05-11-2022 Workshop Packet - Laserfiche WebLink

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Tax Increment Revenue Assumptions To estimate the amount of available TIF revenues generated by the proposed project through the establishment of a new tax increment financing district, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms. • Total existing estimated market value (Base Value) of $294,000 o Parcel ID: 313022310002 o Base value as of Jan. 1, 2021 o Original net tax capacity (ONTC) of $2,205 o Assuming reclassification as residential rental low-income 4d ▪ 0.75% first $100,000 and .25% value above $100,000 • Estimated total market value upon completion o Estimated $200,000/unit o 60 total units o $12,000,000 total taxable value • Incremental value based on difference between existing and new land/building value • Construction commences in 2022 and is completed in 2023 o Project values 100% complete for assess 2024 and taxes payable 2025 o Delay first increment until payable 2025 • Net present value (discount) rate of 4.5% • 2.5% annual market value inflation Preliminary Revenue Projections Existing Base Land Value $294,000 Estimated Total Taxable Value $12,000,000 Estimated annual available increment (full buildout) $68,815 Total gross tax increment (26 years) $2,146,816 City retainage (10%) $214,684 Net amount available for development (90%) $1,932,132 Estimated Present Value Revenues (26 Years) at 4% $1,020,328 Pro forma Analysis of Proposed Development / But-For Test Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The developer has demonstrated that but for the provision of tax increment financing, the project as proposed would not occur. The developer has provided financial information including total sources and uses of funds and 15-year operating cash flow proforma demonstrating a financial gap of approximately $1,000,000 gap due to reduced rents of the project at both 60% area median income (54 units) and 30% area median income (6 units). The reduced operating revenues resulting from the restricted rents limits the ability of the project to support the total development costs with existing sources of revenue. Based on the developer’s stated position relative to the need for tax increment financing assistance, the City could make its “but for” finding and provide tax increment assistance. We recommend, however, that the City review the provided assumptions to consider if the project meets the but-for test and, if so, what an appropriate level and type of TIF assistance may be based on the information submitted by the developer. Following thorough evaluation of the project as provided allows the City to be prepared to make an informe d “but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of assistance. As stated previously, the developer’s request for financial assistance of $1,000,000. Based on current revenue projections, it would the entire term of a new housing TIF District to support repayment. To complete the but-for analysis, we reviewed the developer’s total sources and uses of funds and 15-year operating proforma, showing a result if the developer received the assistance as pay-as-you-go (reimbursement