01-28-1999 - Laserfiche WebLink

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a. Our original (conservative)assumption was that the completed Mermaid ""complex" would have an anticipated market value of$5.9 million, which would be sufficient to generate an annual tax increment (of about$218,000)that could cover the required payments on a bond issuance that would provide the Developer with about$1.7 million in project cost reimbursement. In order to avoid the impact of a "one-time" $550,000 deduction from the pooled TIF account, it has been suggested that the City might want to consider increasing the size of the bond issuance so that the net bond proceeds could provide the Developer with $2.25 million (the $1 .7 million referred to above p/us an additional $550,000) in project cost reimbursement. This type of increase would, of course, result in a corresponding increase in the annual tax increment needed to service the larger bond issuance. Accordingly, the question that was posed to PFM was: what market value(of the completed Mermaid project) would be needed to generate a tax increment that would be sufficient to cover the annual payments on bonds that would provide the Developer with a total of$2.25 million in project cost reimbursement, thereby eliminating the need to take $550,000 out of the pooled TIF account? • The answer, which appears in Scenario #I (the attached fax from PFM), is that a market value of$7.35 million would be required to generate the required tax increment of$271,817. It is worth noting that the Developer's revised projection regarding project costs (the last page of Mr. Berndt's letter dated 1-22-99) reflects $7.49 million in construction costs alone and total project costs of$10.27 million. b. PFM was asked to analyze a second set of circumstances, in which the projected market value was left at$5.9 million (despite the evidence that a higher figure might be justifiable), but the bond issuance was still increased to a level that would generate $2.25 million in project cost reimbursement for the Developer. The question that was then posed to PFM was: inasmuch as the market value of$5.9 million would generate a tax increment that would cover only 1.7million of the$2.25 million in project cost reimbursement, what additional amount would have to be paid out of the pooled TlFaccount on an annual basis to cover the$550,000 difference in project cost reimbursement? The answer, which appears in Scenario #2 (attached), is that a payment of$30,000 would be required in the first year, followed by 12 annual payments of$50,500 each. The advantage of this option is a series of smaller payments rather than a large, one- time "hit." The disadvantage is that a total of$636,000(an "extra" $86,000)would be paid over the 13 year period in question. • ■