06-08-2022 Council Packet - Laserfiche WebLink

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Memo 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: June 8, 2022 Subject: Spending Plan for Use of Unobligated TIF funds per Temporary Transfer Authority for Twin Lake Apartments Housing Project 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 $19.5 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. The developer has requested financial assistance of $1,000,000 from the City through TIF revenues. The developer’s initial request for assistance was through the establishment of a new tax increment financing housing district as a pay-as-you-go note. This method would provide additional annual cash flow to the project and subsequent increased debt financing amount as the remaining funding source to close the financial gap. A pay-as-you-go note would require a 26-year housing district with semi-annual payments made to the developer for up to $1.0M of principal payments plus interest at a rate of approximately 4.5%. Upon further review of the City’s existing tax increment districts (as further described under temporary transfer authority), it was determined the City had an alternate option of providing upfront assistance to the developer (upon certain terms and conditions that would be outlined in a Loan Agreement) to fill the $1.0M gap. This would not require the establishment of a new TIF district and the increased tax capacity would not be captured but instead added to the general tax base for the City, County and School District upon project completion. Under this option the City will use the temporary transfer authority and use unobligated tax increment funds The City will be providing a deferred loan to the developer of $1,000,000 anticipated to be provided after inspection and final approval of the footings and foundation. The developer will make annual payments to the City consisting of interest only for 17 years with the interest rate ramping up with a balloon principal payment in year 17 – to coincide with the developer’s anticipated capital investment/refinancing. Additional terms of the loan are included within the term sheet attached to this memorandum. The City Council will be asked to consider the Loan Agreement at the June 20 City Council meeting. Prior to approving the use of this temporary transfer authority by resolution following a public hearing, the City must also create a written spending plan that authorizes the City to provide the assistance or make the investment that makes the development qualify. The plan must detail the use of transferred increment. The OSA recommends identifying planned expenditures using the same categories identified in TIF plans and TIF reporting (e.g., acquisition, site preparation, financing costs, etc.), except for a category for administrative