09/08/2009 Council Packet (2) - Laserfiche WebLink

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City of Lino Lakes, MN Proposed Country Inn and Suites Conversion — TIF #1 -11 September 8, 2009 Page 3 The above table indicates that with the proposed property conversion, the loss of calculated property tax increment (100 %) could be insignificant if the value is at the high end of the appraiser's estimate of $4,200,000 or could be more than $7,000 if the value is at the low end of the appraiser's estimate ($3,500,000). However, if the delinquencies for all other properties continue, the loss could range from $5,872 with the higher market value to $12,182 with the lower market value. These losses assume the hotel maintains its' current value and continues to pay its' taxes. This situation is not without risk. If the hotel property continues to operate at occupancy as low as twenty percent, the owners may challenge their value which could reduce the available tax increment. On the other hand, the hotel property could stop paying taxes due to continued low occupancy levels resulting in reduced income, which also would reduce the available tax increment. Summary There are two options the city could take: ✓ Accept the proposed conversion and recognize that there will be a potential loss of annual increment in the range of $6,000 to $12,000. ✓ Do not accept the conversion and risk the property challenging their value and reduced tax payments, or non - payment of taxes resulting in a foreclosure situation. If the City is acceptable to the proposed conversion, staff may desire to encourage the developer to make adjustments to the plans to increase the projected tax capacity for the re -use. The staff should understand the necessity for the low- income set - aside, which reduces the tax capacity for the property. Furthermore, the City should be confident that the conversion will result in a more viable property that is able to maintain its value and tax status long -term. Springsted is available to review any additional documents as requested by the City.