6.3 EDSR 10-17-2016 - Laserfiche WebLink

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Springsted's updated assumption quantifies the alternate assumptions based on a blended lease rate of $5.50 SF ($4.75 for industrial and $6.25 for office), for a total revenue stream of $1,096,816 ($948,248 of lease rates and $148,568 of combined City and County tax abatement) over 14 years total (abatement term of 10 years). An increase of the lease rate based on a blended rate increases revenues available for the applicant to support debt service payments which should result in a reduction of the amount of tax abatement revenues needed for the project to move forward. The analysis shows total abatement revenues generated by both the city and the county of $148,567 ($7,097 City share and $7,759 County share) over 10 years, resulting in a reduction of $14,195 from the original 12 year abatement request of 162,762. It should be noted that the first mortgage debt has a 20 year amortization and the requested term of abatement is 10 and 12 years, respectively, for the county and city. Once the abatement assistance has terminated, the lease rate and /or debt service payments would need to be adjusted in order for there to be sufficient revenues to support the remaining debt payments. The applicant has not indicated any future plans to refinance this debt, or plans to adjust the lease rate to cover the remaining debt service on the first mortgage. Staff is concerned that this will put the city at risk of abating property taxes over the course of 10 -12 years if the company cannot financially support the debt service payments after the abatement term is up. The project scored 35 out of 45 total possible points, indicating a moderate project desirability rating. The applicant has recently indicated that they will be incorporating energy efficiency items into their design. This would result in an additional 2 points, or a total of project score of 37 out of 45 possible points. Financial Impact The property tax abatement request would result in the abatement of $70,970 in city property taxes over the next 10 years. Attachments • Property Tax Abatement Application & Score Sheet • EDA Finance Committee Staff Report (September 29, 2016) • Springsted Analysis (September 23, 2016) • Updated Springsted Analysis (October 10, 2016) • Apex Embroidery Property Tax Abatement Agreement • Lease Comps