10-27-2021 Council Packet - Laserfiche WebLink

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Memo To: Chris Heineman, City of Little Canada From: Mikaela Huot, Director Date: October 27, 2021 Subject: Financial Needs Analysis for proposed Owasso Warehouse Industrial Facility Tax Increment Financing Economic Development (TIF) District No. 7-3 Background The City of Little Canada received a request for financial assistance through Tax Increment Financing (TIF) to assist with financing a portion of the extraordinary development costs related to the construction of a new 74,500 square foot warehousing facility. The developer is proposing the acquisition of a vacant lot in the City for growth and expansion of its existing company operations. The proposed property for this project has been identified as an ideal location for the company to locate and meet current demands, as well as allow for future anticipated growth plans, subject to a feasible financing plan. The developer’s original construction budget for the project did not account for the level of site development costs that are required for construction of the building on the identified site. The increased costs related to site development and soils correction have resulted in extraordinary costs that have been identified to be $1,023,000. The project, upon construction, is expected to create at least 5 full time equivalent new jobs to the City of Little Canada with average hourly wages of $30/hour plus benefits. The current projections would more than exceed the City’s existing business subsidy policy provisions. Baker Tilly has been retained by the City to review the application for financial assistance. The purpose of this memorandum is to provide a summary of Baker Tilly’s review of the development project costs and sources of funds, and operating pro forma as provided by the developer to assist the City with making a determination if the project as proposed would be unlikely to proceed “but-for” the requested Tax Increment Financing (TIF) assistance, and to determine the appropriate amount, if any, of public assistance. Prior to establishing a tax increment financing district, there are findings that need to be made by the City that include: 1) determination that the project qualifies as a TIF district and 2) determination that the project as proposed would not proceed without public assistance (meeting the “but-for” test. When reviewing requests for financial assistance it is important to understand how the level of financial assistance would impact the ability of the project to proceed as proposed and maximize new value created on the current project site. Developer Request for Assistance As stated, the developer has identified approximately $1,023,000 as extraordinary costs of the project. Tax increment financing is a tool that could assist to close the financial gap. The extraordinary site development costs that cannot be supported solely by the project alone may justify the need for public financial assistance. The assistance would allow the project to proceed as proposed and to provide appropriate funding sources for financing of the extraordinary project costs. The developer has indicated in discussions with City staff that the receipt of City financial assistance is necessary for the project to proceed based on current financing limitations.