8.1 SR 05-17-2021 - Laserfiche WebLink

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itself in full if tax increment revenues are not sufficient. The project financing as requested includes pay-as-you- go for reimbursement of eligible costs. Tax Increment Revenue Assumptions The County Assessor provided a taxable value estimate for the project. To estimate the amount of available TIF revenues generated by the proposed project, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms.  Total existing value of $548,300 o Base value as of Jan. 1, 2020 o Original net tax capacity (ONTC) of $6,854 o Assuming classification as residential rental  Rental classification is 1.25%  Estimated total market value upon completion o $21,759,300 o 180 new units  Classification for all units as rental o Rental class rate (1.25% per unit)  Incremental value based on difference between existing and new land/building value  Construction commences in 2021 and is completed in 2022 o Project values 100% complete for assess 2023 and taxes payable 2024  First increment collected in 2023 o Election to delay first increment by up to 4 years  Net present value (discount) rate of 4%  0% annual market value inflation  Revenue Estimates Estimated annual available increment (full buildout) $332,678 Projected tax increment (90%) $6,632,848 City retainage (10%) $736,988 Net amount available for development (90%) $7,369,836 Financial Needs (Pro forma Analysis) including But-For Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The applicant has stated that but for the provision of tax increment financing, the project as proposed would not occur. Based on the applicant’s stated position relative to the need for tax increment financing assistance, the City could make its “but for” finding and provide tax increment assistance. We recommend, however, that the City review the provided assumptions to consider if the project meets the but-for test and, if so, what an appropriate level and type of TIF assistance may be based on the information submitted by the applicant. Following thorough evaluation of the project as provided allows the City to be prepared to make an informed “but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of assistance. To complete this analysis, we reviewed the applicant’s provided operating proforma and constructed similar ten-year project proformas, showing a result if the project received financial assistance as pay-as-you-go (reimbursement for TIF eligible costs) and showing a result if the project did not receive assistance. Our analysis of the proformas included a review of the development budget, projected operating revenues and expenditures, and the project’s capacity to support annual debt service on outstanding debt. The purpose of evaluating the operating proformas is to understand the potential cash flow performance through initial development of the project and the annual operations of the project over a 10-year period to assist with determining if the project is financially feasible and would need public participation. Measuring project feasibility is typically accomplished by analyzing a combination of 1) projected rate of return – both annual and cumulative and 2) estimated debt coverage ratio (DCR). Rate of return analysis illustrates the