05-26-2020 JOINT FINANCE COMMITTEE PACKET

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The sources and uses of funds from the developer’s financial materials is illustrated in the table below. Sources Amount Uses Amount First Mortgage $3,290,000 Acquisition $450,000 TIF Mortgage * $780,000 Construction $12,760,000 Syndication Proceeds $11,958,804 Contingency $510,400 Sales Tax Rebate $349,509 Professional Fees (Soft Costs) $1,216,775 Energy Rebates $27,500 Developer Fee $1,000,000 Deferred Developer Fee $502,564 Syndication Fees $39,600 Financing Fees $635,070 Reserves $295,533 Total $16,908,377 Total $16,908,377 * financed as pay as you go for reimbursement of certain costs and included with First Mortgage Qualifications The City of Elk River has been approached by CHDC for the construction of 55 new apartment housing units and would require the establishment of a Tax Increment Financing Housing District. Tax increment financing is a tool the City may consider using to support financial assistance for the project, subject to meeting the but-for test and need for public financial participation. A housing TIF District is a type of tax increment district which consists of a project that is intended for occupancy by persons or families of low and moderate income. Revenue derived from tax increment from a housing district must be used solely to finance the cost of a housing project as defined. For the proposed project to qualify as a tax increment financing housing district, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(d) of the Internal Revenue Code. The requirements of this subdivision apply for the duration of the tax increment financing district. The income requirements are as follows: • at least 20% of units are occupied by individuals whose income is 50% or less of area median income • at least 40% of units are occupied by individuals whose income is 60% or less of area median income. In addition, not more than 20 percent of the square footage of the buildings that receive assistance from tax increments may consist of commercial, retail, or other non-residential uses. The developer has indicated this project would meet the income requirements outlined above with 100% of the units being affordable at levels below 50% of the area median income (AMI). The new units would include a mix of 1, 2 and 3-bedroom units. Revenues from a tax increment financing housing district can be used for all costs related to the qualifying project that may include acquisition, rehabilitation and construction, utilities, parking, streets and sidewalks. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the City may be included in the cost of a housing project. Project Financing There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay- as-you-go basis. With upfront financing, the City would finance a portion of the developer’s initial project costs through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the developer would finance all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for repayment to the developer. If tax increment revenues are less than originally projected, the developer receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However,