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HomeMy WebLinkAboutArticle 23 TIF-MOTION FROM MARK REES Article 23 Tax Increment Financing Plan 1600 Osgood Street (Formerly Lucent Technologies MOTION: Moved that the Town vote to approve a proposed Tax Increment Financing Plan for 1600 Osgood Street (Hereafter known as the TIF Plan) and authorize the Board of Selectmen to reach an Agreement with the owner of the property, for a parcel of land and buildings thereon. The property shall be designated as a Tax Increment Financing Zone, which, as defined in the TIF Plan, presents exceptional opportunities for increase economic development. As outlined in the proposed TIF Plan, the Town shall provide for an exemption of property taxes or a percentage thereof based on the incremental increase in property value in assessed valuation of the property for a period of not more than 20 years in accordance with the requirements of Massachusetts General Laws Chapter 23A, Section 3E, Chapter 40, Section 59, and Chapter 59, Section 5 and pursuant to 760 CMR 22.00 and 402 CMR 2.00. In return for such tax benefits, in accordance with the proposed TIF Plan, the owner of the property shall ensure at the above property the location and expansion of manufacturing, research and development or other like uses which increase job creation, provide higher property values, and retain and/or expand industry in the Town and the Commonwealth, and that the Town approve a Tax Increment Plan (TIF) with 1600 Osgood Street, LLC that has the following components: 1. Term: 20 years 2. Schedule: The following exemption percentages will apply: Year 1: 90% Year 6: 70% Year 11: 25% Year 16: 1% Year 2: 90% Year 7: 65% Year 12: 25% Year 17: 1% Year 3: 85% Year 8: 60% Year 13: 15% Year 18: 1% Year 4: 80% Year 9: 55% Year 14: 10% Year 19: 1% Year 5: 75% Year 10: 50% Year 15: 5% Year 20: 1% 3. Acceptable Uses: The TIF will remain in effect as long as at least 70% of the total net occupied space is occupied by firms engaged in commercial or manufacturing uses. Warehousing or distribution uses are outside of the town's definition of commercial or manufacturing uses. The town will consider as a commercial/industrial use those warehousing or distribution uses that are appurtenant and essential to a user predominantly engaged in commercial or industrial uses at the site, defined on a square foot basis. 4. TIF Zone: The TIF Zone will consist of Assessors Map 34, Parcel 17. Any new buildings on Parcel 17 would receive tax benefits associated with the TIF in the event that the Town of North Andover Board of Selectmen, and the Planning Board, at their sole discretion, approves this building as contributing net economic benefit to the town without significant adverse impact. 1600 Osgood Street, LLC would petition these Boards to obtain their approval. Such approvals would be outside and independent of any other approvals that the town would consider in its ordinary process of reviewing and approving real estate development. 5. TIF Commencement: The TIF would commence in FY2006; pending approval from the Commonwealth that such a commencement is compatible with TIF regulations. 6. Other Conditions: a. Until November 1, 2007, at no cost to the town, 1600 Osgood Street, LLC will make available and maintain the recreation fields currently utilized by the official Town of North Andover youth leagues, specifically soccer and little league. After this initial period, the use of the fields will renew on an annual basis so long as the fields remain. b. 1600 Osgood Street, LLC, will encourage future tenants to join the Merrimack Valley Transportation Management Association. c. 1600 Osgood Street, LLC, for a period of up to 10 years, shall provide 5,000 square feet of office space for municipal purposes rent-free. In addition office furniture can be made available for use within the space. The exact location of said office space to be determined upon further review of the space available at the time of the request. In addition, 1600 Osgood Street, LLC will allow the town to use the auditorium. And that the Board of Selectmen are authorized to enter into any and all agreements and submit any and all applications to the Commonwealth of Massachusetts necessary to implement this TIF plan. ARTICLE 23 WHAT IS TAX INCREMENT FINANCING? Article 23 proposes town meeting approval the use of the Economic Development Incentive Program (EDIP) for the former Lucent Property on Rt. 125. To stimulate business growth and foster job creation, the state has created the EDIP, designed to attract and retain businesses in specific areas, such as the former Lucent property. The EDIP provides for Tax Increment Financing (TIF), for which Article 23 seeks approval for this property. The town has approved two TI F's in previous years. What is Tax Increment Financing (TIF)? Tax Increment Financing allows municipalities to provide incentives to stimulate job-creating development. The municipality and the property owner agree to a property tax exemption based on a percentage of the assessment added through new construction or significant improvement for a period of no more than twenty years. The town's tax rate is unchanged by the TIF. For example, if a property has an existing value of$1 million, which then increases to $1.5 million during the TIF period, the percentage of the property tax exemption applies only to the increment in value, in this case, $500,000. The property owner always pays the full tax on the existing assessment of$1 million. The exemption percentage is defined I a negotiated agreement between the municipality and the property owner. The Commonwealth must approve all TIF's. A TIF thus reduces property taxes for property owners who invest in their property, increasing its value and creating economic activity and jobs. In addition to reductions in property taxes, property owners are exempt from personal property taxes and can receive a state investment tax credit. For multi-tenant properties like the Lucent, the owner passes the tax savings onto tenants, making the property more attractive on the market. How does the TIF proposed in Article 23 benefit North Andover? The former Lucent property is the largest commercial property in the town. As Lucent reduced its operations at the site, its assessed value declined from $50 million to $20 million, shifting the tax burden from commercial property to homeowners. The TIF benefits the town in several ways: ➢ The TIF can accelerate redevelopment of the property, eventually increasing its contribution of property taxes. A very large building designed for a single user, the building requires substantial investment to make it usable for and attractive to tenants. The owner, Ozzy Properties, conservatively estimates $20 million. The TIF supports this necessary investment. ➢ The TIF makes the property more competitive. The real estate market is slow in the Merrimack Valley and Massachusetts overall. The TIF reduces tenants' occupancy costs and provides tax credits, making the property more appealing financially. ➢ The TIF provides the town with more control. The terms of the TIF include provisions limiting warehousing uses and new development on the site, in addition to the zoning controls that the town already exercises. ➢ The TIF provides additional benefits to the town, including use of the athletic fields through 2007 and 5,OOOsf of free office space for 10 years, relieving the town of paying rent for needed office space in the future. ➢ Despite a TIF, the town does not lose any of the taxes that the property now pays. Estimated Tax Bills Rec. Prop. Improvements** Tax Bill TIF Base Value* Cumulative Total Value Tax Rate w/o improvements Tax Bill w/o TIF Tax Bill w/TIF Tax Savings 90% $24,158,236 $1,000,000 $25,158,236 $14.28 $344,980 $359,260 $346,408 $12,852 90% $24,158,236 $2,000,000 $26,158,236 $14.28 $344,980 $373,540 $347,836 $25,704 85% $24,158,236 $3,000,000 $27,158,236 $14.28 $344,980 $387,820 $351,406 $36,414 80% $24,158,236 $4,000,000 $28,158,236 $14.28 $344,980 $402,100 $356,404 $45,696 75% $24,158,236 $5,000,000 $29,158,236 $14.28 $344,980 $416,380 $362,830 $53,550 70% $24,158,236 $6,000,000 $30,158,236 $14.28 $344,980 $430,660 $370,684 $59,976 65% $24,158,236 $7,000,000 $31,158,236 $14.28 $344,980 $444,940 $379,966 $64,974 60% $24,158,236 $8,000,000 $32,158,236 $14.28 $344,980 $459,220 $390,676 $68,544 55% $24,158,236 $9,000,000 $33,158,236 $14.28 $344,980 $473,500 $402,814 $70,686 50% $24,158,236 $10,000,000 $34,158,236 $14.28 $344,980 $487,780 $416,380 $71,400 25% $24,158,236 $11,000,000 $35,158,236 $14.28 $344,980 $502,060 $462,790 $39,270 20% $24,158,236 $12,000,000 $36,158,236 $14.28 $344,980 $516,340 $482,068 $34,272 15% $24,158,236 $13,000,000 $37,158,236 $14.28 $344,980 $530,620 $502,774 $27,846 10% $24,158,236 $14,000,000 $38,158,236 $14.28 $344,980 $544,900 $524,908 $19,992 5% $24,158,236 $15,000,000 $39,158,236 $14.28 $344,980 $559,180 $548,470 $10,710 1% $24,158,236 $16,000,000 $40,158,236 $14.28 $344,980 $573,460 $571,175 $2,285 1% $24,158,236 $17,000,000 $41,158,236 $14.28 $344,980 $587,740 $585,312 $2,428 1% $24,158,236 $18,000,000 $42,158,236 $14.28 $344,980 $602,020 $599,449 $2,571 1% $24,158,236 $19,000,000 $43,158,236 $14.28 $344,980 $616,300 $613,586 $2,714 1% $24,158,236 $20,000,000 $44,158,236 $14.28 $344,980 $630,580 $627,724 $2,856 40% 6,899,600.00 9,898,400.00 9,243,660.00 654,740.00 *The Base Value is the assessed value of the property as of January 1, 2003 and is currently under appeal by the property owner. Subject to state approval, under the proposed TIF agreement the base value will be the assessed value as of January 1, 2004. The TIF benefits would begin accruing in FY06. ** Based on property owners expected property improvements as provided in their TIF request documentation. Model assumes constant base value and tax rate.