Agenda Packets - 1998/03/02 - Laserfiche WebLink

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02/23/98 MON 10:47 FAX 612 885 5969 KRASS MONROE MOUNDS VIEW a004 • represent the level of assistance that the City would provide. This level of assistance would be in the form of a pay as you go revenue note which simply means that the assistance would only be paid if the project were completed and the taxes paid. The $167,000 is to be paid with interest at 7.5% (the present value factor in this analysis is the same 7.5%). As a result, in order to provide this level of assistance for the office buildings approximately 4 years of tax increment would be required. We should also point out that if this site has additional complications or if the Redeveloper were constructing an expensive or unusual facility in which the market rents would not justify the construction of such a facility, then the City may be willing to consider some additional incentive to assure the construction of such facilities. In summary,unless these conditions occur,we would suggest the level of assistance described above. SENIOR RENTAL PROJECT The analysis of senior rental projects is more complicated. If the class rates for rental property continue to be 2.9%,then the taxes per unit for this project will be $2,076 per unit with the entire project generating over $170,000 per year in taxes. For the remaining life of your tax increment district over $2,300,000 of taxes will be generated and when the 10% administrative fees are deducted,the amount of available tax increment is approximately$2.08 million with a 1998 value of approximately$1.06 million. As the uses on the attached Schedule indicate, there is $830,000 of total site costs including land acquisition. If we followed the same approach that we employed above for assistance for the office buildings,the level of assistance would be $543,000 ($830,000 less the value of the land which we have set at $287,000 (82 units times $3,500 per unit)). However, as indicated in the overview above,many if not most communities are actively trying to recycle their housing and are attempting to encourage seniors to move into rental and owner occupied higher density housing. In order to facilitate this goal, the average monthly rents need to be reduced. This can be accomplished by writing the land down and providing the write down in the form of a pay as you go revenue note (this is the same approach that would be used for the reimbursement of site improvement costs—see discussion of Office Building Assistance above). For the senior project, we are suggesting assistance for all of the site improvement costs in addition to the land acquisition costs. This level of assistance will approach$830,000 and should only be paid from the future taxes generated by the senior housing project. As other cities have done, the City will want to assure itself that the project will be maintained as a seniors only project and the City may wish to reduce the level of assistance slightly if the Legislature further reduces the class rates(currently the class rate is 2.9%and the Legislature has targeted a class rate reduction to 2.5%). If the class rates were not changed, and the City were to provide $830,000 of assistance, it would take nine and one-half tax increment years to provide that assistance. However, we think the class rates will probably be reduced and that the estimated market value for this project is somewhat high, so it would be prudent for the City to assume that the remaining 14 years of tax increment in this district will most likely be utilized. S • Page 3