7.1. SR 10-17-2016 - Laserfiche WebLink

Home Browse Search

City of Elk River, Minnesota SBH Properties, LLC Tax Abatement Project September 23, 2016 Page 5 per square foot (13,312). As a side note, the applicant’s materials include square footage of 16,312, as opposed to actual square footage of the project of 13,312. Based on the annual rents estimated to be received from the $5/square foot for 13,312 of square feet the project would generate an estimated annual rental income of $66,560 to support the debt service payments. The estimated annual debt service payments for the first mortgage ($1,049,774 with a 20 year term and 4.25% interest rate) would be $78,007. Annual abatements from both the City and County totaling $14,856 would provide sufficient income to make annual debt service payments. The estimated annual payments for the equipment loan ($351,000 with a 6 year term and 4.55% interest rate) would be an additional $66,958 and not projected to be supported by any annual abatement revenues. As stated tax abatement does not statutorily require a “but for” analysis to determine if the project would proceed without assistance; however 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 applicant has stated the project would increase the City’s tax base and provide additional employment opportunities. The applicant’s submittal includes a projected sources and uses of funds, project description, anticipated number of jobs created, 2014 and 2015 financial statements and 3 years of projected statements (2016- 2018). The one year cash flow showing the results with and without abatement assistance include the annual rental income (rent per square foot and leasable square feet) from the proposed project and estimated debt service payments on the building (20 year term at 4.25%) and equipment (6 year term at 4.55%) loans. There are two scenarios, one with assistance and one without that also include the $200,000 forgivable loan, with a projected return on equity calculation for each. As stated previously, the tax abatement would provide additional annual cash flow to the project to assist with increasing the projected return on equity for the owner, as well as assisting with providing