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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 /> January 25,2018 <br /> Page 8 <br /> expenditures, and the project's capacity to support annual debt service on the first mortgage and any secondary <br /> notes. <br /> Conclusion <br /> The City has received two applications for tax increment financing assistance. Both projects involve multi-family <br /> affordable housing. The first application relates to the construction of a 40-unit multi-family affordable housing project <br /> with a request for tax increment assistance of 90% for 25 years. The second application relates to the renovation of <br /> an existing facility that will include affordable housing. The applicant has stated that both projects would meet the <br /> definition of a housing district with at least 20% of the units restricted for occupants at 50% of the area median <br /> income. <br /> The developer has provided financial information related to the construction of the 40-unit housing project referred to <br /> as Jackson Hills and for the renovation the existing Elk River Lodge indicating that financial assistance is necessary <br /> to provide annual cash flow and meet required debt coverage ratios and market returns. With assistance the projects <br /> are expected to generate returns that the developer has indicated are sufficient to allow the project to proceed, with <br /> tax increment necessary to obtain financing for both the Jackson Hills project construction and the additional <br /> improvements related to the Elk River Lodge housing project. An overall reduction in project costs and/or increase in <br /> revenues may assist with achieving greater market feasibility in the future, and/or reduce the need for tax increment <br /> financing assistance. <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 /> In addition, the City's newly updated Tax Increment Financing Policy and Application provides a general limit on the <br /> term of a housing TIF district to 15 years. The request for assistance between the two submitted applications would <br /> be for a 25 year TIF district with 15 years applied to the Jackson Hills project site and the remaining 11 years pledged <br /> to the Elk River Lodge project site. We recommend further discussion on how the projects meet the City's policy <br /> criteria and the ability to extend beyond the desired minimum term. <br /> Attachments:Proiect Qualifications:Definition of Housing Districts <br />