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Home My WebLink About00-40 Resolution No. 00-40 RESOLUTION ADOPTING A SPECIAL SERVICE AREA DEVELOPMENT FINANCING POLICY BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that it hereby adopts a Special Service Area Development Financing Policy dated February 9, 2000 for the use of special service area financing as a means of funding developer driven capital improvements, a copy of which is attached. s/ Ed Schock Ed Schock, Mayor Presented: February 23 , 2000 Adopted: February 23 , 2000 Omnibus Vote : Yeas 6 Nays 0 Attest : s/ Dolonna Mecum Dolonna Mecum, City Clerk February 9, 2000 CITY OF ELGIN SPECIAL SERVICE AREA DEVELOPMENT FINANCING POLICY INTRODUCTION The City of Elgin will consider requests to issue limited obligated public bonds to finance certain eligible public improvements. The type of bonds that shall be considered are special service area bonds. The proposed financing must serve a public purpose, be consistent with these and other development policies adopted by the City of Elgin and allowed by the appropriate provisions of state law. The bonds contemplated by these policies will be non-recourse to the City of Elgin and the project proponent must provide sufficient collateral to insure a safe and prudent financing. 1 . The City of Elgin would sell bonds in a predetermined amount and identify a specific public improvement as the purpose of the bond sale. 2 . Property owners within the area benefitted by the bond sale would be assessed an additional property tax, the proceeds from the tax would go toward the retirement of ( the bonds . Such a funding mechanism provides a developer with financing at an advantageous interest rate . Eligible public improvements may include: 1 . Streets, sidewalks, lighting and traffic signals 2 . Sanitary sewer improvements 3 . Storm drainage and flood control facilities 4 . Water line improvements Funding preference for the above mentioned improvements shall be given to external improvements to the proposed project site . However, consideration will begin to funding internal public improvements (see list above) if the proposed project is of a significant magnitude. Each project shall be evaluated on a case by case basis . In order to receive financial assistance, the proposed project must exceed typical or routine standards for a project development . The policies and Criteria for project evaluation are identified in attachment A. Only a portion of the funding required to construct the public improvements shall be provided through the bond mechanism. SSA funding assistance shall range from 25% to 750 of the total project costs . The funding level will be determined by a staff review, with Council approval . Adherence to the evaluation criteria stated in Exhibit A will enhance the rating and funding level for a project (location, jobs, public benefits, expansion potential, tax base enhancement) . Costs eligible for financing may include: engineering fees, bond fees, bond reserves, capitalized interest and administrative fees . EXCEPTIONS An exception to the policies may be granted for projects which create significant employment opportunities or produce significant net tax revenues for the City. CREDIT QUALITY REQUIREMENTS FOR BOND ISSUES There are six general issues that should be evaluated related to the credit quality of a proposed conduit financing. These issues , are (i) the feasibility of the project, (ii) the capability and credit worthiness of the developer, as determined by the City' s financial advisor, (iii) the investment in the project subordinate to the bonds, (iv) the debt service the developer is estimated to be obligated for prior to the development of the project, (v) the value of the property compared to the bonded indebtedness supported by the property, and (vi) the structure of the financing. The City may consider exceptions to the credit policies for bond issues that do not --represent an unusual credit risk, either due to credit enhancement or other reasons specified by the City. Satisfaction of these creditworthiness issues does not mandate issuance by the City of any debt . The City Council reserves the right to decide on a case-by-case basis. FEES The City requires a minimum application fee of $5, 000 to accompany any written request for financing. Such a fee is non- refundable and shall be used for the payment of City solicited financial advice and review by City staff . Any costs incurred by the City related to the financing of a proposed project in excess of the application fee shall be the responsibility of the applicant. Upon passing of any financing package, the developer shall be required to pay any and all additional fees required by City ordinance for development projects. ATTACHMENT A SPECIAL SERVICE AREA Funding Policies & Criteria Policies The following policies should be applied when development incentive requests are considered within the City of Elgin: 1. The City will not consider any requests for waiver of the following fees or charges : construction permit fees, utility rates, development impact fees, recapture fees, and other fees as prohibited by City ordinances . 2 . Incentives relating to local share property tax rebate and sales tax rebate shall only be considered in such instances where established incentive programs provide for such relief . (Center City Enterprise Zone benefits and Cook County Auto Dealership Program. ) 3 . The City limits its participation in incentive funding to significant residential adaptive reuse projects and industrial/commercial projects . 4 . Any incentive package shall be contained within a development agreement. 5 . All incentives shall be performance-based with established performance criteria. 6 . If performance goals are not met, all or a portion of the incentive funding shall be required to be returned to the City. Evaluation Criteria Assistance Requests shall be evaluated based upon the following criteria: 1. The potential for receiving economic development incentives is available to private businesses based upon the following criteria: A. Location of development. B . Types and number of jobs created. C. Tax benefit to the City. 2 . The development must be something that is of a public benefit to the City. 3 . The impact of a proposed development on existing businesses shall be evaluated when considering the use of incentives for the new development. 4 . The assisted business must have the potential to grow or expand and should have the potential of attracting other related positive development . 5 . It is the City' s preference that incentive funding be directed toward public improvements whenever possible . (See footnote 2 . ) 6 . The development must enhance the tax base. 7 . Well-paying, long-term jobs must be associated with the proposed project (with a wage rate at least 25o above the average of wage rate for the community) . 8 . The amount of the incentive must be recaptured within a reasonable time period based upon the industry. The recapture period for projects located within the Center City may exceed the recapture period for assistance provided in other areas of the City. L. `0 OF EtcLmwi �� City of Elgin Agenda Item No. ° February 9, 2000 TO: Mayor and Members of the City Council FROM: Joyce A. Parker, City Manager SUBJECT: Special Service Area Economic Development Incentive PURPOSE The purpose of this memorandum is to present to the Mayor and City Council Members a policy recommendation for the use of Special Service Area Bonds to finance developer driven public improvements. BACKGROUND The developers of the Chicago White Metal Casting project which is located on an 80 acre site at Big Timber Road and Tyrell Road have requested that they be permitted to use Special Service Area Bond finances to fund the initial on site capital improvements; sanitary sewer lines, water mains, streets and sidewalks . The SSA bond financing program would work as follows : 1 . The City of Elgin would sell bonds in a predetermined amount and identify a specific public improvement as the purpose of the bond sale . 2 . Property owners within the area benefitted by the bond sale would be assessed an additional property tax, the proceeds from the tax would go toward the retirement of the bonds . While the City of Elgin has issued SSA bonds to finance public improvements, such bonds have never been issued to finance developer driven public improvements . Numerous other communities within the Chicago Metropolitan Area do use this mechanism as an economic development incentive tool . Aurora, Huntley, and Crystal Lake are examples of communities using SSA bonds for economic development purposes . City staff in conjunction with the Greater Elgin Chamber of Commerce have reviewed the request for use of SSA bonds for funding development related improvements and are suggesting that the attached program and incentive policy be initiated. A summary of the provisions in the proposed policy follows : Special Service Area Development Financing Incentive February 9, 2000 Page 2 I . General Terms A. The financing must serve a public purpose and be consistent with other development policies adopted by the City. B . Bonds will be non-recourse to the City and the developer must provide sufficient collateral to insure safe and prudent funding. The City would not be responsible for the repayment of the bonds . II . Facility Financing Priorities A. Improvement must provide a benefit to the city serving not only the future beneficiaries of the particular development, but also current city residents . B. The improvements are found by the city to provide sufficient public benefit . C. The improvements must have a useful life of not less than 10 years . D. Eligible public improvements . 1 . Streets, sidewalks, lighting and traffic signals. 2 . Sanitary sewer improvements. 3 . Storm drainage and flood control facilities . 4 . Water line improvements . E . Funding preferences . 1 . External improvements to the proposed project site. 2 . Internal improvements if project is of a significant magnitude . 3 . Case by case review. F. Funding assistance may range from 25% to 75% of the project cost . G. Exceptions granted for projects which create significant employment opportunities or produce significant net tax revenue for the city. III . Bond Credit Quality Requirement Issues A. Feasibility of the project . B . Capability and credit worthiness of the developer. C. Investment in the project in addition to the bonds . D. Debt service the developer is obligated for prior to the development of the project . E . Value of the project compared to bonded indebtedness supported by the property. F . Structure of the financing. IV. Fees fek A. $5, 000 minimum application fee . Special Service Area ra.... Development Financing Incentive February 9, 2000 Page 3 B. Any city cost related to financing in excess of application fee such as, (bond counsel fees, financial information development and review) is the applicants responsibility. COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED Chamber of Commerce . ( IN• CIAL IMPACT All costs incurred by the city relating to the review of an application for SSA financing will be covered by either the $5 , 000 application fees or by additional fees paid by the applicant after the city has determined that additional payment is required. The bonds contemplated by this incentive will be non-recourse to the City of Elgin and the applicant must provide sufficient collateral (e.g. letter of credit) to ensure principal and interest are repaid. The issuance of these bonds will not affect the City' s debt policy. sciTial /LEGAL IMPACT None. ALTERNATIVES 1 . Approve the use of Special Service Area Financing as a means of funding developer driven site development capital improvements . 2 . Reject the use of SSA financing for developer driven site capital improvements . 3 . Modify the incentive that is being proposed. RECOMMENDATION Staff recommends that the concept of using Special Service Area financing as a means of funding developer driven capital improvements be approved and that the policy being proposed be accepted and approved. ��ectfully bmi : 4 - ' , ) 4.____ tow J•Irce • . Parker City Manager Attachment