HomeMy WebLinkAbout2005-06-14 CC Meeting Packet EnclosureMeeting Date June 14th, 2005
Agenda Item Title: TIF Request — Tim Node & Adopt TIF Policy
Time: 10 minutes
Agenda Placement Old Busines
Originating Departmen son
Enclosed are four key documents relative top the TIF proposal
4. Original submiftal from Tim Nolde
Oak Park Heights
Request for Council Action
Requester's Signature
Action Requested Discussion request and possible action:, Adopt TIF Policy
ENCLOSURE 1
Background/Justification (Ple se i icate if any previous action has been taken or if other public
bodies have advised):
1. A final City TIF Policy, the City should implement such policy regardless of the
outcome of Mr. Nolde's request so that additional formality is put in place.
2. A report from Mr. Nick Skarich of Northland Securities that discusses Mr. Nolde's
application from pay-off perspective. Generally, the proposed land acquisition costs
would be recovered by the TIF increments over 26 years, then at that point this property
would be returned to the tax rolls.
3. Letter from Mr. Bob Dieke, Tim Nolde's TIF Counsel has provided the requested legal
statements that the TIF — Redevelopment — should pass muster with Minnesota TIF law.
Council Members:
have not had a full chance to review this information as 1 have been out of the office the
past week with the flu; on Monday afternoon 1 will direct to your attention a staff memo
providing further analysis on the proposal.
Based on the extent to which the project achieves the policy consideration (1 -3
above), the City will consider providing TIF assistance to projects failing in the
following categories:
O Commercial or residential projects that encourage substantial redevelopment
of substandard properties.
O Research and development; educational entities
• Manufacturing companies
9 Major office, production and warehouse facilities
• Multi - family affordable housing projects that meet all of the requirements for
tax credits under Section 42 the Internal Revenue Code of 1986 as amended.
6. TIF assistance will be allocated for appropriate statutorily authorized uses,
including but not limited to the following:
• Land Acquisition
O Loans
• Site Preparation and improvement
O Public Improvements
• Demolition
O Bonding Costs
• Capitalized Interest
• Specifically stated actual costs of legal and engineering fees
Additional ' equire i i£ ents:
Application for TIF Assistance must be accompanied with a signed "Development
Application" and the payment of a $3,000 non- refundable Application Fee. Additionally
a $10,000 escrow payment must an application for Tit` assistance, these escrow funds are
utilized to ensure payment of bond counsel, financial consultants, attorney's fees, etc.
The applicant is responsible to pay for all fees related to the application and development
of the TIF plan and its implementation.
A final Development Agreement outlining terms and conditions of the final TIF plan
shall be completed and signed by the City and TIF Applicant.
Approved by the City Council:
Signed:
Eric Johnson, City Administrator
NORTHLAND
DATE: June 1, 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:
FROM: Nick Skarich, Vice President
Northland Public Finance
RE: Oakgreen Villas Phase 11
Dear Mr. Johnson and Council Members,
SECURITIES
45 South 7th Street
Suite 2500
Minneapolis, MIT 55402
(800) 851 -2920
(612) 851 -5900
Fax (612) 851 -5917
I have further reviewed the Anohobaypro, Inc. proposal and have provided the attached financial analysis
in efforts to aid the City in understanding the components of the proposed TIF project.
The most recent proposal includes the construction of 41 town homes. The construction is expected to be
completed by September of 2006, This would result in the first tax increments being available in taxes
payable 2008. Closing on the unit sales is expected to happen between July of 2006 and September of
2007. The benefits to the City include replacement of older housing stock, an addition of new housing
units and an increased tax base. It is important to note that the entire project includes 79 additional units
that will not be included in the TIF district.
Procedurally, the City would start by first calling for a public hearing, which would typically be held
approximately 45 days in the future. At that point Northland and Briggs & Morgan 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 current request for financial assistance includes $900,000 of tax increments to help offset $1,605,000
of acquisition related costs of the existing 6 homes on the property and allow for a reasonable return on
investment. This would be accomplished based on the information provided. 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 90% payout (10% adrnin to the City). The assumptions are
based on 41 units assessed at 90% of the sales price or $198,000. Reimbursements are only made
contingent on taxes being paid. No taxes = no TIF. This alleviates any financial risk to the City that
would be assumed if the City were to issue bonds for instance. Based on the attached analysis, and an
assumed market value inflation of 3 %, it would take the entire term of the district (26 years) for the
assistance to be paid in full (interest rate at Prime). At that time the properties would go back on the
City's tax rolls. The typical duration for housing related districts across the state tends to vary from 15 —
26 (full term) years. Twenty -six years of collection is the statutory maximum.
There are a couple of issues that would need to be addressed early on at the developer's expense. The
first is inclusion of certain properties, including replotting issues, that would need to be determined by the
City's bond counsel. The second will be an independent third party study that will determine whether
property will qualify as a redevelopment TIF district as proposed.
Overall, the project looks promising for the City of Oak Park Heights. 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 (612) 851-5907. Thank you.
Certification Request Date
Decertification Date
Present Value Date
Present Value Rate
08/01/05
12/31 /33
08/01/05
6.00%
(26 Years of Increment)
Type of TIF 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%
2004/05 Est.
Administration:
10.00%
Pooling/Sharing:
0.00%
Percentage of Tax Capacity Retained:
100.00%
Market Value Inflator:
103.00%
Base Value Information
2005/2006
2005/2006
(based on pay 04)
2005/2006
CLASS RATE
CLASS RATE
2005/2006
Class PID 4
EMV 1st Tier
2nd Tier
NTC
RES 05029201 40003
153,000 1.00%
1.00%
1,530
RES 0502920110027
70.100 1.00%
1.00%
701
RES 0502920110024
111.100 1.00%
1.00%
1,111
RES 0502920110026
161.800 L00%
1.00%
1,618
RES 0502920110025
155.900 1.00%
1.00%
1,559
RES 0502920110028
142,900 1.00%
1.00%
1,429
Total
794,800
7,948
2006/2007
2007/2008
2008/2009
2009/2010
Base EMV
S794.800 5794,800
$794,800
$794,800
Increase in EMV
Townliomes (1)
0 8.118.000
8,361,540
8,612,386
Project 2
0 0
0
0
Project 3
0 0
0
0
Project 4
0 0
0
0
Total Estimated Market Value
$794.800 S8,912.800
59.156,340
$9,407,186
NTC
Project 1 RES
0 81.180
83,615
86,124
Project 2 RES
0 0
0
0
Project 3 RES
0 0
0
0
Project 4 RES
0 0
0
0
Total Net Tax Capacity
SO S81,180
$83,615
$86,124
EXHIBIT III - TIF District Assum tions
City of Oak Park Heights
Tax Increment Financing (Housing) District No
Oakgreen Villas Phase II
(1) 41 units : E S 198.000 /unit 90% of the S220.000 sales price.
Prepared by: Northland Securities, Inc. -- 6/1/2005 2:15 PM
NORTHLAND
SECURITI ES
TIF 052005 - Assumptions
EXHIBIT IV - Pro ected Tax Increment Cash Flow
NORTH LAND
SECUR1TI ES
City of Oak Park Heights
Tax Increment Financing (Housing) District No.
Oakgreen Villas Phase 11
Less: Less: Retained Annual Less: Less: Less:
Annual Total Base Fiscal Captured Gross Tax State Admin. Additional Annual
Period Net Tax Net Tax Disp. (4_, Net Tax Increment Aud. Ded. Retainage Pooling Net Tax
Ending Capacity Capacity 0,00% Capacity 90.000% 0.36% 10.00% 0.00% Increment
12/311'06 7.948 7,948 0 0 0 0 0 0 0
12 7.948 7.948 0 0 0 0 0 0 0
12/31/08 81.180 7.948 0 73.232 65.909 237 6,567 0 59,
12/31/09 83,615 7.948 0 75,667 68.100 245 6.786 0 61,069
12/31/10 86.124 7.948 0 78.176 70.358 253 7.011 0 63,094
12/31'l l 88.708 7.948 0 80,760 72,684 262 7,42 0 65,180
12(31/12 91369 7.948 0 83.421 75.079 270 7.481 0 67,328
12i31;13 94.110 7.948 0 86,162 77.546 279 7,727 0 69,540
1 4 96.933 7.948 0 88.985 80.087 288 7,980 0 71,819
1231/15 99.841 7.948 0 91.893 82.704 298 8.241 0 74,165
12;31,16 102.836 7.948 0 94.888 85.399 307 8,509 0 76,583
12/31117 105.921 7948 0 97,973 88.176 317 8,786 0 79,073
12/31/18 109.099 7.948 0 101.151 91.036 328 9.071 0 81,637
12/31./19 112.372 7.948 0 104,424 93.982 338 9.364 0 84 ,280
1231,20 115.743 7.948 0 107.795 97.016 349 9.667 0 87,000
12 31121 119.216 7,948 0 111.268 100.141 361 9.978 0 89,802
12131/22 1 22,792 7.948 0 114.844 1 03.360 372 10.299 0 92,689
1231/23 126.476 7.948 0 118.528 106.675 384 10.629 0 95,662
12131/24 130,270 7.948 0 172.322 110.090 396 10.969 0 98.725
1' '31/25 134.178 7.948 0 126.230 113.607 409 11,320 0 101,878
12'31;26 138,204 7.948 0 130.256 117.230 477 1 1.681 0 105,127
12;31/27 142.350 7.948 0 134,402 120,962 435 12,053 0 108,474
12/31/28 146.620 7.948 0 138.672 124.805 449 12.436 0 111,920
1231/29 151.019 7.948 0 143,071 128.764 464 12,830 0 115,470
12 31 /30 155.549 7,948 0 147.601 132.841 478 13.236 0 119,127
1231/31 160.216 7.948 0 132.268 137.041 493 13.655 0 122,893
1 165.022 7.948 0 157.074 141367- 509 14,086 0 126,772
1231:'33 169.973 7.948 0 162.025 145.823 515 14.530 0 130,768
11/31,34 175,072 175.072 0 0 0 0 0 0 0
Prepared by: Northland Securities, lno. - 6/1/2005 2:15 PM
2.630.782 9.468 262.134 0 2,359,180
TIF 052005 - TaxlncAnn
EXHIBIT VI - Pay -as- ou-- o Note
NORIIIi. :1NI)
Sti( :L;Ri'.i "II:
City of Oak Park Heights
Tax Increment Financing (Housing) District No.
Oakgreen Villas Phase II
Note Date: 08.'01:05
Note Rate: 6.00° D
Proceeds: 5900,000
Excess: 5127,553 Loan
Semi- Annual Capitalized Balance
Date Principle Interest P & 1 Net Revenue Interest Outstanding
900,000.00
08'01 '06 0.00 0.00 0.00 0.00 54,000.00 954,000.00
02 `07 o.00 0.00 0.00 0.00 28,620.00 982,620.00
0801.'07 0.00 0.00 0.00 0.00 29.478.60 1,012,099.00
02'01:'08 0.00 0.00 0.00 0.00 30,362.97 1,042,462.00
0801. °08 0.00 2 9,551.00 29,551.00 2 9.551,00 1222.86 1,044,185.00
02'01;09 0.00 29,551.00 29,551.00 29,551.00 1,774.55 1,045,96000
08'01 09 0,00 30,534.00 30,534.00 30,534.00 844.80 1,046,805,00
02- 01.10 0.00 30,534.00 30,534.00 30,534.00 870,15 1,047,675.00
08/01'10 116.75 31,430.25 31,547.00 31,547.00 0.00 1,017,558.00
02;01 11 1 20.26 31,426.74 31,54 7.00 31,547.00 0.00 1 ,047,438.00
08 01 11 1,166.86 31,423.14 32,590.00 32,590.00 0.00 1,046,271.00
02 '01'12 1,201.87 31,388.13 32,590.00€ 32,590.0 €0 0.00 1,045,069.00
08:01 12 2,311.93 31,352.07 33.664.00 33,664.00 0.00 1,042,757.00
02 01 13 2,381.29 31,282.71 33,664.00 33,664.00 0.00 1,040,376.00
08'01 13 3,558.72 31,211.28 34,770,00 34,770.00 0.00 1,036,817.00
0201'14 3,665.49 31,104.51 34.77000 34,770.00 0.00 1,033,152.00
08 01 14 4,914.44 30,994.56 35.909.00 35.909.00 0.00 1,028,238.00
02'01.15 5,061.86 30,847.14 35,909.00 35,909.00 0.00 1,023,176.00
08.'01 15 6.387.72 30,695.28 37.083.00 37,083.00 0.00 1,016,788.00
02'01 '16 6,579.36 30,503.64 37.083.00 37,083.00 0.00 1,010,209.00
08/01 '16 7,984.73 30,306.27 38,291.00 38.291.00 0.00 1,002,224.00
01'01 '17 8,224.28 30,066.72 38.291.00 38,291.00 0.00 994,000.00
08'01 '17 9,716.00 29,820.00 39,536.00 39,536.00 0.00 984,284.00
02'01 '18 10,007.48 29,528.52 39,5 36.00 39,536.00 0.00 974,277.00
08'01 18 11,590,69 2 9, 2 28.31 40,81 9.00 40.819.00 0.00 962,686.00
02 01 19 11,938.42 28,880.58 40.819.00€ 40,819.0 €0 0.0 €0 950,748.00
08 '01 19 13,617.56 28,52 44 42,140.00 42,140.00 0.00 937,130.00
02 01 20 14.026.10 28.113 90 42,140.00 42.140.00 0.00 923,104.00
08 01 '20 15,806.88 27,693.12 43,500.00 43_500.00 0.00 907,297.00
02 01 21 16,281.09 27,218.91 43,500.00 43,500.00 0,00 891 ,016.00
08 '01 '21 18,1 70.52 26,730.48 44.901.00 44,901.00 0.00 872,845.00
02'01. 18,715.65 26,185.35 44,900 1.00 44,901.00 0.00 854,129.00
08'01 20,721.13 25,623.87 46.345.00 46,345.00 0.00 833,408.00
02'0123 21,342.76 25,002.24 46.345.00 46.345.00 0..00 812,065.00
08 01 23 2 3,469.05 24,361.95 47,831.00 47.831_00 0.00 788,596.00
02 01 24 24,173.12 23,657.88 47,83 1.00 47,831.00 0.00 764,423,00
08 01 24 26.429.31 22,932.69 49.362.00 49.362.00 0.00 737,994.00
02 01 25 27 22 22,139.82 49.362.00 49.362.00 0.00 710,772.00
0801 25 29.616.84 21,323.16 50 940.00 50_940.00 0.00 681,155.00
0101 '26 30,505.35 20,434.65 50,940.00 50,940.00 0.00 650,650.00
08 01 26 33,044.50 19,519.50 52,564.00 52,564.00 0.00 617,606.00
02 01 27 34,035.82 18,528.18 52.564.00 52,564.00 0.00 583,570.00
08'01 27 36,729.90 17,507.10 54,237.00 54.237.00 0.00 546,840.00
02'01 28 37,831.80 16,405.20 54.237.00€ 54.237.00 0.00€ 509,008.00
08 01 28 40,688.76 15,270.24 55,959.0 €0 55,959.00 0.00 468,3 19,00
02 01 '29 41,909.43 14,049.57 55,959.00 55,959.00 0.00 426,41 0.00
08 01 29 44,942.70 12,792.30 57,735.00 57.735.00 0.00 381,467,00
02 01 30 46.290.99 11,444.01 57 57.735.00 0.00 335,176.00
0801 30 49.508.72 10,055.28 39.564.00 59,564.00 0.00 285,667.00
02 - 01 31 50,993.99 8,570.01 59,564.00 59,564.00 0.00 234,673.00
08 01 31 54.405.81 7,040.19 61.446.00 61.446,00 0.00 180,267.00
02 01 32 56.0€37.99 5,408.01 61,446.00 61.446.00 0 €.00 121.
08 01 32 59,659.13 3,726.87 63,386.00 63,386.00 0,00 64,570.00
02 01 33 61,448.90 1,937,10 63.386 0 € 63,386.00 0.00 3,121.00
08 01 33 3,121.00€ 93.63 3,214.63 3,2 14.63 0.00 0.00
02 01 34 0.0€0 0.00 0 00 00 00 0.00 0.00
08 0 1 34 0,0 €0€ 0.00 0.00 0.00 0.00 0.00
0201 35 0.00 0.00 0.00 0 00 0.00 0.00
1.047,675 13 1,183,947.30 1231.622.63 2.231.622.63 147,673.93
Prepared by: Northland Securities. Inc. - 6/1)2005 2'16 PM TIF 052005 - PayGo
BRADLEY&DEIKE, P.A.
Attorneys At Law
SUITE 100, 401 WEST 65TH STREET
EDINA, MINNESOTA 55435
Mr. Eric Johnson
City Administrator
City of Oak Park. Heights
14168 Oak Park Blvd.
Box 2007 -
Oak Park Heights, MN 55082
OFFICE: (952) 926 -5337
FAX: (952) 926-5743
June 2, 2005
PATRICK J. BRADLEY
pjb C bradleydeike. coin
ROBERT J. DEIKE
rjd@bradleydeike.com
STEPHEN J. WONTOR
sjw @bradleydeike.com
Re: Oakgreen Villas Phase II
Dear Mr. Johnson:
This firni has been retained by Anchobaypro, Inc.,, (the "Developer ") in connection with its
proposal for tax increment financing from the City of Oak Park Heights to assist it in undertaking
the above - referenced housing development. I understand from Nick Skarich at Northland
Securities that you wanted nee to address by letter a couple of points related to the tax incr enient
proposal.
The first point relates to the qualification of the tax increment district. The creation of a
redevelopment tax increment district requires compliance with the requirements of Minnesota
Statutes, section 469.174, subd. 10. Simply stated, those requirements are:
1. 70% of the area of the proposed district must be occupied by improvements.
2. In order to be` considered "occupied ", at least 15% of the area of a parcel must be
occupied by "buildings, streets, utilities, paved or gravel parking lots, or other similar
structures."
3, More than 50 percent of the buildings, not including outbuildings, must be
structurally substandard to a degree requiring substantial renovation or clearance.
Typically, a municipality will retain an engineering or architectural firm to inspect the properties
and buildings to be included in a district and prepare a report on whether the proposed district
meets the statutory requirements. We propose that the City do that in this case. There are
several firms in the Twin Cities that do such work. Such a report will indicate whether the
district qualifies as a redevelopment district and will form the basis for the City Council's
findings. Based on our knowledge of the site, we believe that there is a good likelihood that the
district will meet the statutory requirements.
The second point you wanted discussed is . the tax increment "but for" test. Under the tax
increment financing laws before a Imunicip ality can create a tax increment district the
municipality must find that if it were not for the tax increment financing assistance, the proposed
development would not occur. Again, a city proposing ,to create a tax increment district will
typically retain a financial advisor to examine the developer's pro forma and to advise the city on
whether the use of tax increment is justified and what the level of assistance should be. I
understand that the City has retained Northland Securities to undertake that analysis for the City.
The Developer has provided to . the City a preliminary project pro forma and will provide such
updated pro formas and supporting documentation as Northland Securities will need to advise
the City on this matter.
The Oakgreen - villas Phase II project involves the acquisition of six single family homes for
demolition to allow construction of new townhouses. The cost of-acquiring the single family
homes is estimated to be in excess of $1,500,000. Such costs are extraordinary costs of
redevelopment and normally can not be recovered through the proceeds received from the sales
of the townhouse units. We believe that the project pro forrnas will demonstrate that without tax
increment assistance the return that the Developer will likely achieve by doing the project will be
below the level that a typical housing developer would expect to receive.
I hope that this letter is sufficient for your purposes at this point. If you have any questions
please let me know.
Sincerely,
Robert J. Deike
cc: Nick Skarich
Tim Nolde
Mr. Eric Johnson
City Administrator
City of Oak Park Heights
14168 oak Park Blvd.
Box 2007
Oak Park Heights, MN 55082
Re: Tax Increment Financing Proposal
Dear Mr. Johnson:
April 5, 2005
This is in response to your letter dated February 16, 2005, and our subsequent meeting
regarding possible tax increment assistance for a portion of the housing development we
are proposing in the City of Oak Park heights. The following is intended to be a
response to the points in your letter we agreed we would address when we met earlier this
month:
Summary Description of Project
The name of the proposed project is Oakgreen villas Phase II. The developer will be
Anchobaypro, Inc. and/or its assigns. As you are aware, the overall housing project
which Anchbaypro, Inc. is undertaking consists of the construction of 149 units of single
family housing. The Oakgreen villas Phase II project, to which the tax increment
proposal pertains, consists of 21 townhouse units to be located where there currently
exists six single family homes directly to the north of Oakgreen Avenue North. That part
of the project involves the acquisition of the six single family ho me s and the construction
of 21 townhouse units on the property acquired. We are proposing that the City create a
tax increment district to encompass the acquired property and certain additional land and
use the tax increment from the district to offset the costs of acquisition of the six homes.
Detailed Description of Project
Type of Tax Increment District. We propose that the City create a redevelopment tax
increment district as defined in Minnesota Statutes, section 469.174, subd. 10. Under
Minnesota law in order to create a redevelopment district 70% of the area of the district
must be "occupied by buildings, streets, utilities, paved or gravel parking lots, or other
similar structures ". In addition, more than 50 percent of the buildings, not including
outbuildings, must be structurally substandard to a degree requiring substantial
renovation or clearance.
Based on our initial review of the site and the law, we believe that that the area proposed
would likely qualify as a redevelopment district. In order to determine whether in fact
the district could be created and in order to create the necessary supporting
documentation, we, or the City at our cost, would retain a consultant to inspect the
property and buildings to determine whether they qualify.
It may be possible to include in the district some property in addition to the six single
family homes being acquired. We propose to create a new tax parcel consisting of a
portion of the property to the north of the single family homes and include such
additional property in the district to extent possible without exceeding the statutory 30%
limit on unimproved property that may be in the district. We believe that 26 townhouse
units, in addition to the 21 units to be built on the property where the 6 homes are
currently located, can be built on property included in the district.
A portion of the property on which the 6 homes are located will be made available to the
City to be used to widen and improve Oakgreen Avenue North.
Project Schedule. The following is a proposed schedule for the creation of the tax
increment district and development of the project:
Event Date
City Council Preliminary Review of Project April, 2005
Developer Acquisition of Properties May /June 2005
City or Developer Hiring of Property Inspector May, 2005
Preparation of Tax Increment Plan May, 2005
City Council Hearing on Creation of District June, 2005
Demolition of Single Family Homes Fall, 2005
Commencement of Construction Fall, 2005
Completion of Construction and Sale of All Units Fall, 2007
Responsibilities of Parties. We anticipate that the developer will be responsible for the
following in connection with the project:
• Acquisition of the 6 single family homes
• Construction of all aspects of the private townhouse project
e Payment of all costs of the City associated with the creation of the tax increment
district
We expect that the City will be responsible for the following;
• Preparation of tax increment plan, at the developer's expense
• Scheduling of hearing on creation of tax increment plan and giving of statutory
notices
® Construction of improvements to Oakgreen Avenue North
Depiction of Proposed District.
Enclosed with this letter as Exhibit A is a preliminary plat showing the property that we
currently anticipate will be included in the district.
Property to Be Included in District.
The following is a list of the properties to be included in the district:
• 5710 Oakgreen Avenue North
• 5754 Oakgreen Avenue North
• 5 762 Oakgreen Avenue North
• 5 770 Oakgreen Avenue North
• 5 800 Oakgreen Avenue North
® 5830 Oakgreen Avenue North
In addition to these properties, as noted above, we propose that certain additional
property located to the north of these properties would be included to the extent that its
inclusion would not violate the prohibition against including unimproved property in
excess of 30% of the area of the district. Including such additional property will allow
approximately 26 additional townhouse units which will generate additional tax
increment that can be used to offset acquisition costs and/or the costs of improving
Oakgreen Avenue North.
Project P ro fo rn a
Attached to this letter as Exhibit B is a project pro forma. The pro forma includes project
costs and revenues associated only with the acquisition of the six single family homes
and the construction and sale of the 21 townhouse units to be built on the property
acquired.
"But For" Analysis
As noted in the attached pro forma, acquisition costs for the 21 townhouse units to be
built on the property occupied by the six single family homes totals $1,605,000, or
approximately $76,000 per unit. Even assuming that tax increment in the amount of
$900,000 is made available to offset those costs, the return to the developer will be
approximately 3% of total project costs associated with the development of the 21 units.
Absent tax increment assistance it will not be feasible to undertake that aspect of the
development and it will not occur.
Benefits Analysis
You requested an analysis of the estimated benefits that the City would derive from the
use of tax increment as proposed. We believe the City will benefit as follows:
• The project will result in the removal of substandard buildings and other buildings
whose location is inappropriate in light of surrounding uses.
• As a result of the project the City will be able to acquire property necessary to
undertake improvements to Oakgreen Avenue North that will enhance traffic flow
in the area of the project.
¢ The neighbors affected by the overall project will be able to sell, their homes at a
reasonable price and concerns about the project and the effect on their properties
will be avoided.
O The project will result in a continuous landscape west of Oakgreen.
We hope that the information in this letter will assist the City in determining whether it is
willing to utilize tax increment to assist the proposed project. If you need additional
information at this time please feel free to contact me.
Tim Nolde
Cost Summary Amount Percent d=
Land Acquisition $ 1,515,000 29.13%
Site Work $ 90,000 1.73%
Environmental $ 5,000 0.10%
Demolition $ 120,000 2.31%
Broker Fees, Commissions $ 45,000 0.87%
Relocation
Total Acquisition $ 1,605,000 30.87%
New Construction Private $ 2,280,000 43.85%
City Fees $ 70,000 1.35%
Private Streets $ 105,000 2.02%
Excavation $ 220,000 4.23%
Contingency $ 100,000 1.92%
Total New Construction $ 2,775,000 53.37%
Architectural and Engineering $ 08,000 1.31%
Architectural Inspections $ 6,000 0.12%
Soil Testing
Surveys $ 10,000 0.19%
Total Architectural and Engineering $ 84,000 1.62%
Sales Fees and Marketing $ 308,000 5.92%
Signage
Sales Commissions
Advertising $ 15,000 0.29%
Total Marketing $ 323,000 6.21%
Construction Interest and Fees $ 147,000 2.83%
Association Fees and Taxes $ 95,000 1.83%
Insurance $ 8,000 0.15%
Total Carrying Costs $ 250,000 4.81 %
Lender Fees
City TIF Fees
Total Financing Fees $
Environmental Consultants $ 13,000 0.25%
Total Environmental Consultants $ 1 3,000 0.25%
Condo Documents
Attorneys Fees
Title Costs
Total Condo, Attorneys, Title
Developer's Overhead
Developer Fees
Total Developer's Overhead
$ 20,000 0.38%
$ 25,000 0.48%
$ 5,000 0.10%
$ 50,000 0.96%
$ 100,000 1.92%
$ 1 00,000 1.92%
Total Project costs $ 5,200,000 1 00.00%
Income Summary
Total Sales Prices of Units $ 4,620,000
Tax Increment $ 900,000
Total Proceeds $ 5,520,000
Proceeds $ 5,520,000
Project Costs $ 5,350,000
Profit $ 160,000
Percent of Cost 2.99%
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