05-11-2022 Workshop Packet - Laserfiche WebLink

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Memo – Updated Draft To: Members of the City Council of the City of Little Canada Chris Heineman, City Administrator Corrin Wendell, Community Development Director From: Mikaela Huot, Director Date: May 11, 2022 Subject: Updated Financial Analysis for proposed Tax Increment Financing Housing (TIF) District (Twin Lakes Apartments) Background The City of Little Canada has received an application 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 60-unit multifamily affordable housing project comprising of 1, 2 and 3-bedroom units with income and rent limits restricted to 60% area median income (54 units) and 30% area median income (6 units). The total development cost of the project is approximately $19 million and will be financed with a combination of debt financing (supported by project cash flow and tax increment revenues), tax credits, deferred developer fee and Ramsey County grant funding. Developer Request for Assistance The developer has identified a financial gap of approximately $1,000,000 and has requested assistance from the City to fill that gap. Tax increment revenues from a Tax Increment Financing District is a source that could assist to close the financial gap. The project costs that cannot be supported solely by the project alone typically justify the need for public financial assistance as it would allow the project to proceed as proposed with reduced rents related to the affordable housing project and to provide appropriate funding sources for financing of the extraordinary project costs. The developer has stated in discussions with City staff that the receipt of City financial assistance is necessary for the project to proceed based on current financing limitations and has provided supporting financial information illustrating the financial gap. The total development costs from the developer’s financial materials is illustrated in the table below. Sources Amount Uses Amount Debt $8,165,000 Acquisition $240,000 Equity (Tax Credits) $7,794,854 Construction $13,656,631 Ramsey County $1,500,000 Professional Fees $1,138,636 TIF $1,000,000 Developer Fee $2,280,000 Deferred Developer Fee $466,826 Syndicator Fees $45,000 NOI During Construction $121,678 Financing Costs $1,388,510 Reserves $299,581 Total $19,048,358 Total $19,048,358 Tax increment financing has been identified as a tool that could either be provided as pay-as-you-go from a new housing tax increment district as reimbursement for eligible costs, or as upfront funding source through the temporary transfer authority and structured as a potential loan with interest repayment. The developer will use traditional affordable housing funding sources including tax credit equity and debt to finance initial project costs