11-30-2021 JOINT FINANCE COMMITTEE PACKET

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The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To Joint Finance Committee Item Number 4.1 Agenda Section General Business Meeting Date November 30, 2021 Prepared by Brent O’Neil, Economic Development Director Item Description TIF Application Jackson Hills Second Edition Reviewed by Cal Portner, City Administrator Reviewed by Action Requested Review application and analysis and recommend support, by motion, to the Housing and Redevelopment Authority (HRA). Background/Discussion The city received an application for Tax Increment Finance (TIF) from Briggs Companies to complete a multifamily housing project known as Jackson Hills II at Jackson Avenue and Sixth Street. The project is similar in size and design to the Jackson Hills apartment project which recently opened and received approval of TIF in 2019. Key parameters of the project and summary of the TIF request are stated below:  44-unit apartment building with a mix of studio, 1-, 2-, and 3-bedroom units.  Twenty percent of units are proposed as income restricted, primarily studio units.  88 total parking spaces, one-half indoors and one-half surface parking.  Project budget of $8.59 million - $6 million in financing, $2.59 million from equity sources.  Current taxes are at $4,400. Developer projects taxes after completion at $88,000. Based on preliminary taxable value estimates from the county, actual taxes may exceed $110,000.  TIF request: 15 years at 90% increment capture during that period.  Overall site excavation and grading is in excess of typical costs and is due to extraordinary mitigation for unbuildable soils. Baker Tilly has been engaged to provide a review and analysis of the request. The attached memo summarizes Baker Tilly’s review and contains its evaluation of cost and revenue assumptions, qualifications as a housing TIF district, and financial need. The analysis includes TIF participation in the project at $850,000 (principal value). The analysis indicates the project would not move forward but for the use of TIF due to the extraordinary costs related to site development and soils correction costs. The committee may recommend the use of TIF as presented, recommend with modifications, or recommend TIF not be utilized for this project.