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EHLERS <br /> LEADERS IN PUBLIC FINANCE <br /> To: Sandy Peine <br /> O <br /> City of Pequot Lakes <br /> 2 From: Shelly Eldridge <br /> W Date: December 17,2007 <br /> 2 Subject: Tax Increment District No. 1-13, Land cost interfund loan <br /> Sandy: <br /> The TIF law requires that all obligations for a Tax Increment("TIF")District be incurred within <br /> the first 5 years of the TIF District. This memo outlines the obligation with respect to the City's <br /> reimbursement for its portion of the land for costs in TIF District 1-13. <br /> History <br /> On August 7, 2007,the City created TIF District 1-13 for the purpose of assisting Lonesome <br /> Cottage Furniture Company with the purchase of 4 lots in the City's Industrial Park. The City <br /> had asked and received$30,000 an acre for the lots in the Industrial Park, as evidenced in the <br /> sale of Lot 3, Block 1 on August 29,2007. The 4 lots purchased by the Lonesome Cottages had <br /> a market value of$209,400. The developer paid the City$46,000 in cash and has signed a note <br /> for an additional$100,000 to be paid over time. The City, in the approved TIF Plan anticipated <br /> being reimbursed for the$63,400 difference through tax increments generated by TIF District 1- <br /> 13. On August 7,2007 the City Council passed a"Resolution Authorizing an Interfund Loan for <br /> Advance of Certain Costs in Connection with Tax Increment Financing District no. 1-13"up to <br /> $84,900 from the Business Park Fund to allow for the repayment of,in part,the write-down of <br /> the cost of the land. <br /> Action Needed <br /> First,the City Council should pass a resolution"Recognizing an Obligation"to the Business <br /> Park Fund from TIF District 1-13 to document the City's portion of the land costs and <br /> authorizing the corresponding obligation, as intended in the interfund loan. <br /> Second,to comply with accounting practices and the Office of the State Auditor("OSA") <br /> requirements, there needs to be a journal entry to transfer$63,400 from the TIF District 1-13 <br /> fund to the Business Park Fund to record the expenditure in the TIF Fund. The City Council <br /> should approve the transfer as is the normal process for all transfers. <br /> Ehlers&Associates Inc. <br /> 3060 Centre Pointe Drive Phone: (651)697-8504 Fax:(651)697-8555 <br /> Roseville,MN 55113-1105 shelly @ehlers-inc.com <br />