04-12-1999 EDA - Laserfiche WebLink

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Page Three March 10, 1999 2. Appraisal. The appraiser retained by the City (at Everest's expense) to appraise the Building N site in connection with the Agreement was directed by City staff to appraise the site based on an office/warehouse use, rather than according to the "highest and best use" appraisal standard typically applied. Since portions of the site were zoned for commercial use, this appraisal restriction had the obvious effect of limiting or reducing the appraised value of the property. In turn, under the pay- as-you-go formula in the Agreement, this limited the potential TIF recoverable by the developer. 3. TIF-Eligible Project Costs. The City's bond counsel excluded certain categories of site and public improvement costs from the description of costs eligible for TIF reimbursement pursuant to Exhibits D and E of the Agreement. Bond counsel eliminated certain cost categories (e.g. paving, TIF application deposit, park dedication fees, SAC and WAC fees, contractor's overhead and profit) despite the fact that (a) the City's written TIF policy specifically authorizes them as eligible TIF costs, and/or (b) they have been commonly recognized as TIF-eligible costs in other cities. Everest submitted a legal opinion to the City supporting the excluded cost categories as TIF-eligible, and, demonstrated that the City's bond counsel firm routinely authorizes TIF expenditures in a competing city (Roseville) for the same cost items. The effect of bond counsel's limitation of the eligible TIF items is to make it more difficult and less likely that Everest will receive the full $1.2 million dollar TIF amount provided under the Agreement. 4. Tax Class Rates. Early in the negotiations, Everest expressed concern that the state legislature may in the future reduce the real estate tax classification rates for commercial/industrial property. Everest requested some form of protection against decreasing tax rates to assure that it could receive the full amount of TIF bargained for on the Building N project. The City was unable or unwilling to provide a solution to this concern in the Agreement. Subsequently, the state has in fact reduced the tax class rates, and Everest is now vulnerable to receiving less increment than originally projected under the agreed pay-as-you-go TIF approach. The cumulative effect of the foregoing terms or requirements is to reduce the opportunity for Everest to receive the full benefit of the $1.2 million TIF assistance negotiated for the Building N project. And, under the pay-as-you-go TIF format, where no TIF is paid out until the project is completed and producing increment, Everest bears essentially all of the risk in this regard, while the City bears none.