4.1. EDSR 04-25-2017 - Laserfiche WebLink

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City of Elk River, Minnesota Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and Elk River Lodge and Residential Suites, LLC April 25,2017 Page 4 assistance. Based on initial review of the project components, it does not appear that the first phase would generate increments sufficient to support the request for assistance. It is the developer's intent that increment generated from the new developments on the former Saxon site would be included to assist with financing of the entire combined redevelopment project. Further information on this concept will be provided at the next EDA Finance Committee meeting following receipt of the developer's additional financial information related to the future phases of residential development on the former Saxon site. Project Financinq There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay-as- you-go basis. With upfront financing, the City would finance a portion of the developer's initial project costs through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the developer would finance all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for repayment to the developer. If tax increment revenues are less than originally projected, the developer receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues. With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying itself in full if tax increment revenues are not sufficient. The developer's financial information for both applications includes pay-as-you-go financing as annual reimbursement. The City also has the ability to spend tax increments from a tax increment financing district on other eligible projects within the City. The type, location and amount of eligible projects that can be financed is subject to the district(s) from which the tax increments would be spent from. This spending is referred to as `pooling' of tax increments. Revenues from a housing district may be spent anywhere within the City as long as the project that is being financed meets the statutory definition of a housing project. Revenues from a redevelopment district may be spent within the boundaries of a project area, subject to certain percentage limitations and timing restrictions. Based on the tax increment revenue analysis provided in the chart above, it is anticipated that should the Jackson Hills Residential Suites project proceed, there may be surplus revenues available that could be spent on other eligible housing projects. An example of this may include the improvements to the Elk River Lodge site, as well as any other affordable housing projects that may be identified within the City. Policy Application The City's existing policy and application for tax increment financing assistance is under review by the EDA, EDA Finance Committee, HRA and City Council. Under the existing policy and application, the Jackson Hills Residential Suites proposed project may be eligible for assistance of up to 65% of the requested amount. It is the applicant's