REVISED 11/19//2018

CITY OF ROCHESTER POLICY ON DEVELOPMENT

INCENTIVES FOR TAX INCREMENT FINANCING AND TAX
ABATEMENT

I. GENERAL POLICY

The purpose of this policy is to establish guidelines and procedures for the provision
of development incentives to private businesses. The fundamental purpose of
providing development incentives are to encourage the redevelopment of the city's
older residential, commercial, and industrial areas; to preserve and expand the city's
economic and employment base, and to provide affordable housing.

Development incentives may be provided when the city believes that the desired
development would not occur without municipal involvement. The city reserves the
sole right to accept or reject proposals for development assistance, taking into account
the degree to which they adhere to the intent of this policy and any other factors the
City Council may wish to consider

II. OBJECTIVES

Within these stated priorities, the City will consider providing development
incentives to private projects to achieve one or more of the following objectives:

A. Encourage development or redevelopment consistent with the goals and

objectives of the City of Rochester.

B. To encourage the redevelopment of developed areas through the removal of

blight and blighting conditions.

C. To retain jobs and/ or increase the number and diversity of quality jobs.

D. To provide a balanced and sustainable housing stock and to promote

neighborhood stabilization and revitalization.

E. To increase the city's tax base.

F. To encourage additional unsubsidized private development, either directly,

or through secondary "spin-off'' development.

G. To meet other public objectives as determined by the Council.

III. PRIORITIES FOR USE OF DEVELOPMENT INCENTIVES
(Projects that meet 1, 2 or 3 below are considered to be of equal priority and are a
higher priority for the use of development incentives than other projects).

1. Development or redevelopment projects that are included in the Destination

Medical Center Development Boundary Area that further the goals and
objectives of the plans and research outlined below:
a. DMC Development Plan
b. Rochester Downtown Master Plan
c. DMC District Design Guidelines
d. Public Realm Plans
e. DMC Transportation Plan
f. City of Rochester Comprehensive Plan
g. DMC District Market Demand Studies

2. Economic development projects of an industrial or manufacturing nature, that

are consistent with the Minnesota Statutes and that create or retain living wage
jobs or increase the tax base in the City.

3. Housing TIF District projects must provide for at least 40% of the units to be
affordable to persons at 60% area median income or 20% of the units to be
affordable to persons at 50% area median income, as required by statute. For
Housing TIF District proposed development projects seeking development
incentives, priority will be given to those projects that

a. Secure other funding sources, such as Housing Tax Credits or Housing

Revenue Bonds
b. Take advantage of an infill site.
c. Are within 1/4 mile of bus stop.
d. Are located within 1/2 mile of essential services that serve the property.
e. Are within the 4 minute EMS response time.
f. Have no tenant relocation issues associated with the project.
g. Single family dwelling owner occupied housing as permitted by Statute.
h. Provide rents affordable to persons at or below 50% AMI

4. Other Redevelopment projects. Determination of project approval should

consider the following:

a. The project site is deemed to be blighted or distressed and in

significant need of renovation or redevelopment, as evidenced by
declining property value, several years of high vacancy rates or
negative impacts on the surrounding neighborhood; or
b. The site's proximity to the downtown core and transit availability; or
c. The site is deemed to have a concentration of households to support
the proposed use of the site; or
 d. If the project includes a housing component, a goal of 20 % of the
units must be affordable to persons at 60% of the area median income
or 10% of the units must be affordable to persons at 50% of the area
median income; or if a project consists of only market rate units, that a
percentage (to be determined by the Council) of the available tax
increments is to be used for affordable housing purposes within the
City.
e. For projects that do not propose a housing component as part of the
project, that 5% of the available tax increments will be utilized for
affordable housing purposes within the City.

5. Other projects deemed critical to the long range economic development of the
City, or as identified for transit oriented redevelopment in the Comprehensive
Plan, as determined by the Mayor and City Council.

IV. RELOCATION ASSISTANCE

1. Prior to submittal of an application for City TIF assistance, it is the developer's

obligation to ensure that appropriate relocation benefits are provided to displaced
rental unit tenants whose incomes are at or below the 60% area median income (AMI)
and that have been displaced within the previous 6 months to an application submittal.

2. In order to qualify for the relocation assistance, a tenant must have resided in the unit for
a period of 90 days prior to the displacement.

3. For those displaced tenants who do not utilize Housing Choice Vouchers, the relocation
assistance amount shall be based upon the monthly difference between the tenant's current
monthly rent amount and the maximum monthly gross rents identified by HUD for
income levels at or below 50% AMI and number of bedrooms, for a period of 42 months.

4. For those displaced tenants that do utilize Housing Choice vouchers for part of the
monthly rent payment, the amount of relocation assistance provided to the tenant
would be the difference between the tenant's portion of the current monthly rent
payment and any increase in monthly rent that would be the tenant's responsibility,
for a period of 42 months.

5. In cases of displaced tenants with special needs, the developer will be obligated to provide
additional relocation assistance in an amount to cover the costs of renovating a
comparable dwelling unit to accommodate the tenant's needs, with a maximum cap of
$20,000 for renovation costs and no more than $25,000 in aggregate, including rental
assistance and moving related costs.

6. The developer will be obligated to pay a fixed cost fee per displaced tenant, based upon
the schedule listed below, which is the MnDOT standard.
 Residential Moving Expense and Dislocation Allowance Payment Schedule
The occupant owns furniture

Rooms 1 2 3 4 5 6 7 8 Each Add’l

Room

Amount $575 $725 $925 $1125 $1325 $1525 $1725 $1925 $275
Residential Moving Expense and Dislocation Allowance Payment Schedule
The occupant does not own furniture

Rooms 1 Each Add’l Room

Amount $450 $100

V. POLICIES

1) To directly link the level of assistance provided to a project to the attainment of the
objectives defined above.

The level of public assistance provided to a project shall be commensurate with the
extent to which the project addresses specific redevelopment, DMC Plan, economic
development or housing goals and objectives. Assistance shall be limited to the
minimum amount necessary for the successful construction of the project and to
address an identified funding gap.

2) To keep the payback period for bonds, loans, abatements, or other forms of assistance to
the shortest te1m possible.

3) To structure any assistance in such a manner as to minimize financial risk to the city. Up
front bonding will primarily be directed to City owned public infrastructure. All other
assistance will be typically done on a "PAYGO" reimbursement basis.

4) To require proposers to provide full disclosure of project information so that the city can
assess the need for incentives.

5) To require guarantees and other forms of financial security commensurate with risk
incurred by the city.
 6) Projects seeking City assistance will be more strongly considered if they meet one of
the Sustainable Building Certification Standards as follows :
a. For commercial projects:
i. LEED for New Construction and Renovation; Certified Silver, Gold
or Platinum.
ii. State of Minnesota B3 Guidelines; Certified Compliant.
b. For residential projects:
i. LEED for New Construction and Renovation; Certified Silver, Gold
or Platinum.
ii. State of Minnesota B3 Guidelines; Certified Compliant.
iii. Green Star; Certified Silver , Gold or Platinum
iv. [ V. Green Communities; Certified

7) Redevelopment and Economic Development Projects must also meet the standards set
forth below:
a. Predicted and actual energy use and greenhouse gas emissions - meet SB 2030
b. Energy Standard through design and operation
Predicted and actual use of potable water: 30% below Energy Policy Act of 1992
levels
c. Predicted and actual use of water for landscaping: 50% reduction from consumption
of traditionally irrigated site
d. Utilization of renewable energy: Evaluation of 2% of on-site renewables;
installation if cost-effective using SB 2030 guidance
e. Electric vehicle charging capability: install conduit that allows charging stations
to be installed at a future date
f. Diversion of construction waste from landfills and incinerators: 75% diversion
rate
g. Indoor Environmental Quality: Low VOC materials includes paints, adhesives,
sealants, flooring, carpet as well as ASHRAE thermal and ventilation minimums
h. Stormwater Management: Quantity and quality requirements, including infiltration
rate, suspended solid and phosphorous reductions
i. Resilient Design: Document a design response to several identified potential
shocks such as utility interruption, extreme rainfall and transportation
interruption. Design Team shall integrate the identified strategies into the design
of the project.
j. Participate in the City of Rochester's Voluntary Benchmarking Program for a
period of three years after construction is completed to report energy and water
consumption of the project
k. Performance standards outlined above must be verified by a third party proposed
by the Developer and acceptable to the City of Rochester

VI. PERMISSIBLE COSTS

 The city may provide financial incentives to cover any cost permitted by regulation
or statute. While the city will consider any eligible cost, it reserves the right to
participate in only those costs it deems appropriate.

VII PROVISIONS

A. Prior to application submittal for any required City land use / zoning approvals,
the Proposers will be required to provide the City with a written notice of intent
to seek City assistance and submit project and financial data in sufficient detail to
document their need for assistance. Such information may include, but not be
limited to, financial statements, project pro-formas, source and use of funds
statements, market and feasibility studies and similar documents.

B. Projects must be consistent with the city's comprehensive plan, zoning ordinance
and other land use policies. Projects not consistent with such plans, ordinances
and policies must obtain land use approvals prior to provision of any financial
assistance.

C. Redevelopment Projects should leverage the maximum private investment

possible. Each project will be reviewed to determine funding gap and the level of
assistance will be based upon that and the public benefits provided by the project.
Desired goals of the City are a maximum city funding of no more than ten (10)
years of present value tax increments be provided to the project, except that
additional tax increments may be provided for eligible expenses that provide
public amenities or benefit, as determined by the City. Projects that are provided
more than 10 years of TIF will be required to meet one of the Sustainable
Building Certification Standards indicated. Not more than 75% of the estimated
project tax increments being provided to the developer on an annual
reimbursement basis

D. If incentives are to be provided, proposers must submit evidence of private

financing satisfactory to the city, or secure the city's costs before the city makes
any significant financial commitment to a project

E. In the case of tax increment financing projects, prior to the execution of any
assistance agreements, the proposer must complete project plans and provide
project financial data in sufficient detail to allow the Olmsted County Assessor to
estimate the market value of the project upon completion, and provide evidence
satisfactory to the City that private financing is secured

F. The city may require collateralized guarantees, assessment agreements, and other
forms of security to protect the public's investment in the project. The amount of
security required will be based on the City's assessment of the risk of the project.
 G. In evaluating a project, the City may utilize outside legal, financial, real estate,
marketing, design and other consultants. Unless waived by the Council, proposers
will be required to pay the costs of such consultants.

H. In the case of tax increment projects, proposers must agree to provide

documentation of actual allowable costs no less than quarterly during project
construction. These costs must be categorized as required by the State of
Minnesota "Tax Increment Financing Authority Report".

VIII. LIMITATIONS

A. Development incentives will not be used to support projects that place

extraordinary demands on city services and infrastructure, unless such demand is
mitigated as part of the project.

B. Because tax abatement requires an offsetting levy increase, it will be used in

very limited instances, primarily used to encourage development or
redevelopment of the central business district or DMC Plan boundary area.
Tax abatement will not be used for retail or office projects located outside of
the central business district. In limited circumstances, the Council may
consider the use of tax abatements to assist manufacturing and technology,
housing, historic preservation and public infrastructure projects. For
manufacturing and technology projects, tax abatements will be considered
only if it is not feasible to provide assistance through tax increment financing
and then, only when there is an imminent threat of significant job loss, or when
there will be a significant increase in new jobs.

C. Where new job creation provides the primary rationale for the granting of
development incentives, the city will consider providing assistance to employers
paying a living wage, shall consider the number of jobs generated and the wage
and benefit levels provided by the Company as factors in determining the amount
of assistance for the project. Assistance agreements may include provision for
repayment of all or a portion of the assistance granted if, the business fails to
either create or maintain the targeted number of jobs at the stated pay level
thresholds.

D. For Statutory Housing TIF District projects that typically include housing
revenue bonds or other state or federal housing assistance, the following
guidelines will be considered:

1. A threshold of no more than $12,000 / dwelling unit or a maximum of

15 years of available tax increments, whichever is less.
2. Priority for TIF assistance will be given to those housing projects that
have been successful in leveraging other sources of funding such as
housing tax credits, housing bond funding or other sources,
 3. The City reserves the right to limit the number of housing units
assisted annually.

IX. PROCESS

A. Prior to submission of a formal application requesting development incentives

and land use / zoning approval, the proposer shall meet with staff to discuss the
nature of the proposal and its relationship to the City's and or DMC Plan
development goals, objectives, and priorities. Procedures and submission
requirements will also be reviewed. For projects located within the DMC
Development Plan boundary area, the City/ DMC EDA joint staff application
submittal and review process will be followed.

B. The proposer shall submit sufficient copies of his / her proposal to the City
Administrator for distribution to appropriate officials and staff.

C. Staff will review the proposal and submit a written report to the Council and/or
City Economic Development Authority (EDA) outlining its findings. The
Council and City EDA may accept the proposal, reject it, or indicate to the
proposer those modifications to the proposal necessary for continued
consideration.

D. A recommendation to accept the proposal shall include the basic terms and
conditions of an agreement to be entered into by the city and the proposer.

E. The terms of the agreement and staff report and recommendation will be
presented to the Common Council and/or the City EDA for final action.

X. SUBMISSION OF PROPOSALS

Proposals for development incentives shall include the following information:

A. A completed application form and application fee.

B. Qualifications of the proposer including prior experience with similar projects.

Qualifications, where applicable, of principal members of development team,
including the architect, construction company, and financial advisor.

C. Financial capability of the proposer to unde1iake the project.

D. Site plans, schematics, and narrative describing the location, type, scope, and size
of the project.

E. Identification of all public assistance being sought.

 F. Preliminary analysis showing existing taxes, estimated future taxes, and for
economic development projects, the number of new jobs created, by wage level.

G. The proposers source and use of funds including any public assistance being
requested.

H. A preliminary listing of any approvals, pe1mits, licenses or other authorizations

required for the project.

I. A statement identifying the specific public objectives the project will address.

J. A preliminary schedule identifying significant milestone dates leading to the

completion of the project.

K. Any other pe11inent data the city may require.

XI. APPLICATION INFORMATION

Applicants shall include the information listed in the City or DMCC application
form that will be provided. Not all of the information will be needed for every
proposal. The applicant will work with city staff to assure all appropriate
information is provided.

A. A $5,000 application fee must be attached to the application. This fee is designed
to cover a portion of the city's costs associated with evaluating the proposal. If
warranted by the complexity of the proposal, additional deposits may be required
to cover City out of pocket expenses related to the application process. If the
project is determined to be a DMC Plan project, the application filing fee shall be
$10,000.

Downtown/devincentpolicy2.doc