5.1 EDSR 10-20-2014 - Laserfiche WebLink

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Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul,MN 55101-2887 Springsted Tel: 651-223-3000 Fax: 651-223-3002 www.springsted.com MEMORANDUM TO: Jeremy Barnhart,Community Operations and Development-Deputy Director FROM: Mikaela Huot, Vice President Julian Bradshaw,Analyst DATE: October 10, 2014 SUBJECT: Stonesthrow Properties, LLC.—Project Analysis The City of Elk River has asked Springsted to evaluate a tax abatement request for assistance submitted by the developer, Stonesthrow Properties, LLC. The developer proposes to purchase the commercial property located at 17834 Industrial Circle NW for the purpose of leasing to Coin-Tainer Co., LLC (in which the developer has an ownership interest) and four other commercial tenants (some of which are existing businesses in the building with current leases).According to the developer, purchasing the property would support the retention of Coin-Tainer in the City of Elk River and would retain 26 existing jobs and create a minimum of 10 new full time positions. The purpose of this memo is to summarize the analysis that Springsted prepared, including the estimate of tax abatement revenues for the project and to assist with determining whether the development is likely to proceed "but for" the requested tax abatement assistance. The analysis is based on our review of the project components and financials and general rationale for assistance as submitted by the developer. There are several methods available to determine if a project would proceed "but for" the assistance. An analysis comparing the rates of return with and without assistance is a common method used to analyze the "but for" test. However, in some cases, a review of the project's sources and uses of funds and operating cash flow performance is done to determine if an operating gap exists or if the project performance is not expected to meet minimum financing requirements and assist with determining that a project meets the "but for" test. If, following the review, it is determined that the project has a shortage of debt, cash, and/or equity based on the projected value of the project upon completion and net operating income available to support debt service, it can be determined that the project would not proceed "but for" the assistance. It is important to note that tax abatement does not statutorily require a "but for" analysis to determine if the project would proceed without assistance, however it must be determined that the project is in the public interest and that the benefits outweigh the costs and the City's current tax abatement policy requires this finding be made. Public Sector Advisors