1. Case Study:
FINANCING THE 169 / BREN ROAD INTERCHANGE
Merrill Shepherd King
Finance Director, City of Minnetonka, MN
104th GFOA Annual Conference
Atlanta, Georgia
June 9, 2010

2. The Plot
 Crucial economic development zone
 Development pressures
 Capped transportation capacity
 Expensive infrastructure fix
 NO MONEY

3. The Lead

4. The Lead
 $7.8 billion assessed market value
¾ residential, ¼ commercial
 ~$12 million major water/sewer
enterprise
 $11-$12 million annual capital budget
 $27.5 million FY10 gen’l fund budget

5. The Lead
 No local sales tax
 $21 million total debt - legal limit debt
capacity of $255.5 million (3%)
 ~50% total budget & 75% of gen’l
fund budget from property taxes
 No local income taxes

6. Opus Business
Park
• 1 sq. mile
• 80% comml
20% resid
• 12,400 jobs
3x by 2030
• 775 hholds
• Light rail
in 2016

7. Opus Business
Park
• At traffic
capacity
• UHG
• Single hway
entrance

8. The Other Players
State
Other cities
County School district
Area residents
Interested businesses
Other district businesses

9. Est. cost of new interchange $19.7 m.
State partnership - grants -$9.7 m.
Remainder to be financed $10.0 m.

10. Options Considered
• Tax abatement
• Tax Increment Financing (TIF)
• Transportation improvement district
County School district
Other district businesses

11. Traffic Trip Financing

12. The Concept - Fairness
 New development “pays its own way.”
 Only property wishing to expand
beyond current use is affected.
 Residential property is not impacted
unless redeveloped to commercial use.

13. Traffic Trip – single PM peak-hour traffic
count using the 169/Bren Road interchange
(from engineering traffic studies)
Definition:

14. The Baseline
Max. capacity (traffic trips) of current interchange
minus
Current traffic trips to current interchange
equals
Excess current capacity to be allocated

15. The Baseline
Allocation of current capacity based upon:
• Zoning – land use and max. density
• Trip generation rates – engineer standard
• Regional adjustment – Transit use,
carpooling, parcel peak times, etc.
• Geographic area in business district

16. Geographic FactorGeographic Area Factor

17.  Parcels below allocated capacity may develop
up to allocated traffic trips.
 Parcels above allocated capacity are
grandfathered, but must pay for new
development traffic trips, i.e. the
capacity added by the new interchange.
 No costs for status quo, no development.

18. Cost yet to be financed $10 million
Add’l capacity added by
new interchange
÷ 789 trips
Traffic Trip Fee
~$12,700 per
trip to new
interchange

19. Traffic Trip Fee Example
• Parcel at max. allocated trips
• Redevelopment will generate
total 35 new trips
• Located in pink zone (40%)

20. 35 new trips
x 0.4 geographic factor
14 trips to interchange
x $12,700 @ trip fee
$177,800 total trip fees due
Traffic Trip Fee Example

21. Private Partnership
• Its proposed new development will use
37% of new interchange add’l capacity.
$10 m. local cost x 0.37 = $3.7 m.
• Willing to contribute $5 million of costs.
UHG participation $5.0 m.
$1.3 m.UHG trip fee revenue share

22. Final Budget
UHG “trip fees” $3.7 m.
UHG partnership $1.3 m.
City investment $5.0 m.
Total project costs $19.7 m.
State grants $9.7 m.
20:80 UHG:city

23. Selling the Plan
 Businesses, commercial property
owners, chamber of commerce
 Residential properties, condo &
tenant associations
 Commercial real estate group
 City council, ordinance

24. Measuring Success
Costs:
Engineering consultant $15,000
Staff time – development,
cumulative 6 persons
725 hours

25. Measuring Success
Benefits:
Property tax base increase $40 million
Permit revenue – initial,
one-time
$700,000
Job creation - initial devpt. 1,700 to city
900 to region
20-year capacity for increased traffic &
economic development

26. Traffic Trip Financing
KEY INGREDIENTS
 Initial capital – existing assets, public or
conduit debt
 No state or other legal constraints
 Devpt analysis – traffic, market, planning
 Ordinance
 Partnerships – private, other governments

27. Additional information . . .
mking@eminnetonka.com