8.1. SR 10-21-2013 - Laserfiche WebLink

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City of Elk River, Minnesota Preliminary Financial Analysis of Blackhawk Woods TIF Application 10/03/2013 Page 6 of the clubhouse activity building as well as remaining site improvements. The construction cost line-item appears reasonable. The Development Fee/Overhead cost equates to approximately 6% of the total development cost. The Soft Cost category is for expenses related to the professional service costs incurred in the planning and development of the site. The Financing Cost line-item is for expenses related to the Tax Credit process as well as costs associated with the permanent financing, and construction loan interest cost. The Contingency line-item is based on approximately 4%of project costs, and the Reserves line-item represents 6 months of debt-service. Sources of Funds The Developer's submittal includes a preliminary total project budget of$10,074,657 as illustrated in the table below: Sources of Funds Private Equity $558,575 Equity(Tax Credit Proceeds) 2,375,000 Permanent Financing 6,866,425 Developer Working Capital 274,657 Total Sources of Funds $10,074,657 The Developer has indicated they are expecting to receive long term financing through HUD in an amount of $5,869,554 and the loan is anticipated to have a 40-year term with an effective interest rate of 4.70%. Additionally, the Developer has indicated they will be able to seek a second mortgage based on the TIF revenue stream, which will provide $996,871 of funding. The term of the second year is 25-years to coincide with the District, and the effective interest rate is 4.70%. In addition to the traditional mortgage financing the Developer has projected they will receive additional equity from the sale of the Tax Credits of $2,375,000. The Tax Credits allows the Developer to reduce both their private borrowing amount and their private equity investment in the project. Their total private equity investment in the Development, not including Tax Credit Proceeds, is $558,575. The return on this private equity investment is measured in the return analysis section. Developer Proforma But-For Analysis In approving a TIF district and project, the City must make several findings, including the "but for" test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The developer has provided a "but-for" argument stating that the developer's lender has indicated that financial assistance from the City is necessary to provide sufficient project cash flow and market returns to investors that will achieve project feasibility. The developer states the assistance is necessary to construct the project as proposed based on current financial indicators. Based on the developer's stated position relative to the