03-28-01 Council Workshop Minutes

Home Browse Search

MINUTES CITY COUNCIL MARCH 28, 2001 first floor of the building would be retail and the two upper floors would be office. Rents for the office would be anticipated at $12.50 per square foot. Project costs are estimated at approximately $4.2 million, and in addition to the land, these developers anticipated the need to reduce project costs by $550,000. (In this discussion they did not ask for a City subsidy and the City would keep the TIF revenue.) Rusty Fifield, Ehlers & Associates, reported that the building would consist of 30,000 to 33,000 square feet. He noted that excess TIF dollars generated from Park Place as well as Country Drive could be used to assist this project. He also noted that the project would not be totally risk free given the potential for class rate compression and the TIF guarantee. Fifield suggested that the City could take an equity position in the project that would be subordinate to the first mortgage. If the building were then sold, once the mortgage was satisfied, the City's project assistance would be reimbursed if there were adequate funds to do so. Scalze asked if Oppidan would retain the building as an investment or if it was being constructed and would then be sold. The City Administrator was not sure at this point. He reported that the developers indicated that they would want to have one floor of the office space rented before they would begin construction. Montour indicated that he agreed with the concept of combined retail and office. He pointed out that providing the land and $500,000 in subsidies will result in $1.4 million of assistance from the City. Anderson asked how the City would recover this money. The City Administrator replied that the money would be recovered through TIF generated from this project and excess TIF from other projects. Fifield indicated that Oppidan is seeking a slightly lower return on investment at approximately 11% than was R. A. Morton & Associates at approximately 15%. The City Administrator indicated that it may be possible to structure the deal so that the amount of the City's assistance to the project would appreciate in value at the same rate that the building value appreciates. Fahey suggested that the result would be a 12.5% limited equity partnership for the City in this project. This is based on a $500,000 subsidy to a $4.2 million project. The City Administrator reviewed projected cash flow information on $1,615,000 General Obligation Tax Increment Bonds for this project. He also reviewed information on sources of tax increment from the Park Place project,