09/09/2004 EDAC Minutes - Laserfiche WebLink

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Mr. Steinman explained the details of the financial package to the committee. The sale of the city land is $2.2 million as an unrestricted source of funds. The developer will purchase the Tagg property and the city land likely in December. When the land is sold, the Village fund will be paid off, and then the project will make an internal loan to the developer, and that loan will be paid off by TIF. There is a small profit in the land sale. Mr. Steinman said the Met Council grant decision is possibly within the next month or so. Ms. Divine said we’d know soon if we are not going to get the grant. The gap is more comfortable with the grant. This project is ready to go, which is what the Met Council wants. You don’t get all the way to that point without having alternatives to completing the project. The Taggs have stated that they are not interested in continuing this project longer than their purchase agreement deadline in December. Mr. Steinman said a worse case scenario is 16 years of TIF. He explained that the upfront $1.7 million (without the grant) would be distributed when buildings are demolished and the preliminary plat is approved, likely in June 2005. The money goes into escrow until the developers pull a building permit on the townhome project. The value in the ground is necessary to ensure payback of the upfront TIF. By this time the developer has $8 million in land costs, and has graded the property. An internal loan of $1 million note to the developer is pay-as-you-go. The site improvements will be all be done at once. Mr. Helgemoe asked about the strength of the developer. Mr. Steinman said they have a banking relationship; the bank is really the developer. Springsted has done due diligence on this developer, and they have a track record with successful performance. If they can secure financing, they have demonstrated ability. Mr. Helgemoe said some banks will take greater risks. Ms. Divine stated the townhomes are the least speculative and are in the TIF district. Mr. Steinman said distribution of TIF funds will go first to the debt service on the TIF bonds. The remainder will be distributed on parity between the $1.7 million that is owed to the city and $1 million that is owed on the development note. Mr. Gorowsky stated a significant joint effort has occurred to arrive at a package that is the best scenario. This is not just the developer saying it’s what they need to have. This was a negotiated tentative conclusion that accomplishes both side’s goals. It would be inappropriate for EDAC to discuss carving it back. Mr. Steinman said the developer’s cost is approximately $17 million, with $5.5 million in assistance. Mr. Vacha asked about the amount of tax base the city will get outside the TIF district. About half the value is generated outside the TIF district. The whole development would generate about $554,000 in city share of taxes, so about ½ of that is in non-TIF portion. Ms. Divine stated that if the entire project were in the TIF district, the pay-off would be 8 years. Mr. Steinman said it is phenomenal that this project is getting paid off in 16 years 2