6.1 EDSR 07-20-2015 - Laserfiche WebLink

Home Browse Search

City of Elk River,Minnesota Envision Co.,LLC(Sportech)request for Tax Abatement June 23,2015 Page 5 for 15 years and County participation for 12 years illustrates that sufficient revenues are projected to be available to repay the Development Fund for the full value of the land. Developer Proforma"But For"Analysis In approving an abatement project,the Elk River EDA has requested that a finding be made that the proposed project 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 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 has stated the assistance is necessary due to the costs of developing the site and inability of the project to fully support those costs upon completion. The current estimated project costs are in excess of the estimated future value of the building upon development as provided by the County. Based on this analysis,the EDA could be justified in determining that the project meets the"but for"test and would not proceed without assistance. As stated tax abatement does not statutorily require a"but for" analysis to determine if the project would proceed without assistance. A city, county or school district may grant a tax abatement, by contract or otherwise, of the taxes imposed by the city on a parcel of property,which may include personal property and machinery,or defer the payments of the taxes and abate the interest and penalty that otherwise would apply,if: • it expects the benefits to the city of the proposed abatement agreement to at least equal the costs to the city of the proposed agreement or intends the abatement to phase-in a property tax increase, as provided in clause(2)(vii);and • it finds that doing so is in the public interest because it will: o increase or preserve tax base; o provide employment opportunities in the political subdivision; o provide or help acquire or construct public facilities; o help redevelop or renew blighted areas; o help provide access to services for residents of the political subdivision; o finance or provide public infrastructure; o phase-in a property tax increase on the parcel resulting from an increase of 50 percent or more in one year on the estimated market value of the parcel, other than increase attributable to improvement of the parcel;or o stabilize the tax base through equalization of property tax revenues for a specified period of time with respect to a taxpayer whose real and personal property is subject to valuation under Minnesota Rules,chapter 8100. The Developer's submittal includes a 20 year financial and cash flow projection for the project and company. Review of the financial statements indicates that cash is shown to be depleted in 2015 and 2016 to finance the expansion project. The project is limited to the amount of financing as offered by the lender, Bremer Bank. Absent a reduction in project costs, the result is a financing gap that is proposed to be filled with financial assistance through tax abatement revenues from the City(and County)to assist with purchasing the land.