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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In
<br />specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member
<br />of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly
<br />Virchow Krause, LLP
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<br /> Scenario 1 Scenario 2 Scenario 3 Scenario 4
<br />Total Number of Years 5 7.5 10 13.5
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<br />Estimated Gross Annual Increment $412,893 $412,893 $412,893 $412,893
<br />Estimated Annual City Retained (5%) $20,645 $20,645 $20,645 $20,645
<br />Estimated Net Annual Increment (95%) $392,248 $392,248 $392,248 $392,248
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<br />Total Gross Tax Increment $2,064,465 $3,092,054 $4,128,930 $5,569,412
<br />City Retainage (5%) $103,223 $154,603 $206,447 $278,471
<br />Net Amount to Development (95%) $1,961,242 $2,937,451 $3,922,484 $5,290,941
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<br />The values for the townhomes would not be included within the boundaries of the TIF District and would be
<br />included within the taxing entities existing tax base once constructed and on the tax rolls. The construction
<br />schedule is assumed to be in conjunction with the senior care campus. In addition, redevelopment of the
<br />corner to include new commercial buildings would also enhance the tax bases and not be included in the
<br />district.
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<br />Developer Pro forma But-For Analysis
<br />In approving a TIF district and project, the City must make several findings, including the “but for” test: that the
<br />proposed development would not reasonably be expected to occur solely through private investment within the
<br />reasonably foreseeable future. The developer has stated the assistance is necessary due to the high costs of
<br />developing/redeveloping the site, including acquisition of the 17 -acre site, in addition to the properties on the
<br />corner to create a larger redevelopment opportunity. There are also significant public improvement and s ite
<br />development costs to allow access into the site. The project is unable to entirely support those extraordinary
<br />costs upon completion. Based on the developer’s stated position relative to the need for tax increment
<br />financing assistance, the City could make its “but for” finding and provide tax increment assistance.
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<br />We recommend, however, that the City also consider an appropriate level and type of TIF assistance for the
<br />project based on the information submitted by the developer. The application includes a requested 15-year
<br />term of assistance to equal approximately $5.3 million. The City’s position relative to the use of tax increment
<br />has typically been to finance extraordinary costs and the level of assistance is in part dictated by the
<br />‘extraordinary’ costs of the project. Historically, on past projects the maximum term of assistance has been
<br />about 5-6 years.
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<br />Following thorough evaluation of the project as provided allows the City to be prepared to make an informed
<br />“but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of
<br />assistance. The “but-for” test is used to determine whether a project is likely to proceed as proposed without
<br />the use of public dollars. To complete this analysis, we review the developer’s provided operating proforma and
<br />will also construct similar ten-year project proformas, showing a result if the developer receives the assistance
<br />as pay-as-you-go (reimbursement for TIF eligible costs) and showing a result if the devel oper does not receive
<br />assistance. Our analysis of the proformas include a review of the development budget, projected operating
<br />revenues and expenditures, and the project’s capacity to support annual debt service on the bank loan.
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<br />The purpose of evaluating the operating proformas is to understand the potential returns to the developer
<br />through the initial development of the project and the operation of the enterprise over a period. A 10 -year period
<br />may not be indicative of the developer’s intended investment period.
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