Commission Votes For TIF District Over Owners Concerns

Tuesday night the Manhattan City Commission spent three hours listening to owners in the Third Street Redevelopment
District. Most did not want the City to approve the estblishment of a tax-increment financing (TIF) district between North
3rd and 4th Streets and between Leavenworth Street and Bluemont Avenue.

The Commission voted 4-0 to approve the district.

Here is a memo given to the Commission by the City staff:

SUBJECT: Public Hearing Regarding a Resolution and First Reading of an Ordinance Establishing a Redevelopment District
within the City of Manhattan in the Area of North Third Street between Leavenworth Street and Bluemont Avenue

PRESENTERS: City Administration Representatives; Plaza Manhattan, LLC, Representatives and Consultants

BACKGROUND

City Administration has been approached by representatives of Plaza Manhattan, LLC, to seek the City's cooperation in
redeveloping an area of the City along North Third Street between Leavenworth Street and Bluemont Avenue. It is City
Administration's understanding that the developer has reached agreement for acquisition of property on some of the parcels in
this area subject to certain conditions and contingencies. One of the primary contingencies is for the developer to obtain
approval from the City of Manhattan and the consent of the governing bodies of other taxing jurisdictions to establish a tax
increment financing district to assist with the acquisition, relocation, infrastructure, and other participating expenses as
determined by State Statute.

A second contingency for the proposed redevelopment project affecting the City is one of obtaining final zoning approval. On
January 18, 2000, the City Commission approved Resolution No. 011800-B authorizing City Administration to negotiate a
Pre-Development Agreement and to consider establishing a Redevelopment District. On February 15, 2000, the City
Commission approved the Pre-Development Agreement with Plaza Manhattan, LLC. On April 18, 2000, the City
Commission approved Resolution No. 041800-C establishing this date and time for the Governing Body to hold a Public
Hearing regarding the establishment of a Redevelopment District. At the April 18th City Commission meeting, the developer
provided a conceptual plan, summary description, and rendering for the proposed project.

DISCUSSION

The developer has requested the City's cooperation in establishing a tax increment financing district in order to make its
development viable. In most cases, it is very difficult and cost prohibitive to redevelop property occupied by existing
businesses, industry, and residential property without some form of local government cooperation and participation. Tax
increment financing is a method created to help government entities assist with the redevelopment of various properties that
meet certain conditions as established by State Statute.

The increase in revenue from sales taxes and/or ad valorem taxes (the tax increment) that occurs because of the
redevelopment can be utilized to assist with the acquisition of property and existing structures thereon; demolition or
relocation of such structures, relocation assistance to existing businesses and residences, infrastructure improvements in and
adjacent to the redevelopment area, site preparation, relocation of utilities, and other expenses necessary to redevelop and
finance the project.

At the April 18, 2000, City Commission meeting, several questions were asked by the City Commissioners and the public
regarding the proposed project. One of the questions was how many businesses/residents and/or people will need to be
relocated because of this project. There are 37 commercial parcels within the proposed District. Of those, 12 parcels,
encompassing about one third of the redevelopment area, are owned by Steel and Pipe Supply Company or related entities.
The remaining commercial parcels appear to have about 23 different owners. There appear to be 38 residential parcels with
about 30 different owners. Within this group are a few apartment complexes with a yet to be determined number of tenants.
Thus, there appear to be about 54 owners of property within the Redevelopment District. In the event the City Commission
establishes the Redevelopment District, one requirement is to develop a relocation assistance plan that must be approved by
a two thirds majority of the City Commission. City Administration is committed to perform a survey of the affected owners
and occupants within the District to assist in developing the relocation plan.

Another question was raised in regard to the financing of the project and total project costs. I will point out that a feasibility
study is required as a part of the redevelopment plan which occurs after the District is established. However, a preliminary
analysis has yielded a total cost of approximately $45 million. Approximately $24 million will be for construction of the
facility; $16.6 million is for onsite improvements such as acquisition, demolition, relocation, and utility relocation; and the
balance of $4.4 million is for offsite improvements such as widening streets, improving and signalizing intersections,
streetscape improvements, pedestrian connections, and related improvements. The developer will pay for the construction of
the facility and provide $8 million toward onsite improvements, for a total contribution of approximately $32 million. Thus, the
developer is anticipated to contribute approximately 71% of the financing for the project with approximately 29% to be
publicly financed.

A third question for considering the establishment of the District was why sales tax funds are being used instead of, or in
addition to, property tax increment funds. It appears that other sources of revenue, such as the use of a portion of new
incremental sales tax, will be needed in addition to traditional increased property tax increments in order to make the project
viable. An alternative would be for the City to issue General Obligation Bonds to finance some of the public expenses, such
as public street improvements, pedestrian improvements, streetscaping, public utility improvements and utility relocations, etc.
in order to meet the long term needs and plans of the entire community. Both of these revenue sources will diminish the need
to utilize portions of incremental sales taxes.

Attachment #1 is a copy of a resolution that the City Commission should consider to establish the Tax Increment Financing
District. The resolution makes certain findings with respect to the Redevelopment Project area, includes the description of the
real estate establishing the boundary of the Redevelopment District, describes a comprehensive plan which identifies all of the
Redevelopment Project areas, generally describes improvements within the area, finds that the area meets the statutory
requirement of having been in a designated enterprise zone, and provides for the effective date and other authorizations of
City officials.

Attachment #2 is the proposed ordinance creating the Redevelopment District.

ALTERNATIVES

It appears the Commission has the following alternatives concerning the issue at hand. The Commission may:

Approve the resolution and first reading of the ordinance making certain findings and establishment of a Redevelopment
District.

Decide not to approve the proposed resolution and first reading of the ordinance making certain findings and establishment of
a Redevelopment District.

Modify the resolution and ordinance to meet the needs of the City Commission.

Table the issue.

RECOMMENDATION

The City Commission should hold a Public Hearing in order to receive input on whether or not this Redevelopment District
should be established. City Administration has provided notice to the owners of record and occupants within the proposed
Redevelopment District and informed them of this Public Hearing according to statute. In addition, we have delivered notices
to Unified School District #383 Board of Education and the Riley County Board of Commissioners, also required by State
Statute.

On April 18, 2000, the City Commission adopted the Downtown Tomorrow Plan and incorporated it as part of the CityÆs
Comprehensive Plan. That plan identifies this area as a primary redevelopment opportunity area. Downtown redevelopment
has also been a goal established by the City Commission. Thus, City Administration recommends approval of this resolution
and ordinance in order to continue discussion for a potential Redevelopment Project.