7.1 HRSR 03-03-2014 - Laserfiche WebLink

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City of Elk River, Minnesota Preliminary Financial Analysis of Blackhawk Woods TIF Application 10/03/2013 Page 2 development is proposed for persons of low and moderate income; which will result in income limitations for potential residents and reduced rental rates. The Developer will be undertaking both the construction and operation of the proposed development, The Developer will be seeking to utilize federal low- income housing tax credits through the Section 42 4% program. These tax credits will provide an equity source for funding of the project. The use of the Section 42 program will result in building cost constraints; tenant income limitations and rent ceilings that are imposed and monitored by the Federal Department of Housing and Urban Development (HUD), The Developer indicated the receipt of TIF assistance from the City is necessary to meet scoring requirements set by the Minnesota Housing Finance Agency (MHFA). The permanent financing for the project is anticipated to be obtained through a HUD FHA low interest loan program, The Developer will be undertaking the construction and operation of the proposed senior housing facility, for which they have sought TIF assistance from the City. The purpose of this analysis is two -fold, first to determine if the project is unlikely to proceed "but -for" the assistance, and second to determine if the requested assistance would create a rate of return in excess of typical market expectations, Developer Request for Tax Increment Financing Assistance The developer, Senior 30 Elk River Limited Partnership, submitted a request for TIF assistance with the purpose of TIF to finance extraordinary costs associated with constructing affordable senior housing within the City. The developer has requested tax increment assistance for financing a portion of the site improvement costs associated with construction of the project and the initial amount in the application was $1,481,404 for the full 25 -year term of the district. After preliminary analysis and review, the developer revised the TIF amount to $996,871 based on revenue estimates for the full 25 year collection, The updated total estimated sources and uses of funds are $10,074,657. Based on the developer's application and total estimated project costs, the City could consider tax increment assistance for financing of the site improvement costs (not including acquisition) associated with the project up to the requested amount for the senior housing project; Project Costs Estimated Amount Original Request for Site Improvements $1,481,404 Developer's total estimated revenues (based on 25 -year TIF collection) $996,871 Estimated Reduction of Request $484,533 There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay -as- you-go basis. With upfront financing, the City would finance a portion of the developer's initial project costs through