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 3 the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and used to pay debt service on the bonds or repayment of the internal loan. With pay -as- you -go financing, the developer would finance all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay -as- you -go- financing is generally more acceptable than upfront financing for the City because it shifts the risk for repayment to the developer. If tax increment revenues are less than originally projected, the developer receives less and therefore bears the risk of not being reimbursed the full amount of their financing. With bonds, the City would still need to make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues. With internal financing, the City risks not repaying itself in full if tax increment revenues are not sufficient. Typically in either case of upfront financing, there is a shortfall payment guarantee with the developer. The developer has requested financial assistance as pay -as- you -go through a developer note. Tax Increment Analysis In order to estimate the amount of TIF revenues generated by the proposed development, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms. • Estimated base value (2 parcels) as of Jan. 1, 2013 0 75- 741 -0182 (EMV of $14,600) 0 75- 753 -0010 (EMV of $296,500) ■ anticipated to be reclassified as 4d rental following development • Estimated incremental market value upon completion o $7,869,290 estimated market value o 84 total townhome units ® 35 2- bedroom units • $105,000 per unit (preliminary assessor's estimate) ® 49 1- bedroom units • $84,000 per unit (preliminary assessor's estimate) • Increment based on new building value only • Construction commences in 2014 and is completed in spring 2015 0 70% assessed in January of 2015 for taxes payable in 2016 0 100% assessed in January of 2016 for taxes payable in 2017 • 0% Annual market value inflator • Present value (discount) rate of 4% • Tax rates, class rates and future market values remain constant • 90% increment pledged to developer • Maximum term of housing district (26 total years)