-030
Inspection Date(s) & Time(s): November 15, 2021 1:00 PM
Inspection Type: Interior and Exterior
Summary of Deficiencies: It is our professional opinion that this building is Substandard because:
- Substantial renovation is required to correct Conditions found.
- Building Code deficiencies total more than 15% of replacement cost, NOT
including energy code deficiencies.
Estimated Replacement Cost: $112,019
Estimated Cost to Correct Building Code Deficiencies: $32,116
Percentage of Replacement Cost for Building Code Deficiencies: 28.7%
DEFECTS IN STRUCTURAL ELEMENTS
1.
COMBINATION OF DEFICIENCIES
1. Essential Utilities and Facilities
a. The entrance is not ADA compliant for an apartment.
b. The apartment does not comply with code for access to and through a covered dwelling.
c. The bathroom is not ADA compliant for an apartment.
d. The kitchen is not ADA compliant for an apartment.
2. Light and Ventilation
a. The HVAC system does not comply with code.
3. Fire Protection/Adequate Egress
a. Exterior thresholds do not comply with code for maximum height.
b. Building does not comply with code for minimum distance to adjacent building.
c. Smoke detectors do not comply with code.
d. There are no code required carbon monoxide detectors.
e. There are no code required Arc Fault Circuit Interrupters in the building.
4. Layout and Condition of Interior Partitions/Materials
a. Ceiling is water stained from roof leaks.
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DRAFT FOR PUBLIC HEARING FEBRUARY 3, 2022 38
TIF District 9 – Flats on Third Page 2 of 2 Building Report
LHB Project No. 210774 Parcel G1– 404 3rd Street East, Hastings, MN 55033
b. Kitchen counter laminate is damaged and should be repaired.
c. Floor to ceiling height in back room does not comply with code for minimum height.
d. Window treatment is damaged.
e. Walls and ceilings should be repaired/repainted.
5. Exterior Construction
a. Windows are failing allowing for water intrusion which is contrary to code.
b. Wood fascia and soffit should be repainted.
c. Rear door jamb is damaged and should be repaired.
d. Roofing material is failing allowing for water intrusion which is contrary to code.
DESCRIPTION OF CODE DEFICIENCIES
1. Building does not comply with code for proper distance from adjacent structure.
2. Entrance to building does not comply with accessibility code.
3. The apartment does not comply with code for access to and through a covered dwelling.
4. The bathroom is not ADA code compliant for an apartment.
5. The kitchen is not ADA code compliant for an apartment.
6. Exterior thresholds do not comply with code for maximum height.
7. The smoke detectors do not comply with code.
8. There are no code required carbon monoxide detectors.
9. There are no code required Arc Fault Circuit Interrupters in the building.
10. The HVAC system does not comply with code.
11. Floor to ceiling height in back room does not comply with code for minimum height.
12. Failed windows should be replaced to prevent water intrusion per code.
13. Failed roofing material should be replaced to prevent water intrusion per code.
OVERVIEW OF DEFICIENCIES
This one-story building is currently permitted by the city as an apartment. The building was vacant when inspected. The
building does not comply with code for proper spacing from adjacent structure. Access to the apartment does not comply with
code. Access to all areas of the apartment does not comply with ADA code. The interior walls and ceilings need
repair/repainting. The back-room area does not comply with code for minimum floor to ceiling height. Smoke detectors do not
comply with code. There are no code required carbon monoxide detectors or AFCI’s in the building. The HVAC system does
not comply with code. Failed windows are allowing for water intrusion which does not comply with code. Failed roofing
material is allowing for water intrusion which does not comply with code.
ENERGY CODE DEFICIENCIES
In addition to the building code deficiencies listed above, the existing building does not comply with the current energy code.
These deficiencies are not included in the estimated costs to correct code deficiencies and are not considered in determining
whether the building is substandard:
M:\21Proj\210774\300 Design\Reports\Building Reports\G1 - 404 3rd Street East Building Report Redevelopment District.docx
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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TIF District 9 – Flats on Third Page 1 of 3 Building Report
LHB Project No. 210774 Parcel G2 – 406 3rd Street East, Hastings, MN 55033
TIF District 9 – Flats on Third
Building Code, Condition Deficiency and Context Analysis Report
Parcel G2 Multi-Unit Apartment
Address: 406 3rd Street East, Hastings, Minnesota 55033
Parcel ID: 19-32150-17-030
Inspection Date(s) & Time(s): November 15, 2021 1:20 PM
Inspection Type: Interior and Exterior
Summary of Deficiencies: It is our professional opinion that this building is Substandard because:
- Substantial renovation is required to correct Conditions found.
- Building Code deficiencies total more than 15% of replacement cost, NOT
including energy code deficiencies.
Estimated Replacement Cost: $246,011
Estimated Cost to Correct Building Code Deficiencies: $111,935
Percentage of Replacement Cost for Building Code Deficiencies: 45.5%
DEFECTS IN STRUCTURAL ELEMENTS
1. Foundation wall is cracked allowing for water intrusion which is contrary to code.
2. Floor joists are not properly supported per code.
COMBINATION OF DEFICIENCIES
1. Essential Utilities and Facilities
a. The entrance is not ADA compliant for an apartment.
b. The apartment building does not comply with code for access to and through a covered dwelling.
c. There is no ADA code compliant bathroom for an apartment.
d. There is no ADA code compliant kitchen for an apartment.
2. Light and Ventilation
a. The HVAC system does not comply with code.
b. Water heater is not properly vented per code.
c. Electrical wiring is not properly installed per code.
d. There is no code required kitchen exhaust system.
3. Fire Protection/Adequate Egress
a. Exterior thresholds do not comply with code for maximum height.
b. Building does not comply with code for minimum distance to adjacent building.
c. Smoke detectors do not comply with code.
d. There are no code required carbon monoxide detectors.
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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TIF District 9 – Flats on Third Page 2 of 3 Building Report
LHB Project No. 210774 Parcel G2 – 406 3rd Street East, Hastings, MN 55033
e. There are no code required Arc Fault Circuit Interrupters in the building.
f. No code required Ground Fault Circuit Interrupters were observed.
g. Stairways do not comply with code.
4. Layout and Condition of Interior Partitions/Materials
a. Ceiling is water stained from roof leaks.
b. Ceiling tile is damaged and should be replaced.
c. Floor to ceiling height in the basement does not comply with code for minimum height.
d. Window treatment is damaged.
e. Walls and ceilings should be repaired/repainted.
f. Carpeting is damaged/soiled and should be replaced.
5. Exterior Construction
a. Exterior wood surfaces should be repainted.
b. Front door is damaged and should be replaced.
c. Windows are failing allowing for water intrusion which is contrary to code.
d. Chimney brick and mortar is cracked/missing allowing for water intrusion which is contrary to code.
e. Roofing material is failing allowing for water intrusion which is contrary to code.
DESCRIPTION OF CODE DEFICIENCIES
1. Cracked foundation wall is allowing water intrusion which is contrary to code.
2. Floor joists are not properly supported per code.
3. The apartment building does not comply with code for accessibility to and through a covered dwelling.
4. There is no code compliant accessible bathroom.
5. There is no code compliant accessible kitchen.
6. The HVAC system does not comply with code.
7. Water heater is not properly vented per code.
8. Electrical wiring is not properly installed per code.
9. There is no code required kitchen exhaust system.
10. Exterior thresholds do not comply with code for maximum height.
11. Building is too close to adjacent structure to comply with code.
12. Smoke detectors do not comply with code.
13. There are no code required carbon monoxide detectors.
14. There are no code required AFCI’s.
15. Code required GFCI’s were not observed.
16. Stairways do not comply with code.
17. Floor to ceiling height in basement does not comply with code.
18. Failed windows should be replaced to prevent water intrusion per code.
19. Chimney brick and mortar is failing allowing for water intrusion which is contrary to code.
20. Failing roofing material should be replaced to prevent water intrusion per code.
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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TIF District 9 – Flats on Third Page 3 of 3 Building Report
LHB Project No. 210774 Parcel G2 – 406 3rd Street East, Hastings, MN 55033
OVERVIEW OF DEFICIENCIES
This building is permitted by the city as an apartment building. The building is currently vacant. Foundation is cracked
allowing for water intrusion which is contrary to code. Floor joists are not properly supported per code. The apartment
building does not comply with access code to and through a covered dwelling. There is no code required accessible restroom
or kitchen. The HVAC system does not comply with code. The water heater is not properly vented per code. There is no
code required kitchen exhaust. Exterior thresholds do not comply with code for maximum height. Building does not comply
with code for proper distance to adjacent structure. Smoke detectors do not comply with code. Floor to ceiling height in
basement does not comply with code. Stairways do not comply with code. There are no visible code required GFCI’s or
AFCI’s. There are no code required carbon monoxide detectors. Failed windows should be replaced to prevent water
intrusion per code. The chimney brick and mortar should be repaired to prevent water intrusion per code. Failing roofing
material should be replaced to prevent water intrusion per code.
ENERGY CODE DEFICIENCIES
In addition to the building code deficiencies listed above, the existing building does not comply with the current energy code.
These deficiencies are not included in the estimated costs to correct code deficiencies and are not considered in determining
whether the building is substandard:
M:\21Proj\210774\300 Design\Reports\Building Reports\G2 - 406 3rd Street East Building Report Redevelopment District.docx
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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APPENDIX C
Building Replacement Cost Reports
Code Deficiency Cost Reports
Photographs
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TAX INCREMENT FINANCING (REDEVELOPMENT) DISTRICT NO. 9
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TIF District 9 - Flats on Third
LHB Project No. 210774 Page 1 of 2 Replacement Cost Report
Parcel G1 - 404 3rd Street East, Hastings, MN
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TIF District 9 - Flats on Third
LHB Project No. 210774 Page 2 of 2
Replacement Cost Report
Parcel G1 - 404 3rd Street East, Hastings, MN
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TIF DISTRICT 9 - FLATS ON THIRD
Code Deficiency Cost Report
Parcel G1 - 404 3rd Street East, Hastings, Minesota 55033 Building Name or Type
Parcel ID 19-32150-17-030 Single-Unit Apartment
Code Related Cost Items Unit Cost Units Unit Quantity Total
Accessibility Items
Access
Modify entrance to comply with accessibility code 1,000.00$ Lump 1 1,000.00$
Modify interior to comply with code for access to and through a coverd
dwelling 1,000.00$ Lump 1 1,000.00$
Bathroom
Modify to comply with code 6.34$ SF 688 4,361.92$
Kitchen
Modify to comply with code 6.75$ SF 688 4,644.00$
Structural Elements -$
Exiting
Thresholds
Modify thresholds to comply with code for maximum height 100.00$ EA 2 200.00$
Fire Protection
Building Position
Modify building to comply with code regarding distance from adjacent
structures 3.00$ SF 688 2,064.00$
Smoke Detectors
Install code compliant smoke detectors 0.75$ SF 688 516.00$
Carbon Monoxide Detectors
Install code required carbon monoxide detectors 0.75$ SF 688 516.00$
Arc Fault Circuit Interrupters
Install code required AFCI's 150.00$ EA 4 600.00$
Exterior Construction
Windows
Replace failed windows to prevent water intrusion per code 8.76$ SF 688 6,026.88$
Roof Construction
Roofing Material
Remove failed roofing material 0.90$ SF 688 619.20$
Install roofing material to prevent water intrusion per code 8.36$ SF 688 5,751.68$
TIF District 9 - Flats on Third
LHB Project No. 210774 Page 1 of 2
Code Deficiency Cost Report
Parcel G1 - 404 3rd Street East, Hastings, MN 55033
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Code Related Cost Items Unit Cost Units Unit Quantity Total
Mechanical- Electrical
Mechanical
Install code compliant HVAC system 7.00$ SF 688 4,816.00$
Total Code Improvements 32,116$
TIF District 9 - Flats on Third
LHB Project No. 210774 Page 2 of 2
Code Deficiency Cost Report
Parcel G1 - 404 3rd Street East, Hastings, MN 55033
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TIF District 9 - Flats on Third
LHB Proct No. 210774
Page 1 of 2
Replacement Cost Report
Parcel G2 - 406 3rd Street East, Hastings, MN
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TIF District 9 - Flats on Third
LHB Proct No. 210774
Page 2 of 2
Replacement Cost Report
Parcel G2 - 406 3rd Street East, Hastings, MN
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TIF DISTRICT 9 - FLATS ON THIRD
Code Deficiency Cost Report
Parcel G2 - 406 3rd Street East, Hastings, Minnesota 55033 Building Name or Type
Parcel ID 19-32150-17-030 Multi-Unit Apartment Building
Code Related Cost Items Unit Cost Units
Unit
Quantity Total
Accessibility Items
Access
Modify entrance to comply with accessibility code 1,000.00$ Lump 1 1,000.00$
Modify interior to comply with code for access to and through a
covered dwelling 1,000.00$ Lump 1 1,000.00$
Bathroom
Modify bathroom to comply with code 2.15$ SF 2,028 4,360.20$
Kitchen
Modify kitchen to comply with code 2.29$ SF 2,028 4,644.12$
Structural Elements
Foundation
Repair cracks to prevent water intrusion per code 250.00$ Lump 1 250.00$
Floor Joists
Support floor joists per code 1.40$ SF 2,028 2,839.20$
Exiting
Thresholds
Modify thresholds to comply with code for maximum height 100.00$ EA 2 200.00$
Basement
Modify basement to comply with code for minimum floor to ceiling
height 20.00$ SF 2,028 40,560.00$
Stairways
Modify second floor stairway to comply with code 1.94$ SF 2,028 3,934.32$
Modify basement stairway to comply with code 0.58$ SF 2,028 1,176.24$
Fire Protection
Building Position
Modify building to comply with code regarding distance from adjacent
structures 3.00$ SF 2,028 6,084.00$
Smoke Detectors
Install code compliant smoke detectors 0.75$ SF 2,028 1,521.00$
Carbon Monoxide Detectors
Install code required carbon monoxide detectors 0.75$ SF 2,028 1,521.00$
Arc Fault Circuit Interrupters
Install code required AFCI's 150.00$ EA 8 1,200.00$
Ground Fault Circuit Interrupters
TIF District 9 - Flats on Third
LHB Project No. 210774 Page 1 of 2
Code Deficiency Cost Report
Parcel G2 - 406 3rd Street East, Hastings, MN 55033
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Code Related Cost Items Unit Cost Units
Unit
Quantity Total
Install code required GFCI's 150.00$ EA 8 1,200.00$
Exterior Construction
Windows
Replace failed windows to prevent water intrusion per code 7.10$ SF 2,028 14,398.80$
Chimney
Repair chimney brick and mortar to prevent water intrusion per code 1,000.00$ Lump 1 1,000.00$
Roof Construction
Roofing Material
Remove failed roofing material 0.90$ SF 2,028 1,825.20$
Install roofing material to prevent water intrusion per code 2.81$ SF 2,028 5,698.68$
Mechanical- Electrical
Mec hanical
Install code compliant HVAC system 5.04$ SF 2,028 10,221.12$
Modify water heater exhaust to comply with code 0.15$ SF 2,028 304.20$
Install code required kitchen exhaust 1.25$ SF 2,028 2,535.00$
Electrical
Install code compliant electrical wiring 2.20$ SF 2,028 4,461.60$
Total Code Improvements 111,935$
TIF District 9 - Flats on Third
LHB Project No. 210774 Page 2 of 2
Code Deficiency Cost Report
Parcel G2 - 406 3rd Street East, Hastings, MN 55033
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