07-20-1998 WS - Laserfiche WebLink

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Item No. Staff Report No. Meeting Date: 7/20/98 Type of Business: WK WK: Work Session;PH:Public Hearing; CA: Consent Agenda;EDAB:EDA Business City of Mounds View Staff Report To: Mayor and City Council Members From: Rick jopke, Community Development Director Item Title/Subject: Discussion of the Mermaid Hotel/Banquet Facility Project Date of Report: July 17, 1998 BACKGROUND: At the July 6, 1998 work session staff discussed the current status of the Mermaid hotel/banquet facility and the proposed$1,700,000 TIF assistance request. Staff estimated that there could potentially be a need for an additional $1,000,000 of assistance needed by the developer over and above the original $1,700,000 to cover land acquisition costs. The City Council directed staff to continue to work with the developers to see if the estimated$1,000,000 gap could be reduced such that the City's assistance could be paid back by the increment generated by the project. The City Council scheduled an additional work session on July 20, 1998 to discuss this matter further. FINANCIAL ANALYSIS City staff, the City's financial consultant, and the developer have completed additional financial analysis and have come up with an alternative which reduces the gap substantially. The attached sheets and the following summarize this scenerio: • The City would issue $2,000,000 of taxable bonds. The developer would receive $1,700,000 of the proceeds upfront. Staff will explore ways to issue a portion of the bonds as tax exempt to reduce the interest rate. • The City would acquire the RentAll site and pays for acquisition and demolition costs from the TIF pool. The City will apply for state funds from the DTED Redevelopment grant program to help offset some of these costs. • The developer would be responsible for the acquisition costs of the rest of the land needed for the project within the $1,700,000. • 100% of the increment generated will be allocated to debt service. • The project as proposed(not including the second phase of the hotel )would generate approximately $218,500 of annual tax increment. • Because of the delay in the start of the project and a recent State Auditor's interpretation on the length of tax increment districts, the developer may have to make a payment-in- lieu-taxes (pilot) in the year 2000.