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 5 desire to hold review of the current application for the Jackson Hills project until a revised policy is approved, anticipating any potential changes to the existing review thresholds and benchmark indicators. The Elk River Lodge and Residential Suites proposed project would also consist entirely of residential. As a result, the applicant would also like to delay review of the application until a revised policy and application is considered and approved. In addition, as indicated previously in the memorandum, additional information is anticipated to be received on the entire project for the Elk River Lodge and former Saxon site that would include all phases of development. This will assist in providing a greater understanding of the overall project,financing and policy review. Developer Pro forma But-For Analysis In approving a TIF district and project, the City must make several findings, including the "but for" test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The developer has provided financial information showing that the operating cash flow requires financial assistance from the City to reduce the amount of debt and equity necessary to finance total project costs, as provided through the annual tax increment revenues from the project, and provide a reasonable return on investment. The developer has stated the assistance is necessary due to the high costs of developing the site and inability of the project to support those costs upon completion. Based on the developer's stated position relative to the need for tax increment financing assistance, the City could make its "but for' finding and provide tax increment assistance. We recommend, however, that the City also consider an appropriate level and type of TIF assistance for the project based on the information submitted by the developer. The City's position relative to the use of tax increment will focus on financing of the extraordinary costs. The level of assistance is in part dictated by the`extraordinary' costs of the project. Initial discussions about the project indicate the assistance would be provided as reimbursement to assist the developer with extraordinary costs associated with the development of affordable housing in the community. Following thorough evaluation of the project as provided allows the City to be prepared to make an informed "but-for' decision based on the likelihood of the project needing assistance, as well as the appropriate level of assistance. The "but-for" test is used to determine whether a project is likely to proceed as proposed without the use of public dollars. To complete this analysis we reviewed the developer's provided operating proforma and also constructed similar ten-year project proformas, showing a result if the developer received the assistance as pay-as-you-go (reimbursement for TIF eligible costs)and showing a result if the developer did not receive assistance. Our analysis of the proformas included a review of the development budget, projected operating revenues and expenditures, and the project's capacity to support annual debt service on the first mortgage and any secondary notes. Conclusion The City has received two applications for tax increment financing assistance. Both projects involve the construction of multi-family housing, with some affordability components. The first application related to construction of a 40-unit multi-family affordable housing project and related financial analysis has been reviewed by City staff and the EDA