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First Mortgage $25,245,020 Acquisition $2,464,000 <br />Equity $6,311,255 Site Development $5,555,183 <br /> Construction $23,537,092 <br /> <br />Total $31,556,276 Total $31,556,276 <br /> <br />Qualifications <br />The City of Elk River has been approached by Sun Rae Apartments, LLC for redevelopment of the project site <br />and would require the establishment of a Tax Increment Financing Redevelopment District. Tax increment <br />financing is a tool the City may consider using to support financial assistance for the project, subject to meeting <br />the but-for test and need for public financial participation. A blight inspection confirming qualification of the site <br />for Tax Increment Financing was completed in 2015 and would provide the basis for which a Redevelopment <br />TIF District could be established. <br /> <br />Project Financing <br />There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay- <br />as-you-go basis. With upfront financing, the City would finance a portion of the developer’s initial project costs <br />through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and <br />used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the <br />developer would finance all project costs upfront and would be reimbursed over time for a portion of those costs <br />as revenues are available. <br /> <br />Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the <br />risk for repayment to the developer. If tax increment revenues are less than originally projected, the developer <br />receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However, <br />in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to <br />make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues. <br />With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying <br />itself in full if tax increment revenues are not sufficient. The project financing as requested includes pay-as-you- <br />go for reimbursement of eligible costs. <br /> <br />Tax Increment Revenue Assumptions <br />The County Assessor provided a taxable value estimate for the project. To estimate the amount of available <br />TIF revenues generated by the proposed project, certain assumptions were made based on the value of the <br />project, construction schedule, and anticipated financing terms. <br /> <br />• Total existing value of $442,400 <br />o Parcel ID: 75-704-0205 <br />o Base value as of Jan. 1, 2020 <br />o Original net tax capacity (ONTC) of $5,530 <br />o Assuming reclassification to rental rates <br /> Rental classification is 1.25% <br />• Estimated total market value upon completion <br />o $21,759,300 <br />o 178 new units at $122,243/unit <br />• Classification for all units as rental <br />o Rental class rate (1.25% per unit) <br />• Incremental value based on difference between existing and new land/building value <br />• Construction commences in 2021 and is completed in 2022 <br />o Project values 100% complete for assess 2022 and taxes payable 2023 <br />• First increment collected in 2023 <br />o Election to delay first increment by up to 4 years <br />• Net present value (discount) rate of 4% <br />• 0% annual market value inflation <br /> <br />Tax Increment Revenue Estimates <br /> <br /> Revenue Estimates