8.1 SR 05-17-2021 - Laserfiche WebLink

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commence construction in 2021. The applicant intends to commence construction of the second building (Phase 2) shortly thereafter but has indicated construction could start 2-3 years after phase 1. Applicant Request for Assistance Stonewood Development, LLC has requested assistance that includes 90% of incremental revenues for 20 years from each building phase as necessary for redevelopment of the project site. The applicant’s supporting financial information includes updated sources and uses of funds with a revised total development cost of $34.7 million with 80% as debt financing and 20% as private equity. Financial assistance through pay-as-you-go tax increment financing from the City of Elk River has been requested to provide additional revenues to support the required level of debt and project cash flow to repay annual debt service payments. Typical extraordinary redevelopment costs that cannot be supported solely by the project alone could justify the need for public financial assistance and allow the project to proceed as proposed to provide appropriate upfront funding and meet the minimum debt coverage requirements. The applicant has indicated the receipt of City financial assistance is necessary for the project to proceed. The updated sources and uses of funds from the applicant’s financial materials is illustrated in the table below. Sources Amount Uses Amount First Mortgage $27,762,071 80% Acquisition $2,225,000 6% Equity $6,940,518 20% Professional $1,368,591 4% General $2,842,024 8% Site Development $1,671,415 5% Construction $17,537,997 51% Concrete $4,347,650 13% Development Fee $1,499,634 4% Construction Management Fee $1,499,634 4% Contingency $1,710,645 5% Total $34,702,589 100% Total $34,702,589 100% Tax increment financing has been requested as pay-as-you-go and would not be an upfront funding source and instead be used to support repayment of first mortgage debt service TIF Eligible Expenses Site Improvements/Preparation Costs Amount Land acquisition $2,000,000 Excavating/grading $860,887 Concrete work $3,902,650 Driveway $220,986 Masonry/precast $445,000 Landscaping $305,000 Total $7,734,523 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 applicant’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 applicant 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 applicant. If tax increment revenues are less than originally projected, the applicant receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues. With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying