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HomeMy WebLinkAboutCH7-EconomicDevelopmentPLAN OF STILLWATER Chapter 7 : Economic Development 7-1 Chapter 7 - Economic Development Introduction THE City of Stillwater has made a conscious decision to build its economy by capitalizing on its historical riches and maintaining a high quality of life. Stillwater is a destination location for citizens of the metro area and beyond. This destination status provides a wealth of economic activities that are not normally expected in a community of this size and demographics. Maintaining the city’s quality of place allows it to receive additional economic benefit from tourism and attracts residents and businesses that treasure the unique marriage of small town living with high quality. These unique merchants typically are only found in much larger communities or the central cities. This chapter provides an overview of the employment and economic conditions in Stillwater and describes the districts where economic activity is concentrated. The chapter will then discuss the array of economic development tools and techniques available to the City and provide a list of implementation programs to meet the goals, objectives and policies. Goals & Objectives The following goals have been reviewed and approved by the City Council and reflect the recommendations from the committees charged to refine the goals and objectives. Economic Development Goals Goal 1. Increase the tax base and provide opportunities for economic growth for Stillwater and Stillwater area residents. Chapter 7 Contents Introduction ........................7-1 Goals and Objectives .................7-1 Existing Conditions ..................7-2 Economic Competitiveness ...........7-12 Finance Tools ......................7-13 7-2 PLAN OF STILLWATER Chapter 7 : Economic Development Objectives 1. Support business expansion in the downtown commercial district and West Stillwater Business Park area. 2. Actively promote the creation of the Research and Development (R & D) office park along TH 36 east of County Road 15. 3. Protect the city’s industrial land base for industrial development. 4. Provide local incentives to encourage clean light industrial and office development. Goal 2. Promote the economic vitality of all commercial and industrial areas in the City. Objectives 1. Cooperate with regional and local economic development organizations to promote the local economy. 2. Work with the Stillwater Area Chamber of Commerce to promote local industries. 3. Assist local industries to prosper and grow in the community consistent with the city’s needs. 4. Work with local and regional economic development interests to promote local economic development. Goal 3. Provide new locations for job growth in close proximity to housing and with convenient access, which may include transit. Objectives 1. Designate land for mixed use, commercial and industrial uses properly located with adequate support services to accommodate future forecast and anticipated economic development. 2. Encourage downtown as a relocation destination for successful businesses. 3. Encourage mixed use development along the Highway 36 corridor. Existing Conditions The economic health of a community plays a critical role in encouraging and maintaining a high standard of living and a desirable place to live for existing residents, as well as attracting new residents. The city has experienced growth that is forecasted to continue. The following information and tables identify current employment trends and other applicable factors. Tourism Stillwater’s preserved historical sites of the 1800’s lumbering era have made the city an attractive destination for tourists. Much of the downtown area is filled with businesses targeted to this tourist trade including historic hotels, inns, museums, riverboats, the Minnesota Zephyr, specialty shops, and a variety of restaurants. Stillwater is also host to many special events that annually draw thousands of tourists to the community including, The Rivertown Art Festival, Lumberjack Days and Music on the Waterfront. Stillwater’s rich history and picturesque location have created an environment where specialty and tourist-related businesses have been able to largely replace any businesses that have left the downtown due to increased retail activity along Trunk Highway (TH) 36. Tourism has allowed the Stillwater downtown to avoid the vacant buildings and physical decline seen in many other traditional downtowns in spite of increased competition from highway-oriented retail. Stillwater’s tourism success does not occur purely on its own. Rather it is a result of coordinated efforts between the private sector, city activities, quasi-public agencies, the community at large, and many others. One of these is the Connections and Visitors Bureau. Another important advocate is the Greater Stillwater Chamber of Commerce, which represents Stillwater and beyond including Bayport, Lake Elmo, and Oak Park Heights. The mission of the chamber is to “serve, advocate, and promote the interest of businesses while enriching the life of our PLAN OF STILLWATER Chapter 7 : Economic Development 7-3 community.” Since 1891, the St. Croix River Valley has been represented by a Chamber of Commerce. Throughout much of the 1900’s, when Stillwater was the major business center in the St. Croix River Valley, the Chamber of Commerce served most of the outlying communities on both sides of the river. The primary service area stretched from Prescott, Wisconsin to Taylors Falls, Minnesota. This wide area became difficult to service from Stillwater. The distant communities grew and prospered, needing their own chambers of commerce. The Greater Stillwater Chamber of Commerce provides business promotion and support services for the four cities and plans numerous special events to promote tourism during the year. Employee and Employers Table 7.1 illustrates the historic and projected employment figures for Stillwater produced by the Metropolitan Council. During the three decades leading up to the year 2000, Stillwater experienced a very rapid employment growth rate, ultimately exceeding the employment per household rate of the metro area and resulting in the need for importing employees. This is a very rare situation for a community in the suburban metro area and illustrates the strength of Stillwater’s own economic engine. The Metropolitan Council is projecting that this superior employment performance will continue throughout the life of this plan. Commuting As seen in Table 7.2 and illustrated in Figure 7.1, just over 17 percent of Stillwater’s employed residents also work in Stillwater. This observation points to the strong live-work tradition in Stillwater. The second highest share of employed Stillwater residents work in Saint Paul, closely followed by Minneapolis. A noticeable share of employed residents work in nearby Oak Park Heights and at the 3M campus in Maplewood. All other locations account for the other half of Stillwater’s employed residents. Table 7.1: Regional Forecasts Year Employment Households Emp/HH 1970 2,830 3,035 0.93 1980 5,516 4,065 1.36 1990 7,040 4,982 1.41 2000 10,719 5,797 1.85 2010 9,628 7,076 1.36 2020 10,700 8,400 1.27 2030 11,300 9,000 1.26 2040 11,700 9,600 1.22 Analysis of commute times (Table 7.4) points to the strength of Stillwater’s live-work economy, as the city significantly exceeds metro averages for commute times less than 15 minutes. Compared to a sample of other communities (see Table 7.3) with the Metropolitan Council Table 7.2: Where Stillwater Residents Work City Percent Stillwater 17.2% St. Paul 10.6% Minneapolis 10.4% Oak Park Heights 5.7% Maplewood 5.5% Other 50.5% Source: U.S. Census Bureau. LEHD Origin- Destination Employment Statistics (2014) Table 7.3: Where Those Who Live in City Work City Employees Work Outside Work In Stillwater 9,264 82.5%17.5% Minnetonka 24,919 87.5%12.5% Anoka 8,496 87.7%12.3% White Bear Lake 12,376 88.6%11.4% Apple Valley 24,888 89.2%10.8% Shoreview 12,200 93.3%6.7% Savage 15,412 94.1%5.9% Source: U.S. Census Bureau. LEHD Origin-Destination Employment Statistics (2015). 7-4 PLAN OF STILLWATER Chapter 7 : Economic Development community designation of Suburban, Stillwater boasts the highest share of residents who commute to jobs within the city in which they live. Table 7.5 identifies the mode of transportation that employees use to access their jobs. Like most communities, the vast majority of residents use private transportation to reach their places of employment. Walking as a means of transportation to get to work has declined from 2000 to 2015. This could be attributed to more people working at home and the rise in popularity of biking to work especially since all other means of transportation to work make up a similar share in 2015 as they did in 2000. Major Employers and Industries Major employers directly in the community include Washington County, Stillwater Public Schools, Bluestone Physicians Services, VistaTech, DiaSorin, and the Lakeview Hospital. Large employment hubs in the community include Downtown Stillwater and the commercial and industrial uses surrounding the TH 36 corridor. Stillwater’s economy and employment picture is also influenced by the Andersen Window Corp, Table 7.4: Commute Times 3.6% 16.5% 13.8% 8.7% 12.1% 7.1% 13.2% 3.8% 7.4% 9.3% 3.2% 1.2% 2.2% 8.4% 12.6% 15.3% 16.6% 8.3% 14.9% 3.7% 4.5% 7.9% 4.2% 1.3% Less than 5 minutes 5 to 9 minutes 10 to 14 minutes 15 to 19 minutes 20 to 24 minutes 25 to 29 minutes 30 to 34 minutes 35 to 39 minutes 40 to 44 minutes 45 to 59 minutes 60 to 89 minutes 90 or more minutes Metro Area Stillwater Source: US Census ACS 2011-2015 Table 7.5: Means of Transportation Source: US Census 2000, US Census ACS 2011-2015 0.8% 1.3% 1.7% 4.6% 7.4% 84.3% 0.9% 0.5% 2.8% 3.9% 7.4% 84.4% Public Tranportation Other Means Walked Worked at Home Carpooled Drove Alone 2000 2015 Figure 7.1: Where Stillwater Residents Work Afton Andover Anoka Apple Valley Arden Hills Bayport Birchwood Village Blaine Bloomington Brooklyn Center Brooklyn Park Burnsville CentervilleChamplin Chanhassen Circle Pines Coates Columbia Heights Columbus Coon Rapids Corcoran Cottage Grove Crystal Dayton Deephaven Dellwood Eagan Eden Prairie Edina Falcon Heights Forest Lake Fridley Gem Lake Golden Valley Grant Ham Lake Hastings Hilltop Hopkins Hugo Inver Grove Heights Lake Elmo Lake Saint Croix Beach Lakeland Lakeland Shores Lakeville Landfall Lauderdale Lexington Lilydale Lino Lakes Little Canada Mahtomedi Maple Grove Maplewood Marine on Saint Croix Medicine Lake Medina Mendota Mendota Heights MinneapolisMinnetonka Mounds View New Brighton New Hope Newport North Oaks North Saint Paul Oak Park Heights Oakdale Orono Osseo Pine Springs Plymouth Prior Lake Ramsey Richfield Robbinsdale Rogers Rosemount Roseville Saint Anthony Saint Louis Park Saint Marys Point Saint Paul Saint Paul Park Savage Scandia Shakopee Shoreview Shorewood South Saint Paul Spring Lake Park Stillwater Sunfish Lake Vadnais Heights Wayzata West Saint Paul White Bear Lake Willernie Woodbury Woodland ")5 ")36 ")244 ")96 ")995A ")95 ")95 £¤61 £¤61 £¤10 §¨¦494 §¨¦694 §¨¦94 River Falls River Falls River Falls River Falls Somerset Somerset River Falls North Hudson Hudson µ0 21,000 42,00010,500 Feet City Limit Where Residents Work Jobs/Sq. Mi. < 39 40 - 141 142 - 311 312 - 549 > 550 Where Stillwater Residents Work This page intentionally left blank. PLAN OF STILLWATER Chapter 7 : Economic Development 7-7 located in Bayport, which employs approximately 3,500 people, 3M Corporation, and other major employers in the East Metro Area. According to the US Census ACS, 2011-2015 5-year estimates, in 2015, 10,011 people were in the civilian labor force in Stillwater. Of the 10,011 people in the civilian labor force, 9,590 were employed. Approximately 96 percent of the civilian labor force population was employed and approximately 67 percent of the population over 16 years of age was employed in 2015. Table 7.6 demonstrates the number of employees per industry. The industries that most heavily employ Stillwater residents include health and social services (25.6%), accommodation and food services (14.5%), retail trade (11.9%) and educational services (9.8%). This mix of industry helps to protect a diversified tax base for the city. Table 7.6: Stillwater Employment by Industry Source: Quarterly Census of Employment and Wages, MnDEED; Metropolitan Council 34 104 114 151 254 270 322 347 351 485 529 900 993 1,200 1,469 2,582 Information Administrative and Waste Services Real Estate and Rental and Leasing Management of Companies and Enterprises Wholesale Trade Finance and Insurance Arts, Entertainment, and Recreation All Other Industries Other Services, Ex. Public Admin Professional and Technical Services Manufacturing Public Administration Educational Services Retail Trade Accommodation and Food Services Health Care and Social Assistance 7-8 PLAN OF STILLWATER Chapter 7 : Economic Development Table 7.7: Where Those Who Work in City Live City Employees Live Outside Live In Stillwater 8,123 80.0%20.0% Apple Valley 14,094 81.0%19.0% White Bear Lake 10,422 86.4%13.6% Savage 7,190 87.4%12.6% Anoka 13,300 92.2%7.8% Minnetonka 41,466 92.5%7.5% Shoreview 11,359 92.8%7.2% Source: U.S. Census Bureau. LEHD Origin-Destination Employment Statistics (2015). Table 7.8: Educational Attainment Education Attainment Stillwater Washington County #%#% Less than 9th grade 93 0.7%2,253 1.4% 9th to 12th grade, no diploma 283 2.2%4,281 2.6% High school graduate 2,532 20.0%36,305 22.0% Some college, no degree 2,749 21.7%34,788 21.1% Associate's degree 1,301 10.3%18,522 11.2% Bachelor's degree 3,815 30.2%44,999 27.3% Graduate or professional degree 1,875 14.8%23,548 14.3% Total 12,648 100%164,696 100% Percent high school graduate or higher - 97.0%- 96.0% Percent bachelor's degree or higher - 45.0%- 41.6% Source: US Census ACS, 2011-2015 Workforce The skills and training for the local workforce contributes to the local economy, influences economic development and also suggests potential demands of current residents. In suburban environments, the skills of the local residents are often an underutilized resource, as residents leave the community each day to their employment in other communities. As was illustrated earlier in this chapter, this is not the situation in Stillwater. More of the city’s residents are able to utilize their skills within the economic base in the community than is generally seen in other parts of the metropolitan area. When a city’s resident skill base and labor needs are more in alignment, as in Stillwater, there are often a number of benefits including reduced commute times, greater involvement/volunteerism within the community and reporting of a high quality of life from residents. Figure 7.2 illustrates that, while Stillwater’s economy draws workers from around the region, including areas of Wisconsin, a large concentration of workers are local. Stillwater residents account for 20 percent of Stillwater’s job base (see Table 7.7). Stillwater’s job market employs a greater share of local workers than does any other job market in the sample of other Metropolitan Council designated Suburban communities. Furthermore, Stillwater’s residents are typically highly skilled with 45 percent of the population obtaining a bachelor’s degree or higher (Table 7.8). This value exceeds the levels experienced in the remainder of Washington County. Work Force Communication Reliable and affordable internet (wireless or broadband), also known as e-Connectivity plays a fundamental role in our economic activity. More importantly, access to high-speed internet is vital for attracting and retaining businesses. It also helps support a larger population of workers choosing to telecommute from home and serves as a catalyst in fostering entrepreneurship and small business growth. In that respect, it is important to recognize the broadband coverage in Washington County. This is displayed in Figure 7.3 Afton Andover Anoka Apple Valley Arden Hills Bayport Birchwood Village Blaine Bloomington Brooklyn Center Brooklyn Park Burnsville CentervilleChamplin Circle Pines Columbia Heights Columbus Coon Rapids Cottage Grove Crystal Dellwood Eagan Edina Falcon Heights Forest Lake Fridley Gem Lake Golden Valley Grant Ham Lake Hilltop Hopkins Hugo Inver Grove Heights Lake Elmo Lake Saint Croix Beach Lakeland Lakeland Shores Landfall Lauderdale Lexington Lilydale Lino Lakes Little Canada Mahtomedi Maplewood Marine on Saint Croix Mendota Mendota Heights Minneapolis Mounds View New Brighton New Hope Newport North Oaks North Saint Paul Oak Park Heights Oakdale Osseo Pine Springs Ramsey Richfield Robbinsdale Rosemount Roseville Saint Anthony Saint Louis Park Saint Marys Point Saint Paul Saint Paul Park Savage Scandia Shoreview South Saint Paul Spring Lake Park Stillwater Sunfish Lake Vadnais Heights West Saint Paul White Bear Lake Willernie Woodbury ")5 ")36 ")244 ")96 ")995A ")95 ")97 ")95 £¤61 £¤61 §¨¦494 §¨¦35 §¨¦694 §¨¦94 River Falls Somerset Somerset River Falls Star Prairie North Hudson Roberts RobertsHudson New Richmond New Richmond µ0 21,000 42,00010,500 Feet City Limit Where Workers Live Workers/Sq. Mi. < 21 22 - 71 72 - 155 156 - 272 > 273 Where Stillwater Workers Live Figure 7.2: Where Stillwater Workers Live Figure 7.3: Existing Broadband Coverage###################################################################RamseyWashingtonAnokaDakotaPointDouglasDrSDellwoodRdSaintCroixTrlNState Hwy 36ForestBlvdNScandiaTrlNM a inStS SibleyMemorialHwyLake St NStCroixTrlNLafayetteFwyStateHwy13S t a t e H wy 28 0 ManningAveSC o u r t h o u s e B l vd H w y 55LakeStSArcade StMainStNSnellingAveNStCroixTrlSSRobertTrlUSHwy61RobertTrlSI- 94I- 494I- 35I- 694Marine onSaintCroixForest LakeWestonHugoCentervilleLino LakesCircle PinesLexingtonBald EagleWhite BearBeachNorth OaksDellwoodGrantWhiteBearLakeMahtomediShoreviewBellaireBirchwoodVillageWillernieGem LakeNew BrightonVadnaisHeightsOak ParkHeightsArden HillsPine SpringsBayportLittle CanadaNorthSaintPaulLake ElmoRosevilleLauderdaleFalconHeightsLakelandOakdaleLakelandShoresMaplewoodLandfallSaint PaulLake SaintCroixBeachSaintMarysPointWoodburyAftonWestSaintPaulLilydaleSouthSaintPaulMendotaMendotaHeightsNewportSunfish LakeInverGroveHeightsSaintPaulParkCottage GroveEaganRich ValleyStillwaterSquareLakeTrlNM a n n i n g T r l N 170th St NStCroixTrlSNealAveS© Copyright 2018, State of Minnesota, St. Paul, MN2018 BroadbandService InventoryMinnesotaWashington County·0241milesUpon request, this information can be made available inalternate formats for people with disabilities by contacting theDEED Office of Broadband Development at 651-259-7610.Additional maps and data are available athttp://mn.gov/deed/programs-services/broadband/mapsSubmit questions or recommended changes to:DEED.broadband@state.mn.usUnderserved Area Wireline Broadband of at Least 100M/20MUnserved Area(Wireline Broadband of at Least 25M/3M but less than 100M/20M)(No Wireline Broadband of at Least 25M/3M)InterstateUS RoadLocal RoadMunicipal BoundaryCounty BoundaryWaterUnservedUnderservedServedand,BroadbandBorder-to-BorderBroadbandDevelopmentGrant ProgramAreasCreated April 2018This map was prepared by Connected Nation under contractwith the Minnesota Department of Employment and EconomicDevelopment. The map represents areas of broadbandservice availability based on provider data submitted to andanalyzed by Connected Nation and modified based onvalidation tools. The data is current as of December 31, 2017. PLAN OF STILLWATER Chapter 7 : Economic Development 7-11 Income As demonstrated in Table 7.9, the median household income in 2015 in Stillwater was $76,970 which is 92 percent of the Washington County median, 112 percent of the Twin Cities Metropolitan Area median, and 125 percent of the state median. The detailed breakdown of household income levels is in Table 7.11. Although the city’s household income lagged Washington County’s in the 2015 Census, the latest weekly wage information from the Minnesota Department of Employment and Economic Development indicates that Stillwater’s employees earn more than employees in the rest of Washington County (Table 7.10) but lag the average in the metro area as a whole. Economic Overview of City The City’s tax base is primarily residential, with commercial contributions from the downtown area, and commercial and industrial uses located along County Road 5 and TH 36. According to the League of Minnesota Cities (2017), approximately 12.94 percent of the City’s tax capacity is comprised of commercial and industrial uses. Stillwater’s commercial and industrial tax capacity is the fourth highest amongst other communities in Washington County - Bayport (14.21%), Oakdale (17.79%), and Woodbury (13.87%). Maintaining a healthy commercial and industrial tax capacity is important to Stillwater’s economic competitiveness. Part of this tax capacity is captured through tourism. For example, it is estimated that 30 percent of all business activity in Stillwater and over 50 percent of business activity in the downtown area is accounted for by tourism. Thus, tourism plays an important part of Stillwater’s economic competitiveness. In order to stay competitive, Stillwater will need to continue to capitalize on tourism, while carving out other market niches. This can be achieved by targeting areas for new development and industries. The Land Use Plan (see Chapter 2) has recognized these opportunities by introducing Table 7.9: City and State Median Household Income Median Income Stillwater $76,970 Washington County $83,706 % of County 92.0% Twin Cities $68,778 % of Twin Cities 111.9% State of MN $61,492 % of State 125.2% Source: US Census ACS, 2011-2015 Table 7.10: Average Weekly Wages Weekly Wages Stillwater $898 Washington County $883 Twin Cities $1,160 Source: Metropolitan Council Community Profile, 2017 Table 7.11: Stillwater Household Income Income Number Percentage Less than $10,000 220 3.1% $10,000 to $14,999 297 4.2% $15,000 to $24,999 551 7.7% $25,000 to $34,999 451 6.3% $35,000 to $49,999 577 8.1% $50,000 to $74,999 1,297 18.2% $75,000 to $99,999 1,147 16.1% $100,000 to $149,999 1,389 19.5% $150,000 to $199,999 529 7.4% $200,000 or more 670 9.4% Total Households 7,128 - Source: US Census ACS, 2011-2015 7-12 PLAN OF STILLWATER Chapter 7 : Economic Development research development parks and mixed-use; however, such development may occur very slowly in the absence of public sector support. By promoting its advantages and being conscious of its challenges, Stillwater has an opportunity to further develop its quality of place which is critical to position itself beyond tourism. Communities that do not have an ability to compete with others on interstate highway convenience need to provide outsiders with a reason to venture a bit further to discover their economic assets. Economic Competitiveness Stillwater, as part of the Twin Cities region, plays a role in providing great locations and policies for businesses to succeed. Retaining, attracting, and growing businesses within Stillwater enables the Twin Cities region to be competitive and prosperous in the global economy. The following development tools allow Stillwater to strengthen its existing economic assets and attract new employment and goods opportunities. Development Tools This portion of the chapter presents items that serve as a focus for city actions. These actions seek to achieve the vision for the future of Stillwater in areas where market forces alone will not be sufficient. State law provides a broad array of powers and tools that may assist the city in these mixed-use development along the TH 36 corridor (see Figure 7.4 to respond to changing markets. The Land Use Plan also carries forward a specific land use designation for a Research and Development Park. This land use designation will support the Lakeview Hospitals plans to relocate and expand in the area. Development that aligns with the Research and Development land use designation will help enhance the community’s economy by creating new jobs. It is also important to recognize the preservation of land guided for industrial use. Currently, industrial uses (planned) account for only 1.8 percent of the total acreage in Stillwater. These areas can serve as an incubator for start-up business and local entrepreneurs. For example, there is growing demand for “makerspace.” Makerspace is a commonly defined space where people can gather to create, invent and learn. Examples include wood working and metal shops, breweries and test kitchens. Preserving these lands for industrial use will help foster new market niches, while providing for a stronger jobs base and tax base in the future. The City also faces several challenges to maintaining a strong economy. The first is securing sufficient talent and employees for local companies. The labor market is very tight across Minnesota, and attracting and retaining talent remains a key issue for most communities. Secondly, the market will dictate redevelopment efforts along TH 36 and the ancillary uses associated with the Lakeview Hospital. The good news, there is a market for GREELEYSTSOSGOODAVENCROIXWOOD BLVD STILLWATER BLVD NWASHINGTONAVEC U R V E C R ESTBLV D W 60TH ST N OAKGREEN AVE NORLEANS ST W CHURCHILL ST W PINE ST W Brick Pond Long Lake Long Lake Long Lake Lily Lake ¬«5 ¬«66 ¬«24 ")36 ")5 µ0 1,000 2,000500 Feet City Limit Future Land Use Low Density Residential Low/Medium Density Residential Medium Density Residential High Density Residential Neighborhood Commercial Commercial Downtown Mixed Use Industrial Mixed Use Institutional Research, Development Park Park, Rec or Open Space Marina Wetland Open Water ROW Future Land Use Plan Figure 7.4: New Mixed Use Land Category PLAN OF STILLWATER Chapter 7 : Economic Development 7-13 initiatives. The following section provides a brief discussion of the tools currently available to the city. Overview of Statutory Authority Every statutory power contains a unique set of authorizations and restrictions. Understanding these provisions is a key to effective use. In some cases, the city may have several options. For example, public improvements can be financed with special assessments, special service districts, housing improvement areas, tax abatement, and tax increment financing. Some key sources of statutory authority come from the following: • Constructing public improvements and levying special assessments – Chapter 429 • Constructing, operating, and maintaining water, sanitary sewer and storm water utility systems – Section 444.075 • Creating and using special service districts – Sections 428A.01 through 428A.101 • Creating and using housing improvement areas – Section 428A.11 • Establishing and using tax increment financing districts – Sections 469.174 through 469.1791 • Making and using tax abatement levies – Sections 469.1812 through 469.1815 • Powers granted to cities through housing and redevelopment authorities – Sections 469.001 through 469.047 • Powers granted to cities through economic development authorities – Sections 469.090 through 469.1081 • Lease financing for real and personal property – Section 465.71 These statutes are available on the Internet at www. revisor.leg.state.mn.us/stats. Finance Tools Economic development actions require a framework for financial decision-making. The investment of public dollars to achieve economic development objectives should be guided by several key principles: • Financial resources are limited. The city has limited funding to apply to economic development initiatives, so the use of resources must be targeted to achieve the greatest effect on the community. • Financial decisions require long-term perspective. The current use of financial resources may reduce monies available in the future. In evaluating short-term opportunities, it is important to question the long-term impact on community development. • Public funds should lead to private investment. While this section focuses on public finance actions, economic development cannot become reality without private investments. The use of public funds should be targeted to actions that encourage private investment in Stillwater. A complete examination of the tools available to the city is not possible in this document, but providing an overview of the most commonly used finance tools is helpful. This discussion focuses on the highlights of those tools. 7-14 PLAN OF STILLWATER Chapter 7 : Economic Development Tax Increment Financing Tax Increment Financing (TIF) is the primary development finance tool available to Minnesota cities. TIF is simple in concept, but complex in its application. Through TIF, the increased property taxes created by new development (or redevelopment) are captured and used to finance activities needed to encourage the development. Only the increased amount of property taxes is captured. The amount of taxes generated by property as it existed (referred to as the “base” condition), continues to be distributed as it previously had been distributed. When the property is redeveloped only the amount of taxes generated over and above the base condition is “captured.” This “capturing” is shown graphically below. The challenge in using TIF lies with the complex and ever-changing statutory limitations. Uses Tax Increment Financing can be used to finance all of the important implementation actions facing the City: land acquisition, site preparation, parking, and public improvements. In addition, TIF creates a means to borrow money needed to pay for redevelopment costs. The City can issue general obligation bonds without an election if 20 percent or more of the debt is supported by tax increment revenues. These bonds are not subject to any debt limit. Type of TIF Districts The implementation of the plan may require the creation of one or more new TIF districts. The following overview highlights some of the considerations in creating a TIF district. The ability to meet the statutory criteria for establishing a district is a key to the use of TIF. Four types of TIF districts have an application to the plan. • Redevelopment: A redevelopment TIF district has two basic criteria. (1) Parcels consisting of 70 percent of the area of the district are occupied by buildings, streets, utilities, or other improvements. To be occupied, not less than 15 percent of the parcel’s area must be covered by the improvements. And (2), more than 50 percent of the buildings, not including outbuildings, are structurally substandard to a degree requiring substantial renovation or clearance (as defined by statute). A redevelopment district may consist of noncontiguous areas, but each area and the entire area must meet these criteria. • Renewal and Renovation: A renewal and renovation TIF district requires similar, but reduced criteria. The following three factors must exist. (1) The same 70 percent occupied test applies. (2) The minimum amount of structurally substandard buildings drops to 20 percent. And (3), 30 of the other buildings require substantial renovation or clearance to remove existing conditions such as: inadequate street layout; incompatible uses or land use relationships; overcrowding of buildings on the land; excessive dwelling unit density; obsolete buildings not suitable for improvement or conversion; or other identified hazards to the health, safety, and general well being of the community. • Housing: A housing TIF district is intended to contain a project, or a portion of a project, intended for occupancy, in part, by persons or families of low and moderate income.INCREASED ASSESSED VALU E FRO M D EV ELO PMENTASSESSED VALUE (AV)BASE ASSESSED VALUE TERMINATEDCREATEDVALUE CAPTURE PERIOD INCREMENTAL ASSESSED VALUE POST VALUECAPTUREASSESSEDVALUE Value Capture - How it Works PLAN OF STILLWATER Chapter 7 : Economic Development 7-15 • Economic Development: Economic development TIF districts focus on industrial development. These districts can be established when the city finds it is necessary to (1) discourage commerce, industry, or manufacturing from moving their operations to another state or municipality; (2) increase employment; or (3) preserve and enhance the tax base of the state. The TIF Act defines specific types of industrial uses that are eligible for the establishment of this form of district. The primary uses are manufacturing, warehousing, research and development, and telemarketing. Limitations State Law imposes a variety of restrictions on the use of TIF. Several of these restrictions are particularly relevant to implementation of the Plan. Use of Tax Increments The use of tax increment revenues is controlled by both State Law and by local plan. State Law sets forth specific limitations based on the type of TIF district. These limitations generally tie back to the original criteria used for establishing the district. For example, at least 90 percent of the revenues derived from tax increments from a redevelopment district or renewal and renovation district must be used to finance the cost of correcting conditions that allowed for the designation of the district. This limitation requires careful consideration of the links between individual projects and the community development initiatives. The use of tax increments must also be authorized by a tax increment financing plan adopted by the city. Pooling The term pooling refers to the ability to spend money outside of the boundaries of the TIF district. For redevelopment districts, not more than 25 percent of revenues can be spent on activities outside of the TIF district. The limit is 20% for all other districts. Monies spent on administrative expenses count against this limit. This limit reduces the ability of TIF to pay for area-wide improvements and to use excess revenues to support other development sites. Timing Constraints Timing factors must be considered in creating a TIF district. Establishing a district too far in advance of actual development may limit future use. Within 3 years from the date of certification, the city must undertake activity within the district. The statutory criteria of activity includes issuance of bonds in aid of a project, acquisition of property, or the construction of public improvements. Without qualifying activity, no tax increment can be collected from the district. Within 4 years from the date of certification, the city or property owners must take qualifying actions to improve parcels within the district. All parcels not meeting the statutory criteria must be removed (knocked down) from the district. Upon future improvement, any parcel so removed may be returned to the district. After 5 years from the date of certification, the use of tax increment is subject to new restrictions. Generally, tax increment can only be used to satisfy an existing debt and contractual obligations. The geographic area of the TIF district can be reduced, but not enlarged, after 5 years from the date of certification. Existing TIF Districts in Stillwater: There are six active TIF Districts in Stillwater as shown on Figure 7.5 Tax Increment Financing Districts and described below: • TIF District #8, Anchobaypro, Inc. This housing district was established in 2000 and has a 25-year duration. Pay-as-you-go increment was used to aid in financing a portion of tax increment eligible costs for the Long Lake Villas low to moderate income multifamily housing project. • TIF District #9, Curve Crest Villas. This housing district was established in 2002 and has a 25-year duration. Increment was 7-16 PLAN OF STILLWATER Chapter 7 : Economic Development used to aid in reimbursement of increment eligible costs to the developer. Curve Crest Villa is a low to moderate income multifamily rental project. • TIF District #10, Scattered Site Housing Projects. This redevelopment district was established in 2004 and has a 25-year duration. Two pay-as-you-go projects funded include Terra Springs and Lofts of Stillwater for reimbursement of tax increment eligible costs. • TIF District #10 Expansion. The City expanded TIF District #10 to additional properties in the Downtown Area. This redevelopment district expansion will be used to fund a new parking ramp to serve the Downtown. • TIF District #11 - 13 Development and Parking Ramp. The TIF funding has been used to facilitate the redevelopment of the Joseph Wolf Building into a boutique hotel, a restaurant and retail space, in addition to a parking ramp located on City property. Tax Abatement Tax abatement acts like a simpler and less powerful version of TIF. With TIF, the city controls the entire property tax revenue from new development. Under the abatement statute (Minnesota Statutes, Sections 469.1812 through 469.1815), the city, county, and school district have independent authority to grant an abatement. Uses Abatement in Minnesota works more like a rebate than an abatement. The city (and other units abating taxes) adds a tax levy equal to the amount of taxes to be abated. The revenue from the abatement levy can be returned to the property owner or retained and used to finance development activities. Tax abatement can be used to finance the key redevelopment actions in the downtown: land acquisition, site preparation, and public improvements. Tax abatement is perhaps best suited as an incentive for reinvestment in existing property. While TIF deals with only the value from new development, abatement can apply to both new and existing value. This power provides the means to encourage rehabilitation of commercial buildings and housing. The City could agree to abate all or part of the municipal share of taxes to encourage reinvestment tied to the plan. The statute grants the authority to issue general obligation bonds supported by the collection of abated taxes. The proceeds of the bonds may be used to pay for (1) public improvements that benefit the property, (2) land acquisition, (3) reimbursement to the property owner for improvements to the property, and (4) the costs of issuing the bonds. These bonds can be issued without an election and are not subject to the debt limit. Example Tax Abatement Project City of Woodbury: I-94 South Frontage Road East of Radio Drive The City of Woodbury used tax abatement to finance the frontage road, east-bound I-94 access ramp and other roadway enhancements in the Radio Drive/ Hudson Road, I-94 region due to increases in population and vehicle traffic. The City felt that such improvements would improve traffic flow on Radio Drive and Woodbury Drive, which are both county roads, as well as provide better access to the freeway system. The City believed that in times of shortage of federal and state financing, tax abatement was the most practical and effective system of improving county roads. Total Project Cost: $6.6 Million City Tax Abatement Bonds $4.8 Million Project Timeline July 2007 through October 2008 Figure 7.5: TIF Districts in Stillwater South Twin Lake Lake McKusick Brown's Creek St. Croix RiverLily Lake Long Lake S William StTax Increment Financing (TIF) District 800 0 800 1,600 Feet October 1, 2008 I:/510/51007001/gis/maps/tif district.mxd 12 15 5 66 24 95 36 64 64 96 95 36 5 5596 TIF Districts TIF #1 TIF #4 TIF #6 TIF #8 TIF #9 TIF #10 -#13 City Limit Right-of-Way Open Water PLAN OF STILLWATER Chapter 7 : Economic Development TIF #11 - #13 Afton Andover Anoka Apple Valley Arden Hills Bayport Birchwood Village Blaine Bloomington Brooklyn Center Brooklyn Park Burnsville CentervilleChamplin Circle Pines Columbia Heights Columbus Coon Rapids Cottage Grove Crystal Dellwood Eagan Edina Falcon Heights Forest Lake Fridley Gem Lake Golden Valley Grant Ham Lake Hilltop Hopkins Hugo Inver Grove Heights Lake Elmo Lake Saint Croix Beach Lakeland Lakeland Shores Landfall Lauderdale Lexington Lilydale Lino Lakes Little Canada Mahtomedi Maplewood Marine on Saint Croix Mendota Mendota Heights Minneapolis Mounds View New Brighton New Hope Newport North Oaks North Saint Paul Oak Park Heights Oakdale Osseo Pine Springs Ramsey Richfield Robbinsdale Rosemount Roseville Saint Anthony Saint Louis Park Saint Marys Point Saint Paul Saint Paul Park Savage Scandia Shoreview South Saint Paul Spring Lake Park Stillwater Sunfish Lake Vadnais Heights West Saint Paul White Bear Lake Willernie Woodbury ")5 ")36 ")244 ")96 ")995A ")95 ")97 ")95 £¤61 £¤61 §¨¦494 §¨¦35 §¨¦694 §¨¦94 River Falls Somerset Somerset River Falls Star Prairie North Hudson Roberts RobertsHudson New Richmond New Richmond µ0 21,000 42,00010,500 Feet City Limit Where Workers Live Workers/Sq. Mi. < 21 22 - 71 72 - 155 156 - 272 > 273 Where Stillwater Workers Live This page intentionally left blank. PLAN OF STILLWATER Chapter 7 : Economic Development 7-19 Limitations State law places several important limitations on the use of tax abatement: • In 2003, the State Legislature increased the total taxes abated by a political subdivision in any year to an amount that may not exceed the greater of 10 percent of the current levy or $200,000. • If one political subdivision declines to abate, then the abatement levy can be made for a maximum of 15 years. If the city, county, and school district all abate, then the maximum period drops to 10 years. • The duration of the abatement can be extended to 20 years if it is for a “qualified business” as defined in the statute. This provision is targeted towards industrial development applications. • Taxes cannot be abated for property located within a tax increment financing district. Special Assessments Public improvements are often financed using the power to levy special assessments (Minnesota Statutes Chapter 429). A special assessment is a means for benefiting properties to pay for all or part of the costs associated with improvements, and to spread the impact over a period of years. This tool can be applied to both the construction of new improvements and the rehabilitation of existing improvements. Uses Special assessments can be used to finance all of the public improvements resulting from the plan. Eligible improvements include sanitary sewer, water, storm sewer, streets, sidewalks, street lighting, park, streetscape, and parking. Special assessments provide a means to borrow money to finance public improvements. Chapter 429 conveys the power to issue general obligation improvement bonds to finance the design and construction of public improvements. Important factors in the use of improvement bonds include: • A minimum of 20 percent of the cost of the improvement must be assessed against benefited properties. • Beyond the 20 percent threshold, any other legally available source of municipal revenue may be used to pay debt service on improvement bonds. • Improvements bonds are not subject to any statutory debt limit. • Improvement bonds may be issued without voter approval. Limitations The amount of an assessment cannot exceed the benefit to property as measured by increased market value. There are also practical considerations. In growth areas, cities must decide how to allocate costs between current and future development. Assessment policies must consider how to make this allocation and the financial resources needed to carry future costs until development occurs. For reconstruction, the challenge becomes determining how much benefiting property owners should pay for enhancing an existing improvement. Within this limitation, several factors will shape the amount of the assessment. • The amount of the assessment must be 20 percent or more of the improvement cost to allow the issuance of bonds. • Local improvement policies and/or decisions made on previous projects often create parameters for assessments. Likewise, assessment decisions should be made with consideration of the potential implications for future similar projects. • The assessment must strike a balance between equity and feasibility. Properties that benefit from improvements should pay a fair share of the costs. The assessment must be affordable for both the property owner and the city. Reducing the assessment to the property requires the city to allocate other revenues to the project. 7-20 PLAN OF STILLWATER Chapter 7 : Economic Development Uses A special service district can be applied to both commercial and industrial areas. The district can provide an alternative means of financing the construction of any of the public improvements discussed previously with special assessments. The service district approach avoids the benefits test imposed by special assessments; the test for the district is that the amount of service charges imposed must be reasonably related to the special services provided. The costs of parking, streetscape, or storm water improvements, for example, may be better spread across a district than through assessments to individual properties. An important use of the special service district is the maintenance of public improvements. Some of the improvements described in the plan require a level of maintenance above the typical public improvement. Items such as banners and planted materials must be maintained and replaced. Higher levels of cleaning and snow removal may be needed. Without a special service district, these costs are typically borne through the General Fund of the city or a private group such as a chamber of commerce. Limitations The use of a special service district is subject to some important constraints: • The process to create a special service district and to levy taxes must be initiated by petition of property owners and is subject to owner veto. The use of a special service district requires a collaboration of property owners and the city. There are two separate steps in the process: (1) adoption of an ordinance establishing the service district and (2) adoption of a resolution imposing the service charges. Neither step can be initiated by the city; the city must be petitioned to undertake the processes to create a special service district and to impose service charges. At a minimum, the petitions must be signed by owners Special Service District A special service district is a tool for financing the construction and maintenance of public improvements within a defined area (see Table 7.12 for examples). Minnesota Statutes, Sections 428A.01 through 428A.10 govern the creation and use of special service districts. A special service district provides a means to levy taxes (service charge) and provide improvements and service to a commercial area. Table 7.12: City Service Districts City Service Funded by District Bloomington Provide street furniture, sidewalks, plowing, sweeping, irrigation, and plants. Crookston Fund Downtown storefront improvements and citywide flood control. Duluth Provide services related to safety, cleanliness, marketing, and physical enhancements to the downtown waterfront district. Eagan Provide signage, landscaping, public parking facilities, and promotion of Cedervale Mall. Lakeville Provide flowerpots, marketing programs, festivals and events, cleaning, maintenance, signage, and public art. Little Falls Fund multi-purpose facility for farmer’s market and retail promotion. Mankato Provide and maintain free parking facilities for customers of business district. Mendota Heights Operate and maintain additional streetlights. Minneapolis Provide additional decorative lighting, banners, security, cleaning, snow and ice removal, and landscaping. New Ulm Provide free on-street and off-street parking. Roseville Fund parking lot improvements, landscaping, lighting replacement, and improvements to waste removal. St. Louis Park Provide general upkeep, snow removal, landscaping, lighting, banners, and waste removal. White Bear Lake Promote and manage district as a shopping or trade area. PLAN OF STILLWATER Chapter 7 : Economic Development 7-21 representing 25 percent of the area that would be included in the district, and 25 percent of the tax capacity subject to the service charge. • The actions of the City Council to adopt the ordinance and the resolution are subject to veto of the property owners. To veto the ordinance or the resolution, objections must be filed with the City Clerk within 45 days of initial City Council action to approve. The objections must exceed 35 percent of area, tax capacity, or individual/business organizations in the proposed district. • The service charge applies solely to non- residential property. State Law limits the application of a service charge to only property that is classified for property taxation and used for commercial, industrial, or public utility purposes, or is vacant land zoned or designated on a land use plan for commercial or industrial use. Other types of property may be part of the service district, but may not be subject to the service charge. Several cities of varying sizes have utilized special service districts as a tool to fund streetscape and other types of amenities as illustrated in the chart below. Some of these service districts are no longer running, however the table provides some good ideas of what it can be used for. Parking Benefits District Typically revenue generated from parking meters automatically reverts back to a municipality’s general fund and the place where the meter revenue is collected sees no direct benefit. A parking benefits district is a designated area in which the parking revenues raised are then reinvested back into the district for a wide range of improvements. The funds may be used to purchase smart parking meters, walking and biking infrastructure, or to pay for improvements to the public realm, such as street trees, benches, and lighting. Typically meter revenue is reinvested in the district while revenue generated from parking violations is used to fund further enforcement. Parking benefits districts not only create a new stream of funding for district improvements, but they also can help better manage parking supply and demand. Parking benefits districts support economic development and neighborhood revitalization efforts. This tool is attractive because, instead of using local tax revenue or assessments for improvements, parking benefits districts capture money from visitors. Business owners are more likely to report parking violations within parking benefits districts because violations result in lost revenue for the district. Uses A parking benefits district can be applied to Stillwater’s downtown district. This tool can be used to finance streetscape improvements, sidewalk maintenance, or the maintenance and development of parking ramps. Improvements made with collected revenue can be accompanied by a special badge or sign indicating the improvement was made with parking revenue dollars. Additionally, parking meters can include a brief message informing customers of how their parking payments are being spent. An example of parking meter revenue being spent where it is collected. 7-22 PLAN OF STILLWATER Chapter 7 : Economic Development Housing Improvement Area The City has the power to establish a special taxing district to make improvements in areas of owner-occupied housing (Minnesota Statutes, Sections 428A.11 through 428A.21). The housing improvement area is similar in concept to the special service district. It is a special taxing district that can be used to finance a variety of improvements. However, there is an important administrative difference with the housing improvement area. The City has the ability to assign the procedures for imposing “fees” and administering the area to another “authority,” such as the HRA or EDA. A housing improvement area is a defined collection of parcels. The area may cover a single housing project or a broader area within the downtown. The city has the power to levy a “fee” on the housing units in the area. This fee may work like a property tax or may be spread using another approach determined by the city. The fee can be collected through the property tax system. Uses The statute allows each city to define the nature of housing improvements. This tool can be used to finance any form of public improvement, including streetscape, parking, and trails. A housing improvement area can also be used for private improvements that are part of new or existing housing developments. Limitations The city does not have the unilateral power to establish a housing improvement area. The process must be initiated by petition of property owners. In addition, the actions to establish the area and impose the fees are subject to veto by the property owners. These potential complications become moot if the area is set up at the beginning of the development process. Typically, there is a single property owner at this stage of the process. In existing neighborhoods, this tool allows residents to take the initiative to improve local parks. Utility Revenues The city operates three municipal utilities: water, sanitary sewer and storm water. The revenues from the operation of these utilities are available to pay for capital improvements in support of community development initiatives. State Law (Minnesota Statutes, Section 444.075) gives the authority to pledge these revenues to general obligation bonds for utility system improvements. Street State Aid The city receives state aid for the construction and maintenance of the local streets. This aid can only be used for streets designated for inclusion in the local state aid street system. These revenues can also be pledged to pay debt service on bonds issued for the construction and maintenance of state aid streets (M.S. 162.18). Street Reconstruction A relatively new municipal power is the ability to issue bonds to finance street reconstruction projects (M.S. 475.58). To use this authority, the streets to be reconstructed must be part of a “street reconstruction plan” that describes the streets to be reconstructed, the estimated costs, and any planned reconstruction of other city streets over the next five years. The issuance of the bonds must be approved by a vote of all of the members of the governing body following a public hearing. The issuance is subject to a reverse referendum provision. The city must hold an election prior to issuance if petitioned by voters within 30 days of the public hearing. Unlike most municipal debt, these bonds are subject to the debt limit. Lease Revenue Bonds Public buildings can be financed through the issuance of lease revenue bonds. This tool combines two pieces of statutory authority. A housing and redevelopment authority (or EDA using these powers) has the ability to issue revenue bonds to finance projects pursuant to a redevelopment PLAN OF STILLWATER Chapter 7 : Economic Development 7-23 plan. These projects can include the construction of public buildings. Most HRAs do not, however, have sufficient revenues to secure these bonds. A city can provide this revenue through a lease purchase agreement with the HRA. The authority for the lease comes from Minnesota Statutes, Section 465.71. In considering the use of lease revenue bonds, several factors should be noted: • The lease is not a long-term, binding obligation in the form of most city bond issues. The lease is subject to a statutory “annual appropriation” pledge. In simple terms, the city council has the right not to appropriate funds to pay the lease in any fiscal year. This action would, however, mean forfeiture of the facilities financed with the lease. • If the amount of the lease exceeds $1,000,000, then the obligation is subject to the statutory debt limit. This limit equals 2 percent of the taxable market value of property in Stillwater. • A levy by the city, to make payments on lease revenue bonds, qualifies as a special levy under the current levy limit system. A levy to pay debt of another political subdivision is an eligible special levy. Although a HRA is a part of city government, it is technically a political subdivision. Capital Improvement Bonds Capital improvement bonds are the newest capital finance power for Minnesota cities. This authority was granted by the State Legislature in 2003. Through this authority, the City can issue bonds to finance the acquisition or betterment of a city hall, a public safety facility, or a public works facility. The statute does not define the precise nature of public safety or public works facilities. This debt authority is subject to several procedural requirements and limitations: • The bonds must be issued pursuant to an approved capital improvement plan. • The issuance is subject to a reverse referendum petition. • The total principal and interest due in any year on all outstanding capital improvement bonds may not equal or exceed 0.05367 percent of taxable market value of the city. 7-24 PLAN OF STILLWATER Chapter 7 : Economic Development This page intentionally left blank.