HomeMy WebLinkAbout2005-09-08 Northland Securities Memo to OPH Re CSM TIFNORTHLAND
DATE: September 8, 2005
E X T E R N A L M E M O R A N D U M
TO: Mr. Eric Johnson, City Administrator
Members of the City Council
CC: Steve Bubul, Kennedy and Graven
FROM: Nick Skarich, Vice President
Northland Public Finance
RE: CSM Commercial Retail TIF
Dear Mr. Johnson and Council Members,
I have reviewed the CSM TIF application and I am supplying this memo, along with the attached
financial analysis, to demonstrate the financial status in its current preliminary state.
PID
0502920110001
0502920110004
0502920110005
0502920110008
0502920110016
0502920110024
0502920110025
0502920110026
0502920110027
0502920110028
0502920110029
0502920110030
0502920110034
0502920110040
0502920110033
TOTAL:
SECURITIES
The proposal includes the construction of 150,000 sq. ft. of commercial retail space. The existing
properties in the proposed TIF district breakdown as follows:
Taxes Payable 2006
Land Bldg
Total
310,800
70,400
1 57,300
33,000
33,000
55,200
64,000
64,000
38,000
64,000
1 ,000
12,900
34,000
374,000
1,029,900
49,600
101,300
100,800
83,000
83,000
94,600
131,600
1 38,900
55,300
118,000
0
0
96,600
170,200
19,500 1,049,400
2,341,500 1,242,400 3,583,900
45 South 7 Street
Suite 2500
Minneapolis, MN 55402
(800) 851 -2920
(612) 851 -5900
Fax (6I2) 851-5917
360,400
171,700
258,100
116,000
116,000
149,800
195,600
202,900
93,300
182,000
1,000
12,900
130,600
544,200
Though the development plan is not yet finalized, the assumption used in this analysis is that all of the
structures will be demolished. Based on State statute, the value of the buildings will be included in the
"base value" of the TIF district. This means that taxes generated on the values above (land and building)
will be paid to the applicable taxing jurisdictions as they would in lieu of a TIF district. Any inflationary
increases in land value will be included as tax increment. Thus, the value of the demolished buildings
will be netted out of the total estimated new market value of the TIF district. The project is expected to
be 50% completed in 2006 (taxes payable 2008) and 100% completed in 2007 (taxes payable 2009). This
will result in a partial tax increment payment in 2008 with full ttx increment being generated beginning
with taxes payable in 2009.
It has been estimated by CSM that there will be $31,106,150 of new market value within the TIF district.
This includes approximately 130,000 sq. ft. in a multi- tenant "junior box" layout, which would include 4-
6 tenants at approximately 20- 30,000 sq. ft. each. The remainder is proposed to be four 5,000 sq. ft. free-
standing retail buildings for restaurant/retail use. The current request for tax increment is $9,000,000 to
offset $11,784,200 of acquisition related costs of existing parcels (land and buildings) within. the TIF
district. Based on the current assumptions, this level of assistance could not be reached with a TJF district
duration in the 15 -20 year range. The estimated present value of increments over 15 years would be
approximately $3,860,000. To provide a comparison, the estimated present value of tax increments over
20 years would be approximately $4,500,000. The actual amount will be dependent on a number of
factors including actual acquisition costs, timing and method of financing and could vary considerably.
The assistance would be provided through a "pay -as- you -go" mechanism. This means that as taxes are
paid on the property the tax increment portion would be returned to the City who would in turn reimburse
the Developer on an annual basis. The payment amount would be determined by terms negotiated in the
development agreement. The attached example reflects a 95% payout (5% admin to the City).
Reimbursements are onl made contin en , . , . x s ben . aid. No taxes = TIF, This alleviates any
fmancial risk to the City at would be assumed if the City were to issue bonds for instance. This allows
the developer to finance the TIF piece one of two ways. The first way would be to obtain bank financing
and be reimbursed annually based on tax increments. The second would be for the developer to sell the
tax . increment note. This method would not add any risk to the City though the City would be the
"conduit" issuer of the note. This allows the developer to get the majority of the tax increments upfront
without the City actually issuing bonds. Twenty -six years of collection is the statutory maximum for this
type of district.
CSM has supplied financial projections reflecting an 8.61% return with the required TIF assistance and
6.14% return without. Even with the TIF assistance, a return of 8.61% would be considered more than
reasonable. This keeps the equity contribution at about 27 %. Without the TIF assistance the equity
contribution would increase to approximately 48 %, which would be cost prohibitive for most types of
projects. Again, these projections are preliminary and many variables will affect these projections. The
City will have the ability to dictate the reimbursement through its development agreement with CSM.
The actual TIF assistance can be tied back to actual acquisition costs, actual lease agreements, etc.
Another issue that would need to be addressed is the additional public costs that may be associated with
the project (road upgrades, signals, etc.). In discussing this with CSM, these potential costs have not yet
been determined at this time but they are willing to work with the City in the payment of these costs.
These are additional items that would be negotiated in the development agreement.
I've include supporting schedules demonstrating the preliminary TIF generation. The Assumptions page
shows the variables going into the calculations. The TIF Cash Flow page shows the annual net TIF
generation which incorporates a 1% annual inflation factor. The Pay -as- you -go note reflects a sample
amortization with interest accruing from November 1 at 7.5 %. This is for discussion purposes and actual
accrual dates would be determined at a later date.
Procedurally, the City would start by first calling for a public hearing, which would typically be held
approximately 45-60 days in the future. At that point Northland and Kennedy & Graven would start the
process of preparing the required documents and notices and forwarding those to the required parties.
The developer would not be able to proceed, including the pulling of a building permit, until the City
passes a resolution approving the establishment of the TIF district following the public hearing.
The City will need to determine its comfort level with the nature of the project, duration of the district,
etc. We look forward to working with you on this project. Feel free to contact me with any questions at
( 851 - 5901. Thank you.
IT I. TIF D�stk pct A
511n� t1�I15 IwgRTH�,A.N, F OSECURITIt5
City of Oak Park Heights
Tax Increment Financing (Housing) District No.
Oakgreen Villas Phase II
2006/2007 2007/2008 2008/2009 2009/2010
Base EMV $3,583,900 $3,583,900 $3,583,900 $3,583,900
Increase in EMV
Project I 0 11,969,175 27,522,250 27,797,473
Project 2 0 0 0 0
Project 3 0 0 0 0
Project 4 0 0 0 0
Total Estimated Market Value
$3,583,900 $15,553,075 $31,106,150 $31,381,373
Certification Request Date
Decertification. Date
Present Value Date
Present Value Rate
Type of Tom' District: Housing
Type of Debt: Loan (Pay -as- you -go)
Fiscal Disparities Election: NA
Fiscal Disparities Rate: 0.0000%
Local Tax Capacity Rate: 90.000%
Administration: 5.00%
Pooling/Sharing: 0.
Percentage of Tax Capacity Retained: 100.00%
Market Value Inflator: 101.00%
Prepared by: Northland Securities, Inc. - 9/8/2005 11:10 AM
1 1/01/05
12131123 (16 Years of Increment)
11/01/05
6.50%
2004/05 Est.
Base Value Information 2005/2006 2005/2006
(based on pay 04) 2005/2006 CLASS RATE CLASS RATE 2005/2006
Class PID # EMV lst Tier 2nd Tier NTC
CIP 0502920110001 360,400 1.50% 2.00% 6,458
CIP 0502920110004 171,700 1.50% 2.00% 2,684
CIP 0502920110005 258,100 1.50% 2.00% 4,412
CIP 050292011 0008 11 6,000 1.50% 2.00% 1,740
CIP 0502920110016 116,000 1.50% 2.00% 1,740
CIP 0502920110024 149,800 1.50% 2.00% 2,247
CIP 0502920110025 195,600 L50% 2.00% 3,162
CIP 0502920110026 202,900 L50% 2.00% 3,308
CIP 0502920110027 93,300 1.50% 2.00% 1,400
CIP 0502920110028 182,000 L50% 2.00% 2,890
CIP 0502920110029 1,000 1.50% 2.00% 15
CIP 0502920 110030 12,900 1.50% 2.00% 194
CIP 0502920110034 130,600 L50% 2.00% 1,959
CIP 0502920110040 544,200 L50% 2.00% 10,134
CIP 0502920110033 1,049,400 1.50% 2.00% 20,238
Total 3,5 83,900 62,580
NTC
Project 1 CIP 0 310,312 621,373 626,877
Project 2 CIP 0 0 0 0
Project 3 CIP 0 0 0 0
Project 4 CIP 0 0 0 0
Total Net Tax Capacity $0 $310,312 $621,373 $626,877
TIF 082305 - Assumptions
IT IV - Pro'ected Tax Increment Cash Flow
Less: Less: Retained
Annual Total Base Fiscal Captured
Period Net Tax Net Tax Disp, a@ Net Tax
Ending Capacity Capacity 0.00% Capacity
12/31/06 62,580 62,580 0 0
12/31/07 62,580 62,580 0 0
12/31/08 310,312 62,580 0 247,732
12/31/09 621,373 62,580 0 558,793
12/31/10 626,877 62,580 0 564,297
12/31/11 632,437 62,580 0 569,857
12/31/12 638,052 62,580 0 575,472
12/31/13 643,723 62,580 0 581,143
12/31/14 649,451 62,580 0 586,871
12/31/15 655,236 62,580 0 592,656
12/31/16 661,080 62,580 0 598,500
12/31/17 666,981 62,580 0 604,401
12/31/18 672,942 62,580 0 610,362
12/31/19 678,962 62,580 0 616,382
12/31/20 685,042 62,580 0 622,462
12/31/21 691,183 62,580 0 628,603
12/31/22 697,386 62,580 0 634,806
12/31/23 703,650 62,580 0 641,070
12/31/24 709,978 709,978 0 0
12/31/25 716,368 716,368 0 0
12/31/26 722,822 722,822 0 0
12/31/27 729,341 729,341 0 0
12/31/28 735,926 735,926 0 0
12/31/29 742,576 742,576 0 0
12/31/30 749,292 749,292 0 0
12/31/31 756,076 756,076 0 0
12/31/32 762,927 762,927 0 0
12/31/33 769,847 769,847 0 0
12/31/34 776,836 776,836 0 0
NO IkT L A 1"'
S. CtJIUTttS
City of Oak Park Heights
Tax Increment Financing (Housing) District No.
CSM Project
Annual
Gross Tax
Increment
90.000%
0
0
222,959
502,914
507,867
512,871
517,925
523,029
528,184
533,390
538,650
543,961
549,326
554,744
560,216
565,743
571,325
576,963
0
0
0
0
0
0
0
0
0
0
0
8,310,067
Less:
State
And. Ded.
0.36%
Less: Less:
Admin. Additional
Retainage Pooling
5.00% 0.00%
0 0 0
0 0 0
803 11,108 0
1,810 25,055 0
1,828 25,302 0
1,846 25,551 0
1,865 25 0
1,883 26,057 0
1,901 26,314 0
1,920 26,574 0
1,939 26,836 0
1,958 27,100 0
1,978 27,367 0
1,997 27,637 0
2,017 27,910 0
2,037 28,185 0
2,057 28,463 0
2,077 28,744 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
29,916 414,006
Annual
Net Tax
Increment
0
0
211,048
476,049
480,737
485,474
490,257
495,089
499,969
504,896
509,875
514,903
519,981
525,110
530,289
535,521
540,805
546,142
0
0
0
0
0
0
0
0
0
0
0
0 7,866,1451
Prepared by: Northland Securities, Inc. - 918/2005 11:11 AM TIF 082305 - TaxlncAnn
Pay-as-you-go Note
Note Date:
Note Rate:
Proceeds:
11/01/05
7.50%
$3,860,982
NORTHLAND
SECURITIES
City of Oak Park Heights
Tax Increment Financing (Housing) District No
CSM Project
Loan
Semi - Antral Balance Accrued
Date Princi•le Interest P & 1 Net Revenue Outstanding Interest
3,860,982.37
8/1/2006 0.00 0.00 0.00 0.00 3,860,982.37 217,180.26
2/1/2007 0,00 0.00 0.00 0.00 3,860,982.37 361,967.10
8/1/2007 0.00 0.00 0.00 0.00 3,860,982.37 506,753.94
2/1/2008 0.00 0.00 0.00 0.00 3,860,982.37 651,540.78
8/1/2008 0.00 105,524.00 105,524.00 105,524.00 3,860,982.37 690,803.62
2/1/2009 0.00 105,524.00 105,524.00 105,524.00 3,860,982.37 730,066.46
8/1/2009 0.00 238,024.00 238,024.00 238,024.00 3,860,982.37 636,829.30
2/1/2010 0.00 238,024.00 238,024.00 238,024.00 3,860,982.37 543,592.14
8/1/2010 0.00 240,369.00 240,369.00 240,369.00 3,860,982.37 448,009.98
2/1/2011 0.00 240,369.00 240,369.00 240,369.00 3,860,982.37 352,427.82
8/1/2011 0.00 242,737.00 242,737.00 242,737.00 3,860,982.37 254,477.66
2/1/2012 0.00 242,737.00 242,737.00 242,737.00 3,860,982.37 156,527.50
8/1/2012 0,00 245,128.00 245,128.00 245,128.00 3,860,982.37 56,186.34
2/1/2013 44,154.82 200,973.18 245,128.00 245,128.00 3,816,827.55 0,00
8/1/2013 104,412.97 143,131.03 247,544.00 247,544.00 3,712,414.58 0.00
2/1/2014 108,328.45 139,215.55 247,544.00 247,544.00 3,604,086.13 0.00
8/1/2014 114,830.77 135,153.23 249,984.00 249,984.00 3,489,255.36 0.00
2/1/2015 119,136.92 130,847.08 249,984.00 249,984.00 3,370,118.44 0.00
8/1/2015 126,068.56 126,379.44 252,448.00 252,448.00 3,244,049,88 0.00
2/1/2016 130,796.13 121,651,87 252,448.00 252,448.00 3,113,253.75 0.00
8/1/2016 138,189.98 116,747,02 254,937.00 254,937.00 2,975,063.77 0.00
2/1/2017 143,372.11 111,564.89 254,937.00 254,937.00 2,831,691.66 0.00
8/1/2017 151,262.56 106,188.44 257,451.00 257,451.00 2,680,429.10 0.00
2/1/2018 156,934.91 100,516.09 257,451.00 257,451.00 2,523,494.19 0.00
8/1/2018 165,358.97 94,631.03 259,990.00 259,990.00 2,358,135.22 0.00
2/1/2019 171,559.93 88,430.07 259,990.00 259,990.00 2,186,575.29 0.00
8/1/2019 180,557.43 81,996.57 262,554.00 262,554.00 2,006,017.86 0.00
2/1/2020 187,328,33 75,225.67 262,554.00 262,554.00 1,818,689.53 0.00
8/1/2020 196,944.14 68,200.86 265,145.00 265,145.00 1,621,745.39 0.00
2/1/2021 204,329.55 60,815.45 265,145.00 265,145.00 1,417,415.84 0.00
8/1/2021 214,606.91 53,153.09 267,760.00 267,760.00 1,202,808.93 0.00
2/1/2022 222,654.67 45,105.33 267,760.00 267,760.00 980,154.26 0.00
8/1/2022 233,647.22 36,755.78 270,403.00 270,403.00 746,507.04 0.00
2/1/2023 242,408.99 27,994.01 270,403.00 270,403.00 504,098.05 0.00
8/1/2023 254,167.32 18,903.68 273,071.00 273,071.00 249,930.73 0.00
2/1/2024 249,930.73 9,372.40 259,303.13 259,303.13 0.00 0.00
8/1/2024 0.00 0.00 0.00 0.00 0.00 0.00
2/1/2025 0.00 0.00 0.00 0.00 0.00 0.00
8/1/2025 0.00 0.00 0.00 0.00 0.00 0.00
2/1/2026 0.00 0.00 0.00 0.00 0.00 0.00
8/1/2026 0.00 0.00 0.00 0.00 0.00 0.00
2/1/2027 0.00 0.00 0.00 0.00 0.00 0.00
8/1/2027 0.00 0.00 0.00 0.00 0.00 0.00
2/1/2028 0.00 0.00 0.00 0.00 0.00 0.00
3,860,982.37 3,991,387.76 7,852,370.13 7,852,370.13
Juran and Moody - 9/8/2005 at 11:13 AM TIF 082305 - PayGoAcc