02-26-1998 - Laserfiche WebLink

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02/23/98 MON 10:47 FAX 612 885 5969 KRASS MONROE -»-- MOUNDS VIEW 003 The City asked us to review the projects and assist the City and the Economic Development • Authority(the "'EDA") in determining the amount of tax increment assistance that is necessary to allow these projects to proceed. OVERVIEW It is very difficult to determine the precise amount of governmental assistance, whether tax increment or not, that is necessary to facilitate the development of a project. Until a developer walks away from a project because it cannot recover unusual costs or because the market will not allow for the level of rents that must be charged, the city never lmows if it has provided more assistance than necessary. As a result, most of the cities near Mounds View will assist a developer with various site acquisition and improvement costs so that the site will be competitive with other similarly situated sites. In short, very few if any cities will provide a 100 percent land write down. However, most cities will generally make an exception for senior housing projects in order to make these projects more affordable and to encourage seniors to move out of larger homes (encouraging the reuse or recycling of larger homes for families is generally thought of as a positive goal in most communities). With these principles in mind, we provide the following observations. GAS STATION/CONVENIENCE STORE No assistance has been requested for the gas station/convenience store. For the remaining life of the City's existing tax increment district, over$300,000 of tax increment will be generated by this improvement. After subtracting administrative fees of 10% or approximately $30,000, there remains approximately $276,000 of available tax increment. We have present valued (put into 1998 dollars) the future revenues represented by available tax increment. Using a 7.5% present value rate, the almost $276,000 has a 1998 present value of$146,872. This amount is reflected on the summary page which is attached to this memo (the "Summary"). In conclusion, the gas station convenience store will provide additional revenues for your redevelopment program. OFFICE BUILDINGS 5,000 SQUARE FEET AND 25,000 SQUARE FEET Upon completion these two buildings will pay in excess of$90,000 per year in taxes and will generate total tax increment in excess of$1,100,000. After deducting the administrative fees, the $1,000,000 of available of tax increment has a value in 1998 dollars of$502,673 as is shown on the attached Schedule. The Schedule also shows various land acquisition, pieparation, public improvement, site improvement and miscellaneous costs in the amount of$467,000. We have placed a value on the site of$300,000 (30,000 square feet of building times $10 per square foot of building for site costs). Following the principals outlined above, the City would not be assisting for the land acquisition • costs but would-assist with all other site related costs. Accordingly, if the land acquisition of $300,000 is subtracted from the total costs of $467,000, the remainder of $167,000 would •Page 2