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Total Estimated Net Tax Increment Present Value with <br />5% interest rate $1,058,720 <br />Portion of Land Purchase Price Required Upfront or via <br />Shortfall Agreement $347,140 <br />Portion of Land Purchase Price as Write Down $1,025,000 <br />Estimated Interest Payment $379,662 <br /> <br /> <br />The developer has also indicated the potential for a 40,000 square foot building expansion. Should the building <br />expansion occur during the term of the TIF District and generate additional revenues sufficient to repay the City’s <br />interfund loan in full plus interest at 3.5% or 5% (actual interest rate TBD), there may be consideration to increase <br />the interfund loan amount at that time to reimburse the developer for the initial upfront purchase. Additional <br />discussion on potential feasibility anticipated to occur. <br /> <br />An alternate option to adjusting the upfront purchase price based on availability of tax increment revenues would <br />be to incorporate a shortfall payment formula that could be calculated on either an annual basis or at a future <br />determined time (tied to construction of expansion and/or completion of TIF District). As illustrated in the table <br />below, construction of the building expansion is expected to generate additional increment that is expected to be <br />sufficient to support repayment of the full land write down amount of $1,372,140 plus interest (TBD). <br /> <br />Table 3: Additional Land Repayment Options <br /> <br />Land Purchase Price $1,372,140 <br /> <br />Total Estimated Net Tax Increment and Present Value with <br />0% interest rate $1,854,232 <br />Total Estimated Interest Payments (0%) $0 <br />Total Estimated Net Tax Increment Present Value with <br />3.5% interest rate $1,466,353 <br />Total Estimated Interest Payments (3.5%) $339,593 <br />Total Estimated Net Tax Increment Present Value with <br />5% interest rate $1,331,916 <br />Total Estimated Interest Payments (5%) $532,953 <br /> <br />Financial Needs Analysis) <br />Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that <br />the proposed development would not reasonably be expected to occur solely through private investment within <br />the reasonably foreseeable future. The developer has stated that without assistance being provided as upfront <br />through land write down, the project would not be able to secure the structure and level of debt financing <br />necessary for the project to be viable due to the following factors: 1) using equity to pay for upfront land costs <br />would impact HMI’s working capital. It would rely on higher cost funding and potential hinder future abilities to <br />remain price competitive and subject it to less reliable source of working capital to support operations, 2) the bank <br />would require higher equity investment from PLM properties if upfront assistance were not provided. This may <br />strain or limit the project scope due to capital constraints, 3) there are limitations on the level of bank financing <br />the project can secure due to the size of the capital investment and project. The developer’s submittals have <br />indicated that the upfront land write would alleviate the financing risks and concerns, provide PLM with the <br />necessary financial stability to secure a more favorable loan structure with a lower debt burden that would allow <br />HMI to maintain sufficient cash flow to meet operational needs, and to ensure business continuity during <br />construction of the project. Additionally, reduced equity requirements from the bank resulting from land write down <br />and availability of more working capital may allow PLM properties to accelerate the possibility of constructing the <br />40,000 square foot expansion. <br /> <br />Based on the developer’s stated position relative to the need for tax increment financing assistance, the City <br />could make its “but for” finding and provide tax increment assistance. We recommend, however, that the City