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MAYOR <br />Bill Blesener <br />COUNCIL <br />Rick Montour <br />John Keis <br />Michael McGraw <br />Shelly Boss <br />515 Little Canada Road, Little Canada, MN 55117 -1600 <br />(651) 766 -4029 / FAX: (651) 766 -4048 ADMINISTRATOR <br />www.cidittle- canada.mn.us Joel R. Hanson <br />MEMORANDUM <br />TO: Mayor Blesener and Members of the City Council <br />FROM: Joel Hanson, City Administrator <br />DATE: November 23, 2012 <br />RE: Authorize Increase in Interfund Loan Amount — TIF District 6 -1 <br />Attached is a resolution increasing the interfund loan authorized for TIF District 6 -1 (2966 <br />Arcade) from $300,000 to $400,000. This increase is necessary due to the accrual of interest on <br />the amounts previously advanced and to ensure the fund balance at the end of 2012 is in positive <br />territory. As you may recall, we provided 50% of the financing to Masterpiece Homes, Inc. <br />related to the acquisition of 2966 Arcade. We also paid 50% of the taxes and demolition. <br />Interest has been accruing at 6.5% based on the initial terms of our development agreement with <br />Masterpiece. However, staff has recently learned that statutory restrictions limit the interest rate <br />to 5% on the initial amount and 4% on the additional $100,000. This will revised down the <br />amount of accrued interest, but we should still authorize the additional amount to make sure we <br />have an adequate amount authorized. <br />It now appears this project is poised to move forward next year with the acquisition of 2959 <br />LaBore and the pending acquisition of 2945 by Masterpiece Homes. As a result, this interfund <br />loan will be retired in 2013 when the new terms of the development program are established. (It <br />is likely a new interfund loan will be in place to finance the TIF portion of the project, but those <br />details will be worked out over the next few months as the development program is finalized.) It <br />should be noted that the interfund loans act as an investment for the borrowing fund and yield a <br />higher return that could be generated otherwise. <br />Staff recommends approval on the interfund loan increase with the source of funding to be <br />the same as initially designated in 2008. <br />1 <br />