7.4. SR 05-18-2015 - Laserfiche WebLink

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City of Elk River, Minnesota GATR request for Tax Abatement April 24, 2015 Page 5 The Developer’s submittal includes a 15 year financial and cash flow projection and proforma with and without abatement assistance. The 15 year financial and cash flow projection indicates negative income before taxes for the first 8 years, and increasingly stabilizing each year, followed by positive income for the remaining 7 years. The proforma with and without tax abatement is an analysis of the developer’s use of the annual abatement revenues to reduce the mortgage liability on the property and increase the projected return on equity for the project. The analysis indicates the tax abatement assistance will have a positive impact on the return. Conclusion The developer has requested assistance in the amount of $546,810 from the City of Elk River and that the project would not be feasible without assistance as demonstrated by the return on equity comparisons. There are several methods to determine if a project would proceed “but for” assistance. Based on the available information, in this case a debt service and project cash flow gap analysis was utilized to test the viability of the project. The tables as provided in the application indicate that the tax abatement assistance reduces the annual debt service burden on project cash flows and improve the projected return on equity. “But for” abatement assistance, a reduction in operating and/or borrowing costs, or increased revenues or some combination of the above, the developer has indicated the project as proposed would not go forward. In addition, it is important to note that the developer has indicated that the project will aid in the creation of 63 new jobs in the City of Elk River. Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-223-3036 or mhuot@springsted.com with any questions or to discuss.