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<br /> <br />advantage for this option is that it would represent a sizeable obligation that would satisfy TIF <br />regulations. The main hurdle for using this method of financing is does it meet the “But For” <br />Test. In discussions with Ehlers & Associates, our TIF financial advisors, using TIF for <br />developing these mostly vacant parcels for high-end homes would be “pushing the envelope” <br />as to whether the project is eligible. Individual parcels with substandard units can be <br />purchased with TIF dollars under the City’s Housing Replacement Program <br /> <br /> <br />2. Special Projects Fund/HRA Fund <br /> <br />An alternative would be to acquire the Fyksen property using some other City funds besides <br />TIF. Probably a new fund similar to the EDA (possibly a Housing & Redevelopment Fund, <br />HRA) would be set up with no connection to TIF. This could receive a transfer from the <br />Special Projects Fund for the expected loss and an internal loan from the Special Projects <br />Fund for the amount that is expected to be repaid at the end of the project. The Special <br />Projects Fund typically has been used to construct public facilities owned and operated by the <br />City. To date it has not been used to acquire land for development, though there doesn’t <br />appear to be any legal constraint for doing so. <br /> <br />The main advantages for this method are greater flexibility (e.g. no “but-for” test) and total <br />control over the project. The HRA Fund would own the land, put in the streets and utilities, <br />select the builder, and approve house designs. As an alternative, the HRA Fund could sell <br />the lots piecemeal and let the buyers design the houses. Some higher value houses would <br />add variety to the City’s housing stock. The main disadvantage is that the City would be <br />taking on greater risks. <br /> <br />If done properly, the HRA Fund should realize enough revenue from each sale of property for <br />repaying the loan from the Special Projects Fund. A contingency plan should be made for the <br />possibility that there could be some loss incurred. <br /> <br /> <br />3. Sell City’s Property to Private Developer <br /> <br />A third option to develop the Fyksen and City-owned property could be the use of a private <br />developer that could acquire both directly. The City would encourage a housing developer <br />that would assemble all properties. The City would sign a letter of intent (LOI) to sell the <br />property to be developed in an agreed upon fashion. The City of Mounds View could send <br />out RFP’s to developers to solicit their ideas regarding the project and potential funding <br />sources. <br /> <br />A variation could be that the City acquires the Fyksen parcels and, in turn, sells all the <br />property to a developer for an agreed upon price. This would increase our leverage with the <br />developer. The advantage of using a private developer is that it minimizes the risk to the City <br />of Mounds View. However, the downside is that the City may have less control and may only <br />breakeven on its investment. <br /> <br /> <br />NECESSARY ACTION/RECOMMENDATION <br />