8.1 SR 05-17-2021 - Laserfiche WebLink

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financial assistance were appraisals supporting the anticipated purchase price. The additional requested documentation provides support for the request and term of financial assistance. Based on the financial analysis and available financing assumptions, without financial assistance, the project does not appear to be feasible. The applicant’s operating proforma without tax increment assistance is less than 1.0x DCR and with assistance using tax increment revenues as available cash flow, would be closer to 1.2x DCR, which is generally an acceptable level required for this type of project. Without assistance, the projected annual and cumulative rate of return is below industry standards for this type of project and with annual public assistance the project is projected to achieve marketable returns. Both the rate of return and debt coverage analysis indicate that the provided financing structure would not be financially viable without one or more of the following: 1) reduction in project costs 2) additional annual cash flow, and/or 3) additional funding sources. The projected performance of the project without as or would be necessary to obtain a level of debt financing necessary to fund all project costs and provide a reasonable return. Considerations for level of public assistance parameters include:  Public to private investment  Public assistance (TIF) and private equity  Extraordinary costs  Financial gap Additional factors that may impact project feasibility and level of public assistance include review of the City’s current TIF policy and implications to the financing assumptions. The City’s TIF policy provides for TIF District terms be limited to the minimum term necessary to meet the project needs with a redevelopment district limit of 15 years. Only projects exceeding the objectives identified in the policy will be considered to exceed those general thresholds. The application includes a request for 20 years of assistance. A supporting preapproval letter from the potential lender has indicated that 90% of the tax increment revenues over 20 years is needed to support debt service. Also related to policy guidelines is the requirement of owner cash equity of 10%. The applicant’s level of equity as proposed is 20%. The City commissioned a Comprehensive Housing Market Study Update in 2018. At that time the study identified a potential demand for approximately 864 new housing units through 2025. There was also strong demand for additional market rate (172 units). Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533 or Mikaela.huot@bakertily.com with any questions or comments.