7.1 EDSR 05-20-2024 - Laserfiche WebLink

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Table 1c: Tax Increment Revenue Projections (Combined Phase 1 and Phase 2) Total Estimated Gross Tax Increment over Remaining Term $1,951,823 Estimated City Retained (5%) $97,591 Total Estimated Net Tax Increment and Present Value with 0% interest rate $1,854,232 Total Estimated Net Tax Increment Present Value with 3.5% interest rate $1,466,353 Total Estimated Net Tax Increment Present Value with 5% interest rate $1,331,916 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 increments 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 itself in full if tax increment revenues are not sufficient. The City has historically financed projects as pay-as-you-go for reimbursement to the developer of eligible costs, but in certain instances financed with internal loans to be repaid with future tax increments. It is important to note the request for financial assistance for this project does not include any City bond issuance or upfront funding requirements. The City would be acting more like a lender of its own funds and collecting future tax increments to pay the developer’s land purchase price. The developer has requested assistance for the project through upfront land write down. The City would not be paid for the land at closing and would collect future tax increment revenues generated by the new project to reimburse itself for the land. The repayment may include interest subject to availability of tax increments to repay the land purchase price in full. The estimated purchase price for the property assuming approximately 14 acres is $1,372,140 and based on $2.25 per square foot. The estimated tax increment revenues that may be generated from Phase 1 of the project (110,000 square foot building), potential Phase 2 (40,000 square foot expansion) and combined for Phases 1 and 2 are all summarized in the tables on the previous page. Tax increment revenues from Phase 1 are expected to be sufficient to reimburse the City for the land write of $1,372,140 but would be less than what would be necessary to include an interest repayment component over the maximum 9-year term of the TIF District. Should Phase 2 be constructed, additional tax increment revenues would be generated and expected to provide sufficient revenues to support interest repayment on the City’s land write down. Because the City owns the land and is taking the role as lender, it may have some flexibility and ability to consider alternate repayment structures of the land write down. The City may consider requiring a portion of the land be paid upfront, subject to the availability of tax increment revenues to repay principal plus interest at a rate to be determined on the interfund loan, or require a shortfall agreement that could be structured on either an annual basis or upon completion of the district. The developer has also included in the application for tax increment assistance an additional request for pay-as-you-go financing for reimbursement of site improvements of $264,520 and further analysis regarding this request is expected prior to finalizing the repayment structure. Page 39 of 64