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PROJECT AREA BUDGET CANYON RIM COMMONS COMMUNITY REINVESTMENT AREA (CRA) MILLCREEK COMMUNITY REINVESTMENT AGENCY, UTAH NOVEMBER 26, 2018 ---PAGE BREAK--- Page I 2 Table of Contents TABLE OF CONTENTS 2 SECTION 1: INTRODUCTION 3 SECTION 2: DESCRIPTION OF COMMUNITY DEVELOPMENT PROJECT AREA 3 SECTION 3: GENERAL OVERVIEW OF PROJECT AREA BUDGET 4 SECTION 4: PROPERTY TAX INCREMENT 5 SECTION 5: COST/BENEFIT ANALYSIS 7 EXHIBIT A: PROJECT AREA MAP 7 EXHIBIT B: MULTI-YEAR BUDGET 9 ---PAGE BREAK--- Page I 3 Section 1: Introduction The Millcreek Community Reinvestment Agency (the “Agency”), following thorough consideration of the needs and desires of the City of Millcreek (the “City”) and its residents, as well as understanding the City’s capacity for new development, has carefully crafted the Project Area Plan (the “Plan”) for the Canyon Rim Commons Community Reinvestment Project Area (the “Project Area”). The Plan is the result of a comprehensive evaluation of the types of appropriate land-uses and economic development opportunities for the land encompassed by the Project Area which includes land along both sides of 3300 South, between 2000 East to the west, Pioneer Street to the east, 3225 South to the north and 3395 South to the south. The Plan is envisioned to define the method and means of development for the Project Area from its current state to a higher and better use. The City has determined it is in the best interest of its citizens to assist in the development of the Project Area. This Project Area Budget document (the “Budget”) is predicated upon certain elements, objectives and conditions outlined in the Plan and intended to be used as a financing tool to assist the Agency in meeting Plan objectives discussed herein and more specifically referenced and identified in the Plan. The creation of the Project Area is being undertaken as a community reinvestment project pursuant to certain provisions of Chapters 1 and 5 of the Utah Community Reinvestment Agency Act (the “Act”, Utah Code Annotated (“UCA”) Title 17C). The requirements of the Act, including notice and hearing obligations, have always been observed throughout the establishment of the Project Area. Section 2: Description of Community Development Project Area The Project Area includes land along both sides of 3300 South, between 2000 East to the west, Pioneer Street to the east, 3225 South to the north and 3395 South to the south. The Project Area is comprised of approximately 75 acres of property. A map of the Project Area is attached hereto in EXHIBIT A. ---PAGE BREAK--- Page I 4 Section 3: General Overview of Project Area Budget The purpose of the Project Area Budget is to provide the financial framework necessary to implement the Project Area Plan vision and objectives. The Project Area Plan has identified that tax increment financing is essential to meet the objectives of the CRA Project Area. The following information will detail the sources and uses of tax increment and other necessary details needed for public officials, interested parties, and the public in general to understand the mechanics of the Project Area Budget. Base Year Value The Agency has determined that the base year property tax value for the Project Area will be the total taxable value for the 2017 tax year which is estimated to be $69,547,441. Using the tax rates established within the Project Area the property taxes levied equate to $1,041,125 annually. Accordingly, this amount will continue to flow through to each taxing entity proportional to the amount of their respective tax rates being levied. Payment Trigger The Project Area will have a twenty-year (20) duration from the date of the first tax increment received by the Agency. The collection of tax increment will be triggered at the discretion of the Agency prior to March 1 of the tax year in which they intend to begin the collection of increment. The following year in which this increment will be remitted to the Agency will be Year 1, e.g., if requested prior to March 1, 2019, Year 1 of increment will be 2020. The Agency anticipates it will trigger tax increment by March 1, 2020, but in no case will the Agency trigger the first year of tax increment collection after March 1, 2023. Projected Tax Increment Revenue – Total Generation Development within the Project Area will commence upon favorable market conditions which will include both horizontal and vertical infrastructure and development. The Agency anticipates that new development will begin in the Project Area in 2019. The contemplated development will generate significant additional property tax revenue as well as incremental sales and use tax above what is currently generated within the Project Area. Property Tax Increment will begin to be generated in the tax year (ending Dec 1st) following construction completion and Tax Increment will be paid to the Agency in March or April after collection. It is projected that property Tax Increment generation within the Project Area could begin as early as 2020 or as late as 2021. It is currently estimated that during the 20-year life of the Project Area Budget, property Tax Increment could be generated within the Project Area in the approximate amount of $12.02 million or at a net present value (NPV)1 of $7.77 million. This amount is over and above the $20.82 million of base taxes that the property would generate over 20 years at the $1,041,125 annual amount it currently generates as shown in Table 4.1 below. 1 Net Present Value of future cash flows assumes a 4% discount rate. The same 4% discount rate is used in all remaining NPV calculations. This total is prior to accounting for the flow-through of tax increment to the respective taxing entities. ---PAGE BREAK--- Page I 5 Section 4: Property Tax Increment Base Year Property Tax Revenue The taxing entities are currently receiving - and will continue to receive - property tax revenue from the current assessed value of the property within the Project Area (“Base Taxes”). The current assessed value is estimated to be $69,547,441. Based upon the tax rates in the area, the collective taxing entities are receiving $1,041,125 in property tax annually from this Project Area. This equates to approximately $20,822,504 over the 20-year life of the Project Area. TABLE 4.1: TOTAL BASE YEAR TO TAXING ENTITIES (OVER 20 YEARS) Entity Total NPV at 4% Salt Lake County $2,816,671 $1,913,974 Salt Lake County Library 777,540 528,351 Granite School District 10,880,002 7,393,139 Millcreek City 2,798,589 1,901,687 South Salt Lake Valley Mosquito Abatement District 20,864 14,178 Mt. Olympus Improvement District 388,075 263,703 Central Utah Water Conservancy District 556,380 378,069 Unified Fire Service Area 2,584,383 1,756,130 Total Revenue $20,822,504 $14,149,231 Property Tax Increment Shared with RDA All taxing entities that receive property tax generated within the Project Area, as detailed above, will share at least a portion of that increment generation with the Agency. All taxing entities will contribute 70% of their respective tax increment for 20 years. The City, County and the State will not contribute any portion of their incremental sales tax to implement the Project Area Plan. Table 4.2 shows the amount of Tax Increment shared with the Agency assuming the participation levels discussed above. TABLE 4.2: SOURCES OF TAX INCREMENT FUNDS Entity Percentage Length Total NPV at 4% Salt Lake County 70% 20 Years $1,138,599 $735,364 Salt Lake County Library 70% 20 Years 314,310 202,997 Granite School District 70% 20 Years 4,398,084 2,840,504 Millcreek City 70% 20 Years 1,131,289 730,644 South Salt Lake Valley Mosquito Abatement District 70% 20 Years 8,434 5,447 Mt. Olympus Improvement District 70% 20 Years 156,874 101,317 Central Utah Water Conservancy District 70% 20 Years 224,908 145,257 Unified Fire Service Area 70% 20 Years 1,044,700 674,720 Total Sources of Tax Increment Funds $8,417,197 $5,436,249 ---PAGE BREAK--- Page I 6 Uses of Tax Increment Many of the commercial structures in this corridor were built in the early 1960s and in desperate need of replacement. Additionally, some of the infrastructure along this important corridor needs replacement and/or modification, “but-for” the creation of the CRA and public participation, this vital corridor cannot reach its full potential. The Agency will use 3% of the tax increment to administer the CRA. Most of the remaining tax increment collected by the Agency will be used to overcome the obstacles outlined above Including: offsetting certain on-site public infrastructure costs, land assemblage, development incentives, Agency requested improvements and upgrades, desirable Project Area improvements, and other redevelopment activities as approved by the Agency. The remaining 10% will go towards affordable housing, as required by the Act. TABLE 4.3: USES OF TAX INCREMENT Uses Total NPV at 4% Redevelopment Activities $7,322,962 $4,729,537 CRA Housing Requirement 841,720 543,625 Project Area Administration 252,516 163,087 Total Uses of Tax Increment Funds $8,417,197 $5,436,249 A multi-year projection of tax increment is including in EXHIBIT B. Total Annual Property Tax Revenue for Taxing Entities at Conclusion of Project As described above, the collective taxing entities are currently receiving approximately $1,041,125 in property taxes annually from this Project Area. At the end of 20 years an additional $695,098 in property taxes annually is anticipated, totaling approximately $1,736,224 in property taxes annually for the area. “But for” the assistance provided by the Agency through tax increment revenues, this 67 percent increase in property taxes generated for the taxing entities would not be possible. TABLE 4.4: TOTAL BASE YEAR AND END OF PROJECT LIFE ANNUAL PROPERTY TAXES Entity Annual Base Year Property Taxes Annual Property Tax Increment at Conclusion of Project Total Annual Property Taxes Salt Lake County $140,834 $94,026 $234,860 Salt Lake County Library 38,877 25,956 64,833 Granite School District 544,000 363,197 907,197 Millcreek City 139,929 93,423 233,352 South Salt Lake Valley Mosquito Abatement District 1,043 696 1,740 Mt. Olympus Improvement District 19,404 12,955 32,358 Central Utah Water Conservancy District 27,819 18,573 46,392 Unified Fire Service Area 129,219 86,272 215,491 Total Revenue $1,041,125 $695,098 $1,736,224 ---PAGE BREAK--- Page I 7 Section 5: Cost/Benefit Analysis Additional Revenues Other Tax Revenues The development within the Project Area will also generate sales taxes for the City and County. Table 5.1 shows the total revenues generated by the Project Area. This total includes the anticipated property tax increment and sales and use tax. TABLE 5.1 TOTAL REVENUES Entity Property Tax Sales Tax Total Incremental Revenues Salt Lake County $1,626,570 $1,002,484 $2,629,054 Salt Lake County Library 449,014 - 449,014 Granite School District 6,282,977 - 6,282,977 Millcreek City 1,616,128 $572,848 2,188,976 South Salt Lake Valley Mosquito Abatement District 12,049 - 12,049 Mt. Olympus Improvement District 224,105 - 224,105 Central Utah Water Conservancy District 321,298 - 321,298 Unified Fire Service Area 1,492,428 - 1,492,428 Total Revenue $12,024,567 $1,575,331 $13,599,901 Additional Costs The development anticipated within the Project Area will also likely result in additional general government, public works, and public safety costs. These costs, along with the estimated budget to implement the Project Area Plan, are identified below. TABLE 5.2 TOTAL EXPENDITURES Entity CRA Budget General Government Public Works Public Safety Total Incremental Expenditures Salt Lake County $1,138,599 $44,606 - - $1,183,205 Salt Lake County Library 314,310 -2 - - 314,310 Granite School District 4,398,084 437,995 - - 4,836,079 Millcreek City 1,131,289 252,892 212,941 383,746 1,980,868 South Salt Lake Valley Mosquito Abatement District 8,434 617 - - 9,051 Mt. Olympus Improvement District 156,874 29,293 - - 186,167 Central Utah Water Conservancy District 224,908 18,187 - - 243,095 Unified Fire Service Area 1,044,700 73,218 - - 1,117,918 Total Expenditures $8,417,197 $856,808 $212,941 $383,746 $9,870,693 The total net benefit to the taxing entities of participating in the Project Area is $3,729,208, with the City’s net benefit being $208,108. Exhibit A: Project Area Map 2 The Library’s General Government expenditure is included in the County’s $44,606 expense. ---PAGE BREAK--- Page I 8 ---PAGE BREAK--- Page I 9 Exhibit B: Multi-Year Budget