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City of Elk River, Minnesota <br /> Tax Increment Applications for Proposed Jackson Hill Residential Suites Housing Project and <br /> Elk River Lodge and Residential Suites, LLC <br /> April 25,2017 <br /> Page 6 <br /> Finance Committee. Existing City policy guidelines have indicated the maximum amount the developer could be <br /> eligible for is 65% of the total request of $500,000 to equal a maximum amount of $325,000. Through the <br /> submission of the tax increment financing application and supporting financial information, the developer has <br /> indicated that the project as proposed would not occur on the current site without financial assistance from the City <br /> due to the below-market returns and low debt coverage metrics projected to be generated by the project. <br /> Based on the current assumptions, without assistance the project as proposed would not be considered feasible. <br /> With assistance the project is expected to generate returns that the developer has indicated are sufficient to allow the <br /> project to proceed. An overall reduction in project costs and/or increase in revenues may assist with achieving <br /> greater market feasibility in the future. The developer has indicated an amount greater than 65% of the request is <br /> necessary for the project to proceed. <br /> The second application includes both the existing Elk River Lodge and former Saxon sites. The developer has <br /> proposed the renovation of the existing Elk River Lodge to include internal and external improvements, construction <br /> of 25-unit garage and new parking lot. Future phases of development include redevelopment of the former Saxon <br /> site into a 3-building approximate 225-unit (each building with 75 units) multi-family residential project. The <br /> developer has provided financial information related to the first phase of renovating the existing Elk River Lodge <br /> indicating that financial assistance is necessary to provide annual cash flow and meet required debt coverage ratios <br /> and market returns. <br /> Because both projects proposed to be constructed comprise of housing and the City is in the process of reviewing <br /> and potentially updating the existing tax increment financing policy and application, the developer has requested <br /> review of the applications be delayed until the next EDA Finance Committee meeting in May. Therefore, additional <br /> information related to the financial analysis of both projects will be provided at that meeting. The Committee has <br /> already reviewed the Jackson Hills Residential Suites project based on the existing policy. Any updates based on <br /> changes to the policy and application will be provided. Initial analysis relating to the Elk River Lodge and Residential <br /> Suites proposed project will also be provided, including financial feasibility and but-for review. <br /> Both projects as proposed would include a provision of affordable housing units within the City. By establishing a <br /> Housing TIF District for the Jackson Hills Residential Suites project, the developer would be agreeing to maintain a <br /> portion of the units as affordable (meeting the income requirements as outlined previously) over the life of district. <br /> Without tax increment assistance the developer is not required to maintain any affordable units. As shown in the <br /> estimated tax increment revenue section of this memorandum, there are projected to be surplus revenues available <br /> from the Jackson Hills Residential Suites project that could be used to finance other eligible affordable housing <br /> projects within the City. Further discussion regarding how those surplus funds could be used, whether through a <br /> pooling program or on an annual basis, is recommended to occur. <br /> Attachments:Proiect Qualifications:Definition of Housing and Redevelopment Districts <br />