09/27/2000 Env Bd Packet - Laserfiche WebLink

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4, City of Lino Lakes September 11, 2000 Page Two • TAX INCREMENT FINANCING We understand that tax increment financing (TIF) is available from the City. TIF has been factored into our acquisition costs because, without that subsidy, we would not have agreed to buy this land. Indeed, unless reasonable TIF is approved, we will not pursue this development. Our Purchase Agreement contains an express contingency to that effect [§ 8.1(d)]. We hereby request that our TIF be 12% of the market value of the completed project. Please note that NAC's operations will create 7 or 8 new jobs in the City. The jobs will include operators, a truck driver, and distribution personnel. In addition, because NAC will use this location as its new "Minneapolis facility," managers will be present as well. The quality of our project merits the amount of TIF requested. As indicated, we will be constructing a large building, approximately 24,000 feet (comprising 25% of the site). It will be of very high quality. Furthermore, NAC has experienced rapid growth — more than doubling in size in the last two years — and this project is being done with expansion thoughts in mind. We request "up front TIF" equal to the amount of the special assessments. The balance of the TIF can be on a "pay as you go" basis. Of course, since those payments are deferred, we assume that — like other municipalities — the City will add interest to those deferred payments (or alternatively, increase the percentage above 12 %). The TIF period should run through 2008. A completed TIF Application — in triplicate — is attached. Please let us know when the "escrow fee" of $5,000 needs to be paid. PRO FORMA We realize the City would like to see a pro forma in connection with the TIF application. But in this case, bidding will be done only if and when the City Council gives its approval, so our cost estimates cannot be stated with any degree of accuracy. More importantly, we have a long history of actual transactions, so we hope that past information can serve as our pro forma. This Owner has already done five "purchase and leaseback" transactions with NAC and Interplastic Corporation. In the first four, Owner paid all of the acquisition and construction costs, then charged the corporate occupant monthly rent. In each of those cases, Owner achieved the desired 15 % return on investment. The fifth transaction — the most recent one — did not turn out as well. That acquisition involved a land and building in the San Antonio area. We believe it's similar to Lino Lakes; well over $1 million was paid, and a government subsidy was available. However, the eventual subsidy turned out to be too small, and that return on investment has been a disappointing 12 %. Owner does not want to be in that position again. So unless a reasonable TIF award is made in this case, Owner wants to be able to abandon this development, and a provision was built into the Purchase Agreement to provide that right [§ 8.1(d)] .