10.1. SR 02-05-2018 - 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 January 25, 2018 Page 4 15 years at 90% $696,225 Estimated Present Value at 4.5% $480,523 Equity $250,000 Estimated surplus increment (remaining 11 years) $510,565 Estimated Present Value at 4.5% $197,184 It is important to note that the maximum term of a housing district is 25 years after receipt of first increment for a total of 26 years. The application for assistance includes a request for 90% of tax increment revenues for 25 years with the City retaining 10%. The City's general policy provides for a maximum term of assistance of 15 years for a housing TIF district. It is our understanding that the request is for 15 years of tax increment revenues for the Jackson Hills project with the remaining 11 years pledged to the Elk River Lodge project site (as will be described in greater detail below). Background: Elk River Lodge and Residential Suites Redevelopment Project The developer submitted a request for TIF assistance related to the proposed renovation and redevelopment of the existing Elk River Lodge site as a housing district. The developer has currently provided financial information related to the project which would include interior and exterior improvements to the existing Elk River Lodge building, construction of a 25 -unit garage and new parking lot. The developer has estimated the total cost of the project to be approximately $1.5 million and financed with a combination of debt and equity. The mini -perm financing would be used to refinance an existing mortgage and provide new proceeds to finance the identified improvements. Correspondence from the applicant's potential lender has indicated that financing for the new improvements is subject to receiving tax increment financing assistance as a means of repaying the debt. The applicant needs $750,000 to refinance the existing mortgage with $500,000 for improvements necessary for rehabilitating the current site. $200,000 of the improvements have already been completed and the applicant anticipates completing the remaining $300,000 following consideration for tax increment financing assistance. The developer has requested tax increment assistance for a 10 year term. Based on the current project and timing for improvements, it does not appear that the Elk River Lodge site would be a viable stand-alone housing TIF district. Any tax increment assistance would need to come from surplus available revenues from another funding source, and presumably based on the applications for assistance would be from the Jackson Hills site (if established). See complete sources and uses below from the developer's supporting financial materials submitted to Springsted for the Elk River Lodge project site. It is our understanding that the applicant has previously acquired the project site and the land acquisition price as listed is not a current expenditure of the project. Sources Amount Uses Amount Equity $250,000 Land Acquisition $200,000 Debt $1,250,000 Site Work $300,000