02-23-2021 JOINT FINANCE COMMITTEE PACKET

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The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity. Updated: August 2020 Request for Action To Joint Finance Committee Item Number 4.1 Agenda Section General Business Meeting Date February 23, 2021 Prepared by Colleen Eddy, Economic Development Specialist Item Description The Delta Apartments TIF Application Reviewed by Cal Portner, City Administrator Reviewed by Action Requested Review application and provide a recommendation to the Economic Development Authority on the requested Tax Increment Financing Application. Background/Discussion In early fall 2020, the City of Elk River received an application from Sun Rae Apartments, LLC for Tax Increment Financing (TIF) assistance for the redevelopment of the former Saxon site to offset a portion of the costs necessary to construct 176 units of market rate apartments. The application requested up to 26 years of TIF. City policy limits redevelopment project assistance to 15 years. The request was reviewed by the Joint Finance Committee (JFC) on September 26 and December 29. At the Dec. 29 meeting, the applicant indicated no less than a 20-year term of assistance would allow the project to be financially viable. In early January, the city was informed that a new developer was interested in taking on the project and acquiring the property from Sun Rae. Stonewood Development, LLC submitted an application on February 5, 2021. The request for assistance was the same 26 years as originally requested. Included with the application is a preliminary preapproval letter from Bank Forward indicating that 20 years of TIF would be an assumed revenue source to obtain financing for the project. The applicant also provided a purchase agreement for $2,000,000 between Sun Rae Apartments, LLC and Stonewood Development, LLC indicating acquisition of the property and subsequent construction of the project was contingent upon 20 years of TIF. The maximum term of assistance pursuant to the city policy is 15 years and less than what the applicant has requested. As outlined in the analysis, adjusting the financing assumptions for total development costs would increase the project performance and reduce the level of public assistance to terms that could be supported within the city’s policy criteria. Financial Impact N/A Mission/Policy/Goal The City of Elk River shall utilize TIF to encourage desirable development or redevelopment that would not otherwise occur but for TIF.