7.2. HRSR 07-06-2020 - Laserfiche WebLink

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N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\Joint Finance Committee Agenda Packets\2020\4.1 sr Community Housing Development Corporation TIF Application.docx 5. Facilitates the development process and achieves development on sites that would not develop “but for” the use of TIF. 6. Removes blight and/or encourages redevelopment of commercial and industrial areas resulting in high quality redevelopment and private reinvestment. 7. Offsets redevelopment costs (i.e. contaminated site cleanup) over and above the costs normally incurred in development. 8. Aids the implementation of the Mississippi Connections Plan. The proposed project meets public purpose objective #1. TIF District Term City’s policy limits TIF Districts to the minimum term necessary to meet the project needs. Only projects exceeding the objectives identified in the policy will be considered to exceed the maximum term allowed for housing projects of 15 years (26 Max) for Housing Districts.  The developer is requesting a term of 26 years of tax increment, which exceeds the general term allowed by the policy for Housing Districts. Policy Considerations 1. Each Project is required to meet the but for test to determine the need for and level of assistance.  Baker Tilly Municipal Advisors, LLC completed a but for analysis to determine if the project is expected to proceed as proposed without TIF assistance and/or if alternate funding options, structures or sources could be available that would still allow the project to proceed. The developer has indicated in the application that tax increment financing assistance is necessary for the project to be viable and meet the income restrictions of occupants and provide sufficient cash flow to finance annual operating expenses and debt service. 2. Developers receiving TIF assistance shall provide a minimum of 10% cash equity investment in the project. TIF is not to be used to supplement cash equity.  The developer is proposing to finance this project with multiple funding sources that include Minnesota Housing First Mortgage, TIF Mortgage, Sales Tax Rebate, Energy Rebate, Deferred Developer Fee and Tax Credit Proceeds. It is not a traditionally financed project that includes Owner Cash Equity and Private Mortgage. The deferred developer fee included as a funding source is $502,564, equating to 50% of the total upfront developer fee and the maximum allowable for this type of project. 3. TIF will not be used in circumstances where land and property price is of fair market value.  The developer will be required to provide the city with recent appraisals, as required for financing and performed by a third-party to determine the fair market value of the land. 4. The developer shall demonstrate a market demand for the proposed project.  The most recent housing study completed on February 15, 2018, indicates a need for 93 units of affordable rental. Financial Impact Per city policy, the total estimated gross increment available over 15 years for housing projects is $1,818,810. The developer could receive 90% of the gross increment over 15 years of $1,636,935 or a present value of $1,125,475. However, based on the developer’s application and request for assistance, it may only take up to 10 years to meet the full requested amount.