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costs. Without assistance, the projected annual and cumulative rate of return to the developer is projected to
<br />be below industry standards for this type of project. The rate of return analysis indicates that the provided
<br />financing structure would not be financially viable without one or more of the following: 1) reduction in project
<br />costs 2) additional annual cash flow, and/or 3) additional funding sources. With annual public assistance, the
<br />project is projected to achieve marketable returns by providing additional cash flow to the project. The level of
<br />public assistance is expected to have a positive impact on what the projected returns for the project could be as
<br />compared to no assistance.
<br />The purpose of this memorandum is to provide a summary of Baker Tilly’s review of the development project
<br />costs, operating pro forma and other financial information as provided by the developer to assist the City with
<br />making a determination 1) if the project as proposed would be unlikely to proceed “but-for” the requested Tax
<br />Increment Financing (TIF) assistance, and 2) if assistance was necessary, to determine an appropriate level of
<br />public assistance that could be considered.
<br />Developer Request for Assistance
<br />The developer has requested assistance that includes 90% of incremental revenues for up to 9 years related to
<br />development of the project site to support approximately $6.7M ($5.9M excluding MSP property) in TIF eligible
<br />costs. The preliminary request includes an approximate $67.1 million project funded through a combination of
<br />private debt and equity and public assistance through TIF. Typical extraordinary redevelopment costs that
<br />cannot be supported solely by the project alone could justify the need for public financial assistance and allow
<br />the project to proceed as proposed. Tax increment financing from the City provides an additional funding source
<br />to the project that allows the developer to obtain an appropriate level of upfront funding and meet minimum debt
<br />coverage and return metrics. A summary of the sources and uses of funds is illustrated in Table 1 below.
<br />Table 1: Sources and Uses of Funds
<br />Sources Amount Uses Amount
<br />First Mortgage $40,250,111 Land/Soft Costs $11,955,387
<br />Equity $21,187,210 Site Work $13,847,328
<br />Offsite $1,846,051
<br />TIF * $5,727,541 Shell Construction $29,328,000
<br />Transaction Costs $10,188,096
<br />Total $67,164,862 Total $67,164,862
<br />Tax increment financing has been requested as pay-as-you-go and would not be an upfront funding source.
<br />Developer would obtain separate TIF Note supported by City TIF resulting in estimated available TIF proceeds
<br />amount of approximately $5.7M as requested. Actual TIF Note amount subject to approval.
<br />Table 2: Estimated Total Tax Increment Eligible and Extraordinary Costs
<br />Identified Costs Extraordinary Costs
<br />Extraordinary Site Costs
<br />Soil Corrections/Lime Stabilization $1,000,000 $1,000,000
<br />Site Fill $2,500,000 $200,000
<br />Public Utility Relocation $300,000 $300,000
<br />Aggregate Piers $1,000,000 $1,000,000
<br />Subtotal Extraordinary Site Costs $4,800,000 $2,500,000
<br />Offsite 21st Ave Road Extension
<br />Removals/Sitework $300,000 $150,000
<br />Utilities $300,000 $100,000
<br />Paving $200,000 $100,000
<br />Landscaping/Street Lighting $100,000 $0
<br />A&E/Mgmt/Inspections/Contingencies $200,000 $50,000
<br />Subtotal Offsite 21st Ave Road Extension $1,100,000 $400,000
<br />Total Ryan Project $5,900,000 $2,900,000
<br />Extraordinary Costs $2,900,000
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