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Home My WebLink About02-26-1998 ECONOMIC DEVELOPMENT COMMISSION AGENDA February 26, 1998 • 7:30 A.M. MOUNDS VIEW CITY HALL • CONFERENCE ROOM C CALL TO ORDER A.M. 2. ROLL CALL (Present = P,Absent = A) Carlson Larson Goff Nelson Field Stigney(EDA Liaison) Sjoberg Whiting(Staff) Schmidt Jopke(Staff) 3. APPROVE EDC MINUTES • January 29, 1998 Action: Motion Second Vote 4. SPECIAL BUSINESS S. EDC BUSINESS A. Consideration of Proposal for Tax Increment Financing for Silverview Estates Action: Motion Second Vote Comments: B. Consideration of Housing Improvement Loan Program 1 • Action: Motion Second Vote Comments: 6. Report of Commissioners,Staff and EDA Liaison Status of Amendments to Business Loan Program Update of Proposal for Tax Increment financing for Development of a Hotel/Conference Center North Metro 135W Corridor Coalition Status of filling Economic DevelopmentCoordinator Position 7. ADJOURN A.M. Next Meeting March 26, 1998 40 • N:\DATA\GROUPS\ECONDEY\EDA-EDCVGEN226.EDC Minutes of the Economic Development Commission City of Mounds View • Ramsey County,.Minnesota Regular Meeting January 29, 1998 City of Mounds View, Council Chambers 2401 Highway 10, Mounds View, MN 55112 1. CALL TO ORDER: The meeting was called to order at 7:37 a.m. by Chairperson, Cindy Carlson. 2. ROLL CALL: Members present: Cindy Carlson, Rosemary Goff, Ron Schmidt, and Brian Sjoberg. Members absent: Dan Nelson, Tom Field, and Steve Larson EDA Liaison present: Roger Stigney resent: Ci Administrator Chuck Whiting and Community Development Director Rick Staff p tY Jopke • 3. APPROVAL OF MINUTES: Motion econd: Goff/Schmidt to approve the minutes from November 20, 1997. Motion Carried 4 Ayes 0 NaYs LIQfLSecond: Goff/Schmidt to approve the minutes from December 18, 1997. Motion Carried 4 Ayes 0 NaYs 4. SPECIAL BUSINESS City Administer Chuck Whiting introduced the new EDA iais onRogerm . S g enson xplained that tigney and Community Development Director Rick Jopke toclopment to Cathy Bennett's former position is being changed be under the sup Dense° n of theD°unity EEconomic Development Coordinator and would Development Director. 5. EDC BUSINESS A. onsideration of A royal of the 1998 Work Plan Chairperson Carlson reviewed the proposed Economic Development Commission 1998 Work Plan including the mission statement and the action steps. • N ADATA\GROUPS\ECONDEv\EDA-EDC\EDCMIN 1.98 Motion/Second: Goff/Sjoberg to approve the 1998 Work Plan Motion Carried 4 Ayes 0 Nays B. Consideration of Proposal for Tax Increment Assistance for Development of a Hotel/Conference Center Community Development Director Jopke explained that this item was not yet ready for EDC action. The project involves construction of a 185 room hotel and a 11,500 square foot banquet center onto the existing Mermaid Supper Club facility. Jopke stated that various details of the project are still being refined and negotiated. Jopke mentioned that he is in the process of getting proposals from two relocation consultants to assist the City with the acquisition of parcels and the relocation existing businesses. C. Consideration of Proposal for Tax Increment Financing for Silverview Estates This project involves the construction of a Holiday station store, two office buildings and a senior housing project at the intersaction of Silver Lake Road and Highway 10. Jopke stated that the city's financial consultant is reviewing the tax increment generated and the financial needs of each component of the project. D. Update on Design Theme Community Development Director Jopke reported that the city's consultant, Hoisington Koegler Group, had conducted the first of two workshops concerning the creation of a design theme for the Highway 10 corridor. 12 of the 28 people invited attended. Jopke added that the consultant led the the group through an exercize to identify important historical themes in Mounds View which could be incorporated into a design theme for Highway 10. The i consultant also showed the group various design elements which have been used in other areas. E. Discussion of Items to be Included in the Update of the Economic Development Plan The Commission reviewed varius elements which could be included in an updated Economic Development Plan. The Economic Development Plan will be incorporated into the City's Comprehensive Plan. Discussion focused on chages that could be made to the business loan program to make it more effective. Suggested changes included: 1. Make both new and existing businesses eligible for the program. 2. Clarify that home-based businesses are not eligible for the program. 3. Clarify that the applicant must meet bank eligibility and underwriting criteria. 4. Add language to require that the activities should provide a direct visible overall benefit to the City. 5. Add language that the City reserves the right to to evaluate the credit-worthiness of the applicant and whether the proposed activities would meet the City's goals for the program. • In addition to the above changes staff will discuss with the city attorney whether equal opportunity and non-discriminatory language as well as language concerning tax increment eligibility should be added. Staff will draft proposed changes for EDC consideration at a future meeting. • N:\DATA\GROUPS\ECOND EV\EDA-EDCIEDCMIN 1.98 • 6. R TORTS FROM CHAIR, COMMISSIONERS, AND STAFF: None 7. ADJOURNMENT There being no further business before the Commission, this meeting of the Economic Development Commission adjourned at 9:15 a.m. Respectfully Submitted, Rick Jopke Community Development Director i • N:\DATA\GROUPS\ECONDEV\EDA-EDC\EDCMIN 1.98 1 9Aki To: Economic Development Commission Members From: Rick Jopke, Community Development Director M{IIORAIIDUM Subject: Silverview Estates Tax Increment Assistance Request )ate: February 23, 1998 BACKGROUND Project: Silverview Estates; Inc Is proposing to construct a mixed use project on a 13 acre site on the southeast corner of Silver Lake Road and Highway 10. Proposed uses include a Holiday convenience market/gas station/car waski,.a 25,000 square foot, two story office building, a 5,000 square foot, one story office building and an 82 unit market rate senior rental housing building. A 4.5 acre wet! Trd would be maintained on the site. City Approvals: In May of 1997 the City Council approved Ordinance No. 599 approving the PUD rezoning for the site and Resolution No. 5127 approving the general concept PUD plan. In December of 1997 the City Council approved Resolution No. 5 183 approving a preliminary plat for the site and Resolution No. 5 184 approving a development stage PUD plan. It is anticipated that a final plat for the property will be presented for City approved on • March 9, 1998. TIF Assistance Request: In November of 1997, Silverview Estates, Inc. submitted a request for tax increment assistance for the project. They have asked for pay-as-you-go tax increment assistance equal to 90% of the projected increment with respect to each component of the project. While no assistance is being requested to assist the Holiday Station Store, they have requested that 90% of the increment generated by the Holiday Station Store be allocated to the senior housing project. The proposed term of the assistance is 13 years. Initial projections indicate, that on a present value basis, the developer's request would equal approximately $1.7 million dollars.The developer has indicated that the assistance is necessary to make the project financially viable. According to the developer, without the assistance, the amount of profit anticipated to be generated by the projects is not adequate to compensate the owner for the required equity investment.A copy of Silverview Estates, Inc application for tax increment financing is attached. Staff/Consultant Analysis: the City has contracted with Mr.Jim Casserly with the firm of Krass Monroe to review the request. Mr. Casserly has reviewed the request and based on how the project is currently proposed indicates that it would be reasonable to provide total pay-as-you- go tax increment assistance equal to approximately$1 ,000,000 ($167,000 for the office buildings and $830,000 for the senior housing project). A copy of Mr. Casserly's report is attached. City staff would concur with Mr. Casseriy's analysis that$1 ,000,000 would be a • reasonable amount of assistance based on the type and amount of assistance typically approved for these types of projects. This would equate to 4 years increment for the office ■ portions of the project and 9.5 to 14years of increment for the senior housing portion. I have also S P a a copy of a preliminary TIF Analysis Worksheet which indicates that based on the information submitted that 5 years of increment would be appropriate. A copy of the tax increment policy is attached for your use also. RECOMMENDATION City staff recommends that the Economic Development Commission make a recommendation to the EDA supporting tax increment assistance for the Silverview Estates project at the southeast corner of • Silver Lake Road and Highway I 0 by passing a resolution. N:\DATAGROUPS\ECONDEV\EDA-EDC\SLVLKEST.MEM • • S • • APPLICATION FOR TAX INCREMENT FINANCING FOR 5,000 SQ. FT. OFFICE BUILDING 1 Adopted 5/12/97 • CITY OF MOUNDS VIEW APPLICATION FOR TAX INCREMENT FINANCING PROJECT: 1. Business Name: Silverview Estates, Inc. - 5,000 Sq. Ft. Office Building Address: 4196 Lexington Avenue, Shoreview, MN 55126 Telephone #: (612) 483-5518 Contact: Marcel Eibensteiner 2. Brief Description of the Business. (Please provide # of years in business under current ownership and # of years in Mounds View) Silverview Estates, Inc. is a single purpose Minnesota corporation which was formed for the sole and exclusive purpose of the development of a mixed use real estate project in Mounds View, Minnesota. Silverview Estates, Inc. ("Silverview") was recently incorporated for purposes of development of the project and has not commenced business operations. Silverview is owned 50% by Mr. Marcel Eibensteiner and 50% by Mr. Dale Jones. Both Mr. Eibensteiner and Mr. Jones have a long history of real estate development ownership and operation including the ownership and operation of multi-family housing, office and other commercial projects. Mr. Eibensteiner and Mr. Jones each have over 30 years of experience in real estate development, sales and finance. A copy of Mr. Eibensteiner's and Mr. Jones' resumes are attached. 3. Present Ownership of the Site: The entire project site is currently owned by Mr. Dale Jones, family members and various affiliates. It will be conveyed to the- development entities at financing closing. A small portion of the Project site is owned by a third party which is the owner of the proposed adjacent convenience store. Silverview Estates has an agreement with the adjacent owner for the acquisition of this portion of the Project site. _. • 4. Present Project: Building square footage, location of project, size of property, description of buildings - materials, etc. Attach site plan, if available The entire Silverview Estates Project being proposed is comprised of three (3) distinct components in addition to an adjacent convenience store which will be owned by a separate development group. The Silverview Estates Project consists of (1) an 82 unit senior housing project. The housing project is anticipated to be a three story brick and wood frame construction independent living facility for persons 55 years and older. The other components of the project are: (2) a 25,000 square foot two story office building and (3) a 5,000 square foot one story office building. Silverview Estates, Inc., will be the developer of each of the three (3) components. For reasons related to project finance, each of the three (3) components will be owned by a separate legal entity in which Silverview Estates, Inc. or its principals will have an ownership interest. It is anticipated that Silverview will construct the senior housing component along with the 5,000 square foot office building portions of the Project first, commencing approximately July 1, 1998. 5. If the property is to be subdivided, Show Division Planned. . The property is to be developed under a PUD which has been approved by the City. 6. Estimated Project Costs: (please enclose construction proforma, if available.) a. Land Acquisition . 3100,000.00 b. Site Preparation $15,000.00 c. Site Utilities $5,000.00 d. Public Improvements $5,000.00 e. Landscaping $8,000.00 f. Hard Building Costs (Historical Data) $218,716.00 g. Construction Fee (Included in Hard $10,936.00 Building Costs Above) h. Architectural Fee $10,000.00 i. Legal Fees $2,000.00 j. Financing Costs $6,000.00 k. Broker Costs $0.00 1. Contingencies $5,000.00 m. Equipment $0.00 n. Other (Pond Grading) $0.00 41, Total $385,652.00 641) 7. Total Estimate Market Value at Completion — • (Explain Calculation) 400,000 based on discussions with County Assessor 8. Submit an Itemized List of Eligible Costs Qualifying for Assistance (see Page 1 of Tax Increment Policy). a. Land Acquisition $100,000; b. Site Preparation $15,000; c. Utilities $5,000; d. Public Improvements $5,000; e. Pond Grading Total $125,000 9. Sources of Financing a. Equity $146,500 5 5)-7,P° b. Bank Loan $231,000 c. Tax Increment Assistance $ d. Industrial Revenue Bonds $ e. Other (please specify source) $ • 10. Form of Tax Increment Financing Assistance Requested __X Pay as You Go Bond Issuance Excess Increment 11. Name & Address of Architect, Engineer, and General Contractor. Architect is Charles J. Radloff General Contractor is SB Commercial Construction Charles Plowe is the Civil Engineer 12. Estimated Real Estate Taxes on Project Site upon Completion of Project. (please show calculations.) $14,000, this is the estimated real estate tax based upon specific discussions with the county assessor. • S 0 13. Project Construction Schedule: a. Construction start date July 1998 b. Construction completion date July 1999 Lease up expected by 1-1-2000 c. If phased project: Year % Complete Year % Complete Silverview anticipates developing the three (3) components in essentially two (2) separate phases. The first phase would consist of the construction of the senior housing component and the 5,000 square foot office building commencing on approximately July 1, 1998 and continuing thereafter to a projected completion date of July 1, 1999. Thereafter construction of the 25,000 square foot office component would be undertaken based upon an analysis of when the market accepts the project. 14. Estimated Number of Jobs: Created 48 construction;'3 nonconstruction (within 2 yrs) Retained 3 permanent-nonconstruction • There will be a significant number of full time equivalent construction related jobs created estimated at 37 by the general contractor for the senior housing project, 9 for the 25,000 square foot office building and 2 for the 5,000 square foot office building. 15. Average Annual Wage Level of Jobs Created (within 2 yrs) Retained 25,000 - 30,000 for senior housing project and office components consisting of an on site manager and caretakers. 16. Ls Job Training Assistance Needed? No TAX INCREMENT FINANCING REQUEST: 1. Describe amount, term and purpose for which tax increment financing is required and how the project fits into the City's economic development and redevelopment goals and objectives. Silverview Estates is proposing pay-as-you go tax increment financing equal to 90% of the projected increment with respect to each component of the Project. Silverview is also requesting that 90% of the tax increment generated from the adjacent convenience store • (which is developed as part of the same PUD and which is in the same tax increment district) be allocated to the senior housing component of the Project. The term of the TIF we are requesting is thirteen (13) years with respect to all components of the project (which we understand is the term of the underlying TIF district.) Simply put, the purpose of the tax increment financing is to provide reimbursement for a portion of the development costs of each of the projects so as to make the projects financially viable. Without the TIF assistance, the amount of profit anticipated to be generated by the operation of the Projects is not adequate to compensate the owner for the required equity investment. We believe the Silverview Estates Project is consistent with the general policy for tax increment financing because it is providing quality real estate development consistent with the existing land use proposals for this area which would not otherwise be achievable. As stated in Mounds View tax increment policy: "The Mounds View Economic Development Authority understands and abides by the fundamental principal which makes tax increment financing viable to encourage development and redevelopment which would not otherwise occur." We believe that the Projections and the related economic analysis provided with this application clearly demonstrate that the Project could not be constructed and operated without tax increment financing assistance in the amounts proposed. We believe that the senior housing and office development is consistent with land use goals and will contribute to the immediate Project area and the entire City of Mounds View. 2. Statement of necessity for use of tax increment financing for project. • The acquisition, development and construction of the Silverview Project cannot be completed without the benefit of TIF financing. The financial forecasts and Prospectus which are a part of this application set forth in detail the applicant's assumptions concerning operating revenues, operating expenses and construction costs. Taken together, we believe these projections clearly indicate that neither the Project as a whole nor any component thereof is financially viable without the benefit of TIF financing which we are requesting. For example, assuming the maximum possible mortgage on the 5,000 square foot office project, the project will still require approximately a one hundred forty- eight thousand dollar ($148,000.00) equity investment based upon our present cost analysis. With the benefit of 90% of the TIF from the office project only, the project will produce a very small i.e., $9,000 annual profit during the first five (5) years. This is obviously not an inadequate return on the one million dollar equity investment (i.e., average 2%). The case for TIF is even more compelling in light of the risk inherent in the construction, financing, and lease-up of these properties. 3. Describe the Potential for Growth. The projections have assumed that operating expenses and operating income grow at the rate of 5% and 3% respectively. 4. What is the Return on Equity Invested that you or investors need to make the • project feasible? • The rate of return on equity to make real estate projects such as the senior housing and office market feasible is at least 10%. This is similar to what a REIT or pension fund would be paying for fully constructed and leased projects. 5. If Rental Space, What is the Range of Targeted Rental Rates The specific targeted rental rates are $620 for one bedrooms and $750 for two bedrooms. The office rentals are from $10 to $12 per square foot net rents plus common area changes. 6. If Rental Space, Who are the tenants and what is the ledLgth of their leases. On the Senior Housing project, the tenants are persons 55 years and older with leases of at least six (6) month lease terms. With respect to-the office project, the perspective tenants are professional service firms, real estate companies and other Class B office profile tenants pursuant to leases of preferably ten (10) years by a minimum of at least five (5) terms. 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E .; :• 1 ii:15 . ■■ . ! : r. k : :251§2 :: E I k&! k 0:: :1. :$ § 4.0I • 5 k}k!a E!§ ! \ 555 . .225 I§IEL !§! - kG.=j Ail § § §§§ : .::. . -::. 2-, ! 5..1 \,� . • - . -1=;; |\i i ! m:t .aa; ....... 515 ! 50.2 0 . ( -�§!� I§. . 2 .3_ \ .._� 3::=4 §§§ . ) �!3!k? §k ! \ i;! ! .■■i =:==G. !z§ 2 l,.S APPLICATION FOR TAX INCREMENT FINANCING FOR 25,000 SQ. FT. OFFICE BUILDING Adopted 5/12/97 1111 CITY OF MOUNDS VIEW APPLICATION FOR TAX INCREMENT FINANCING PROJECT: 1. Business Name: Silverview Estates, Inc. - 25,000 Sq. Ft. Office Building Address: 4196 Lexington Avenue, Shoreview, MN 55126 Telephone #: (612) 483-5518 Contact: Marcel Eibensteiner 2. Brief Description of the Business. (Please provide # of years in business under current ownership and it of years in Mounds View) Silverview Estates, Inc. is a single purpose Minnesota corporation which was formed for the sole and exclusive purpose of the development of a mixed use real estate project in Mounds View, Minnesota. Silverview Estates, Inc. ("Silverview") was recently incorporated for purposes of development of the project and has not commenced business operations. Silverview is owned 50% by Mr. Marcel Eibensteiner and 50% by Mr. Dale Jones. Both Mr. Eibensteiner and Mr. Jones have a long history of real estate development ownership and operation including the ownership and operation of multi-family housing, office and other commercial projects. Mr. Eibensteiner and Mr. Jones each have over 30 years of experience in real estate development, sales and finance. A copy of Mr. Eibensteiner's and Mr. Jones' resumes are attached. 3. Present Ownership of the Site: The entire project site is currently owned by Mr. Dale Jones, family members and various affiliates. It will be conveyed to the development entities at financing closing. A small portion of the Project site is owned by a third party which is the owner of the proposed adjacent convenience store. Silverview Estates has an agreement with the adjacent owner for the acquisition of this portion of the Project site. 4. Present Project: Building square footage, location of project, size of property, • description of buildings - materials, etc. Attach site plan, if available The entire Silverview Estates Project being proposed is comprised of three (3) distinct components in addition to an adjacent convenience store which will be owned by a separate development group. The Silverview Estates Project consists of: (1) an 82 unit senior housing project. The housing project is anticipated to be a three story brick and wood frame construction independent living facility for persons 55 years and older. The other components of the project are: (2) a 25,000 square foot two story office building and (3) a 5,000 square foot one story office building. Silverview Estates, Inc., will be the developer of each of the three (3) components. For reasons related to project finance, each of the three (3) components will be owned by a separate legal entity in which Silverview Estates, Inc. or its principals will have an ownership interest. It is anticipated that Silverview will construct the senior housing component along with the 5,000 square foot office building portions of the Project first, commencing approximately July 1, 1998. 5. If the property is to be subdivided, Show Division Planned. The property is to be developed under a PUD which has been approved by the City. II 6. Estimated Project Costs: (please enclose construction proforma, if available.) a. Land Acquisition $350,000.00 b. Site Preparation $20,000.00 c. Site Utilities $10,000.00 d. Public Improvements $25,000.00 e. Landscaping $28,000.00 f. Hard Building Costs (Historical Data) $1,112,795.00 g. Construction Fee (Included in Hard $44,512.00 Building Costs Above) h. Architectural Fee $58,000.00 i. Legal Fees $10,000.00 j. Financing Costs $22,000.00 k. Broker Costs $25,000.00 1. Contingencies $20,000.00 m. Equipment $25,000.00 n. Other (Pond Grading) $0.00 Total $1,750,307.00 7. Total Estimate Market Value at Completion IP (Explain Calculation) $$1,542,857 pursuant to discussion with County As. ssor 8. Submit an Itemized List of Eligible Costs Qualifying for Assistance (see Page 1 ©f�' Tax Increment Policy). a. Land Acquisition $350,000; b. Site Preparation $20,000; c. Utilities $10,000; d. Public Improvements $25,000; e. Pond Grading $50.000. Total $455,000 9. Sources of Financing a. Equity $750,768 b. Bank Loan $1,001,757 c. Tax Increment Assistance $ d. Industrial Revenue Bonds $ ilke. Other (please specify source) $ j 10. Form of Tax Increment Financing Assistance Requested X Pay as You Go Bond Issuance Excess Increment 11. Name & Address of Architect, Engineer, and General Contractor. Architect is Charles J. Radloff General Contractor is SB Commercial Construction Charles Plowe is the Civil Engineer 12. Estimated Real Estate Taxes on Project Site upon Completion of Project. (please show calculations.) $54,000 o year 1 stabilized, this is the estimated real estate tax based upon specific discussions with the county assessor. 13. Project Construction Schedule: a. Construction start date July 1998 b. Construction completion date July 1999 Lease up expected by 1-1-2000 c. If phased project: Year % Complete Year % Complete Silverview anticipates developing the three (3) components in essentially two (2) separate phases. The first phase would consist of the construction of the senior housing component and the 5,000 square foot office building commencing on approximately July 1, 1998 and continuing thereafter to a projected completion date of July 1, 1999. Thereafter construction of the 25,000 square foot office component would be undertaken based upon an analysis of when the markeI accepts the project. 14. Estimated Number of Jobs: Created 48 construction, 3 nonconstruction (within 2 yrs) Retained 3 permanent-nonconstruction There will be a significant number of full time equivalent construction related jobs created estimated at 37 by the general contractor for the senior housing project, 9 for the 25,000 square foot office building and 2 for the 5,000 square foot office building. 15. Average Annual Wage Level of Jobs Created (within 2 yrs) Retained 25,000 - 30,000 for senior housing project and office components consisting of an on site manager and caretakers. 16. Is Job Training Assistance Needed? No TAX INCREMENT FINANCING REQUEST: 1. Describe amount, term and purpose for which tax increment financing is required and how the project fits into the City's economic development and redevelopment goals and objectives. Silverview Estates is proposing pay-as-you go tax increment financing equal to 90% of the projected increment with respect to each component of the Project. Silverview is also • requesting that 90% of the tax increment generated from the adjacent convenience store (which is developed as part of the same PUD and which is in the same tax increment • district) be allocated to the senior housing component of the Project. The term of the TIF we are requesting is thirteen (13) years with respect to all components of the Project (which we understand is the term of the underlying TIF district). Simply put, the purpose of the tax increment financing is to provide reimbursement for a portion of the development costs of each of the projects so as to make the projects financially viable. Without the TIF assistance, the amount of profit anticipated to be generated by the operation of the Projects is not adequate to compensate the owner for the required equity investment. We believe the Silverview Estates Project is consistent with the general policy for tax increment financing because it is providing quality real estate development consistent with the existing land use proposals for this area which would not otherwise be achievable. As stated in Mounds View tax increment policy: "The Mounds View Economic Development Authority understands and abides by the fundamental principal which makes tax increment financing viable to encourage development and redevelopment which would not otherwise occur." We believe that the Projections and the related economic analysis provided with this application clearly demonstrate that the Project could not be constructed and operated without tax increment financing assistance in the amounts proposed. We believe that the housing and office development is consistent with land use goals and will contribute to the 111 immediate project area and the entire City of Mounds View. 2. Statement of necessity for use of tax increment financing for project. The acquisition, development and construction of the Silverview Project cannot be completed without the benefit of TIF financing. The financial forecasts and Prospectus which are a part of this application set forth in detail the applicant's assumptions concerning operating revenues, operating expenses and construction costs. Taken together, we believe these projections clearly indicate that neither the Project as a whole nor any component thereof is financially viable without the benefit of TIF financing which we are requesting. For example, assuming the maximum possible mortgage on the senior housing project, the senior housing project will still require approximately a seven hundred fifty thousand dollars ($750,000.00) equity investment based upon our present cost analysis. With the benefit of 90% of the TIF from the 25,000 square foot office project only, the project will produce a very small i.e., approximately S25,000 annual profit during the first five (5) years. This is obviously not an inadequate return on the seven hundred fifty thousand dollar equity investment (i.e., average 2%). The case for TIF is even more compelling in light of the risk inherent in the construction, financing, and lease-up of these properties. 3. Describe the Potential for Growth. • The projections have assumed that operating expenses and operating income grow at the rate of 5% and 3% respectively. 4. What is the Return on Equity Invested that you or investors need to make the project feasible? The rate of return on equity to make real estate projects such as the senior housing and office market feasible is at least 10%. This is similar to what a REIT or pension fund would be paying for fully constructed and leased projects. 5. If Rental Space, What is the Range of Targeted Rental Rates The specific targeted rental rates are $620 for one bedrooms and $750 for two bedrooms. The office rentals are from $10 to $12 per square foot net rents plus common area changes. 6. If Rental Space,Who are the tenants and what is the length of their leases. On the Senior Housing project, the tenants are persons 55 years and older with leases of at least six (6) month lease terms. With respect to the office project, the perspective tenants are professional service firms, real estate companies and other Class B office profile tenants pursuant to leases of preferably ten (10) years by a minimum of at least five (5) terms. MPLI:220270-1 S 7- ii 7 ) ) li § ! °I ) k § f\ 0'1/ / ;2 § k O ! /i ! |2 | ! r. , ! | R 2 V | 77 c ] § ! ;", \ e . |- !$2 ( 7! ; ! §! §. 2 \ @ § k ` 0 q i 4111 | ! | 7� | ® ; }\ ■ \ | 2 ? | - e| | • 2 7 . , _ § _ ! _ ! ° | i f 7 5 § ! }a ¥ !m§ ■ k PI ! -5 }/ q 1 . 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Y2oi S 1E2E2 YYS 22 F s3z 2 .Iii :!:!i-o -.Si Y .E01 o 0 a - -.2 = - g .)3 g _ .I111 Y20sIL 222 . Sio: .1.2- YY. . . :Y 2 '8._. - 2 8Y - -- 0 o $=523 0=2 3 . 5:15 2 .233.2 e.Y:se ai4 0 0000 0 E Y.ti-- 222 Y » 322 » »2oY »:Y. :.. '.t YwY 022"2. '34.72`2 .2. . 0 022E 33: ::0$ »w+ iii w v.e 2E= M . • 1 inn $s3 Y » 282 E 02:• Y•••le :2."7 t 22.2 S SYwy' 551 • 3 22: S o::' •.e . APPLICATION FOR TAX INCREMENT FINANCING FOR SENIOR HOUSING PROJECT • I Adopted 5/12/97 S CITY OF MOUNDS VIEW APPLICATION FOR TAX INCREMENT FINANCING PROJECT: 1. Business Name: Silverview Estates, Inc. - Senior Housing Project Address: 4196 Lexington Avenue, Shoreview, MN 55126 Telephone #: (612) 483-5518 Contact: Marcel Eibensteiner 2. Brief Description of the Business. (Please provide # of years in business under current ownership and # of years in Mounds View) Silverview Estates, Inc. is a single purpose Minnesota corporation which was formed for the sole and exclusive purpose of the development of a mixed use real estate project in Mounds View, Minnesota. Silverview Estates, Inc. ("Silverview") was recently incorporated for purposes of development of the project and has not • commenced business operations. Silverview is owned 50% by Mr. Marcel Eibensteiner and 50% by Mr. Dale Jones. Both Mr. Eibensteiner and Mr. Jones have a long history of real estate development ownership and operation including the ownership and operation of multi-family housing, office and other commercial projects. Mr. Eibensteiner and Mr. Jones each have over 30 years of experience in real estate development, sales and finance. A copy of Mr. Eibensteiner's and Mr. Jones' resumes are attached. 3. Present Ownership of the Site: The entire project site is currently owned by Mr. Dale Jones, family members and various affiliates. It will be conveyed to the development entities at financing closing. A small portion of the Project site is owned by a third party which is the owner of the proposed adjacent convenience store. Silverview Estates has an agreement with the adjacent owner for the acquisition of this portion of the Project site. S 4. Present Project: Building square footage, location of project, size of property, description of buildings - materials, etc. Attach site plan, if available The entire Silverview Estates Project being proposed is comprised of three (3) distinct components in addition to an adjacent convenience store which will be owned by a separate development group. The Silverview Estates Project consists of: (1) an 82 unit senior housing project. The housing project is anticipated to be a three story brick and wood frame construction independent living facility for persons 55 years and older. The other components of the project are: (2) a 25,000 square foot two story office building and (3) a 5,000 square foot one story office building. Silverview Estates, Inc., will be the developer of each of the three (3) components. For reasons related to project finance, each of the three (3) components will be owned by a separate legal entity in which Silverview Estates, Inc. or its principals will have an ownership interest. It is anticipated that Silverview will construct the senior housing component along with the 5,000 square foot office building portions of the Project first, commencing approximately July 1, 1998. 5. If the property is to be subdivided, Show Division Planned. The property is to be developed under a PUD which has been approved by the City. 6. Estimated Project Costs: (please enclose construction proforma, if available.) a. Land Acquisition $429,000.00 b. Site Preparation $205,000.00 c. Site Utilities $35,000.00 d. Public Improvements $25,000.00 e. Landscaping $105,000.00 f. Hard Building Costs (H'istorical Data) $4,386,000.00 g. Construction Fee (Included in Hard $0.00 Building Costs Above) h. Architectural Fee $96,000.00 i. Legal Fees $23,000.00 j. Financing Costs $85,000.00 k. Broker Costs $84,000.00 1. Contingencies $55,000.00 m. Equipment $84,000.00 n. Other (Pond Grading) $200 000.00 Total $5,812,000.00 10 I . 7. Total Estimate Market Value at Completion (Explain Calculation) $5,084,000 $62,000 per unit X 82 units 8. Submit an Itemized List of Eligible Costs Qualifying for Assistance (see Page 51 <a a Tax Increment Policy). • a. Land Acquisition $429,000; b. Site Preparation $205,000; c. Utilities $35,000; d. Public Improvements $25,000; e. Pond Grading $200,000. Total $894,000 9. Sources of Financing a. Equity $1,040,000 b. Bank Loan $4,783,971 c. Tax Increment Assistance Included in Mortgage d. Industrial Revenue Bonds $ e. Other (please specify source) $ 111 10. Form of Tax Increment Financing Assistance Requested X Pay as You Go Bond Issuance Excess Increment 11. Name & Address of Architect, Engineer, and General Contractor. Architect is Charles J. Radloff General Contractor is SB Commercial Construction Charles Plowe is the Civil Engineer 12. Estimated Real Estate Taxes on Project Site upon Completion of Project. (please show calculations.) $150,000, this is the estimated real estate tax based upon specific discussions with the county assessor and in comparison the an.existing adjacent senior housing project. • S AI13. Project Construction Schedule: a. Construction start date July 1998 b. Construction completion date July 1999 Lease up expected by 1-1-2000 c. If phased project: (see below) Year % Complete Year % Complete Silverview anticipates developing the three (3) components in essentially two (2) separate phases. The first phase would consist of the construction of the senior housing component and the 5,000 square foot office building commencing on approximately July 1, 1998 and continuing thereafter to a completion date of July 1, 1999. Thereafter construction of the 25,000 square foot office component would be undertaken based upon an analysis of when the market accepts the project. 14. Estimated Number of Jobs: Created 48 construction, 3 nonconstruction (within 2 yrs) Retained 3 permanent-nonconstruction There will be a significant number of full time equivalent construction related jobs created estimated at 37 by the general contractor for the senior housing project, 9 for the 25,000 square foot office building and 2 for the 5,000 square foot office building. 15. Average Annual Wage Level of Jobs Created (see above) (within 2 yrs) Retained 25,000 - 30,000 for senior housing project and office components consisting of an on site manager and caretakers. 16. Is Job Training Assistance Needed? No TAX INCREMENT FINANCING REOUEST: 1. Describe amount, term and purpose for which tax increment financing is required and how the project fits into the City's economic development and redevelopment goals and objectives. Silverview Estates is proposing pay-as-you go tax increment financing equal to 90% of the projected increment with respect to each component of the Project. Silverview is also requesting that 90% of the tax increment generated from the adjacent convenience store 4110 • (which is developed as part of the same PUD and which is in the same tax increment district) be allocated to the senior housing component of the Project. The term of the TIF we are requesting is thirteen (13) years with respect to all components of the project (which we understand is the term of the underlying TIF district.) Simply put, the purpose of the tax increment financing is to provide reimbursement for a portion of the development costs of each of the projects so as to make the projects financially viable. Without the TIF assistance, the amount of profit anticipated to be generated by the operation of the Projects is not adequate to compensate the owner for the required equity investment. We believe the Silverview Estates Project is consistent with the general policy for tax increment financing because it is providing quality real estate development consistent with the existing land use proposals for this area which would not otherwise be achievable. As stated in Mounds View tax increment policy: "The Mounds View Economic Development Authority understands and abides by the fundamental principal which makes tax increment financing viable to encourage development and redevelopment which would not otherwise occur." We believe that the Projections and the related economic analysis provided with this application clearly demonstrate that the Project could not be constructed and operated without tax increment financing assistance in the amounts proposed. We believe that the senior housing and office development is consistent with land use goals and will contribute to the immediate Project area and the entire City of Mounds View. 2. Statement of necessityfor use of tax increment financing for project. The acquisition, development and construction of the Silverview Project cannot be completed without the benefit of TIF financing. The financial forecasts and Prospectus which are a part of this application set forth in detail the applicant's assumptions concerning operating revenues, operating expenses and construction costs. Taken together, we believe these projections clearly indicate that neither the Project as a whole nor any component thereof is financially viable without the benefit of TIF financing which we are requesting. For example, assuming the maximum possible mortgage on the senior housing project, the senior housing project will still require approximately a one million two hundred thousand dollar ($1,200,000.00) equity investment based upon our present cost analysis. With the benefit of 90% of the TIF from the senior project only, the project will produce a very small i.e., (-$41,000) to ($22,000) annual profit during the first five (5) years. This is obviously not an inadequate return on the one million dollar equity investment (i.e., average less than 2%). The case for TIF is even more compelling in light of the risk inherent in the construction, financing, and lease-up of these properties. 3. Describe the Potential for Growth. The projections have assumed that operating expenses and operating income grow at the rate of 5% and 3% respectively. S 4. What is the Return on Equity Invested that you or investors need to make the 40 project feasible? The rate of return on equity to make real estate projects such as the senior housing and office market feasible is at least 10%. This is similar to what a REIT or pension fund would be paying for fully constructed and leased projects. 5. If Rental Space, What is the Range of Targeted Rental Rates The specific targeted rental rates are $620 for one bedrooms and $750 for two bedrooms. The office rentals are from $10 to $12 per square foot net rents plus common area changes. 6. If Rental Space, Who are the tenants and what is the length of their leases. On the Senior Housing project, the tenants are persons 55 years and older with leases of at least six (6) month lease terms. With respect to the office project, the perspective tenants are professional service firms, real estate companies and other Class B office profile tenants pursuant to leases of preferably ten (10) years by a minitiium of at least five (5) terms. 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III: • \ k : k2§ 2A kkktk §ki ; s 2, a § | ;;.js . . 1.,....-1.. k § P. 1 Inn in § ni 1 §§!k CilIhl §IA » .t§k: 1 k\kk\ !\t j \ _;, A !)!\ !tt§\t k\i ; tk§: 0 ' kjk}k k�\ - k\\ 4 i i !ltjkt !�i t tn.!. } = ;;;�; ,;@ ; 2 322 § - ,. -a i!£!l $|! ! t i!! % Z:lk ��ttz% Itt § Itkt NOTES ON FINANCIAL FORECAST SILVERVIEW ESTATES GENERAL PARTNERSHIP FINANCIAL PROJECTIONS 111 TABLE OF CONTENTS Page 1 Accountants ' Letter Summary of Significant Accounting Policies and 2-6 Projection Assumptions . Projected Schedule of Debt Service Coverage Ratios and Return on Investment1, 1998 for the Period Commencing January and Ending December 31, 2012 Projected Statement of Operations for the Period Commencing January 1, 1998 8 and Ending December 31, 2012 Projected Statement of Change in Partner Equity (Deficit) for the Period Commencing January 1, 1998 9411 and Ending December 31, 2012 Projected Statement of Cash Flow 1998 for the Period Commencing January 1, 10 and Ending December 31, 2012 Pro Forma Balance Sheets 1, 1998 for the Period Commencing January11 and Ending December 31, 2012 Projected Schedule of Marketing, Administrative, Operating and Maintenance Expenses for the Period Commencing January 1, 1998 12 and Ending December 31, 2012 D DAVID H. HESLEY, LTD. Certified Public Accountant &Consultant October 15 , 1997 To the Partners of Silverview Estates General Partnership I have compiled the accompanying financial projections for Silverview Estates a General Partnership, for the period commencing January 1, 1998 and ending December 31, 2012, including summaries of significant accountingnspolicies i bythe Ameri an Intion st tute of Certtions , in ified Public ance with standards established Accountants . A compilation is limited to presenting in the form of a projection, information that is the representation of management and does not include evaluation of the support for the assumptions underlying the projections . I have not examined the projections and, accordingly, do not express an opinion or any other form of assurance on the accompany- ing statements or assumptions . Furthermore, even if the projected levels of rental income, operating expenses, and the projected financing arrangements are attained there will usually be differences between the projection and actual results , because events and circum- stances frequently do not occur as expected, and those differences may be material . The financial projections are designed to provide information for assistance in obtaining permanent financing and limited partner' s capital for the e eproject used forknown any otherpurpose . Estates , and should not b considered or I have no responsibility to update this report for events and circum- stances occurring after the date of this report. ti DAVID H. HESLEY, LTD . Certified Public Accountant 2607 WHrrE BEAR AVENUE • MAPLEWCOD,MQ•INESOTA 55109 • OFFICE(612) 770-8505 • FAX(612) 770-0627 GENERAL PARTNERSHIP SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROJECTION ASSUMPTIONS FOR THE PERIOD COMMENCING JANUARY 1 , 1998 AND ENDING DECEMBER 31 , 2012 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Business Silverview Estates , Inc . , A Minnesota Corporation (the General Partner) will construct, develop, lease and sell a 82 unit senior citizen multi- family market rate residential housing project, a 25 , 000 square foot office building and a 5 , 000 square foot office building located in Mounds View, Minnesota . These financial projections present, to the best of management' s knowledge and belief , the Partnership' s expected results of its balance sheet, operations , Partner' s equity and cash flow for the projected period presented on the tax basis of accounting. Accordingly, the projection reflects the General Partner' s judgment as of October 15, 1997 , the date of this projection, of the expected conditions and its expected course of action. The assumption and policies disclosed herein are those that the General Partner believes are significant to the projection. There will usually be differences between the projection and results , a because and hosts nd e differencesm mayc es lbe frequently o notoccurasexpected, material . PROJECTIONS ARE INHERENTLY SUBJECT TO VARYING DEGREES OF UNCERTAINTY, AND THEIR ACCURACY DEPENDS, AMONG OTHER THINGS, ON THE RELIABILITY OF THE UNDERLYING ASSUMPTIONS AND THE PROBABILITY OF THE OCCURRENCE OF COMPLEX SERIES OF FUTURE EVENTS OR TRANSACTIONS, MANY OF WHICH ARE NOT410 WITHIN THE CONTROL OF THE GENERAL PARTNER, ESPECIALLY MATERIAL SET FORTH UNDER "FEDERAL INCOME TAX ASPECTS" AND "RISK FACTORS" . The federal income tax position reflected in the projected financial statements are those which the Partnership intends to take in preparing and filing its federal informational returns of income. It is the belief of the General Partner that these tax positions have sufficient support under current tax law and interpretations thereof, to justify their being reflected in such returns . The reader should consult with their own tax advisor to determine the effect of their own particular tax situation. Items such as passive activity loss rules , low-income housing credits and its limitations , interest deductions , alternative minimum tatax, and d dstate and local income taxes may have additional impact on in this Partnership . Method of Accounting The projection has been prepared based on the tax basis of accounting using accrual accounting methods . • Organization/Syndication Costs Organization and start-up costs are amortized over 60 months . 110 Syndication fees are capitalized but will not be deducted or amortized. Property acquisition fees are capitalized and depreciated over 27 .5- year recovery period . ( 2 ) SILVERVIEW ESTATES GENERAL PARTNERSHIP SUMMARY OF SIGNIFICANT ACCOUNTINPLICIES ANDYAND PR1OJ1C9ION ASSUMPTIONS FOR THE PERIOD COMMENCING2012 AND ENDING DECEMBER 31 , 1110 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued property and Depreciation Property and equipment are capittalizedfor pense , income tax purposes . Maintenance and repairs are charg The combined property' s Construction Costs are $7 , 133 ,585 . Finance, closing costs and other organization costs are projected at $257 , 000 . Capitalized land improvements are forecasted at $686 , 000 . The allocation between land, buildings and personal property is estimated as shown below. COMBINED PROJECTS Life �ost - $ ;79 , 000 Land 15 . 0 years y86 , 000 Land Improvements 27 .5 years 6 , 145 ,585 Building 7 . 0 years 109 ,000 Personal Property 30 . 0 years 222 ,000 Finance Costs 5 . 0 years 35 ,000 Organization Costs Illtder the Internal Revenue Code, a partnership may recover the cost of uepreciable real property under the Modified Accelerated Cost Recovery System (MACRS) . Under MACRS, depreciable residential real roperty d placed in service after December 31 , 1986 may Pre 27 . 5-year period using the straight-line method. The Code provides that depreciation of residential real property over a 27 . 5-year period and commercial real property over a 39 year period is subject to adjustment upon audit by the Service . However, the Service may len e the allocation of the cost between real property, personal property, and land. A successful affect nthe et timingsrtneand ramount of la for depreciation claimed wou Partner' s taxable income or loss . Depreciation of personal property placed in service after December 31, 1986 is computed over, a seven-year recovery period using the 200% declining balance method, switching to the straight-line method to maximize the deduction. that It should be noted that certain slaw may bes have not opted subs MACRS, nti ally dlower the depreciation allowed under state than the amounts reflected in the projection. SUMMARY OF SIGNIFICANT PROJECTION ASSUMPTIONS The accompanying financial projection assumptions for the period commencing January 1 , 1998 and ending December 31, 2012 is based on information provided by the General Partner ofof accounting the Partnership. Accruale projection is presented on the tax basis the projections . accounting methods have been used in preparing ( 3 ) SILVERVitw zs12"%1LJ GENERAL PARTNERSHIP SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROJECTION ASSUMPTIONS FOR THE PERIOD COMMENCING JANUARY 1, 1998 AND ENDING DECEMBER 31, 2012 SUMMARY OF SIGNIFICANT PROJECTION ASSUMPTIONS - Continued 4111 It is assumed that December 31 will be the year end of the Partnership. The projection and assumptions are based upon the following, without limitation: a. The Partnership will be treated for tax purposes as a partnership rather than as an association taxable as a corporation. b. The Partnership will be approved for tax increment financing with the City of Mounds View. The Partnership has projected a 90% increment "pay-as-you-go" reimbursement of real estate taxes paid each year over the remaining twelve ( 12 ) year life of the existing TIF district. Financing The Partnership projects to secure permanent financing on each project. Interest rates are projected at 8 .5% with interests and principal payments payable over thirty (30) years . Rental Income The projected rental income assumes that the Partnership will initially 410 lease housing units, garages, office building and storage at the following rents : Number Square Rent of Units Feet 1 Bedroom-Market Rate 620 28 760 2 Bedrooms 750 54 1, 037 Garages - Underground 40 82 Office Building $12 .00/sq ft 5 , 000 Office Building $10 .00/sq ft - 25 , 000 Maintenance Reimburse- ment $2 . 00/3 . 00 sq ft - The Partnership projects that annual increases to rental income will be 3 . 0% a year beginning the first year subsequent to the first year of operation, through the year 2012 for the senior housing. Rent income on the office buildings are based on fixed 5 year leases , increased at $1 . 00 per square foot every five years . Maintenance reimbursement increase is projected to 5% per year the same projected increase for expenses . Interest Income Interest income on the partnership ' s replacement and debt service cash reserves , are calculated using an interest rate of 5 . 00% ( 4 ) GENERAL PARTNERSHIP SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROJECTION ASSUMPTIf1N FOR THE PERIOD COMMENCING JANUARY 1, 1998 AND ENDING DECEMBER 31, 2012 •MMARY OF SIGNIFICANT PROJECTION ASSUMPTIONS - Continued Vaca The partnership anticipates that it will incur vacancies at an averege rate of 5% each year. Additional vacancies were projected for the first twelve ( 12 ) months of operations due to the rent-up stage. Combined Rental Operations The projected marketing, administrative, operating and maintenanc, expenses are based on historic costs from experienced, profession,..1 management organizations . The partnership anticipates expenses will be increased 5% over the costs of the prior year due to inflation. Combined Marketing Expenses Advertising expense will be incurred in order new ochievidneara100% occupancy. A credit report will be run on each tenant or commercial lessee to check current credit and any criminal activities . A portion of the credit check fee may be paid by each resident applying to rent an apartment of the 82-unit senior housing building. Sombirled Administration Expenses Salaries, are the largest expense in this category. Full time permanent employees will be hired to manage Silverview Estates . Additional responsibilities of on-site personnel include leasing, maintenance, and grounds maintenance. The use of ouidescontractn services will be limited. Fire and liability insurance an estimate by State Farm Business Insurance. Workers compensation is based on wages and apartment value multiplied by a rate of 10 .5% . Combined Utilities Expenses Operating expenses , which includes all utilities , are based on the current utilities ' rates and square footage of the building. Combined Repair & Maintenance Expense Repair Maintenance expense will be baseone contracts for the various services i e d will be reviewed and cost estimated based on a building of this size. Combined Management Fees A property management fee of 5% of the net rental income of each project on a monthly basis will be paid for management . The manage- ment fee will pay for services incurred by a professional independent accredited management organization. The management company will have significant experience in senior housing and retail office to insure maximum rents and administrate policy and procedures . (5 ) GENERAL PARTNERSHIP SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROJECTION ASSUMPTIONS FOR THE PERIOD COMMENCING JANUARY 1, 1998 AND ENDING DECEMBER 31 , 2012 SUMMARY OF SIGNIFICANT PROJECTION ASSUMPTIONS - Continued • Combined Property Taxes Property taxes are estimated, based on hard construction costs and increase at 4% per annum. Property taxes in Minnesota are based upon the following factors : Assessed Market Value x Effective Local Tax Rate The assessed market value is determined by capitalizing the net operating income before property taxes, less a reserve for replace- ment . The capitalization rate includes a provision for a return of approximately 10 . 5% plus the normal tax classification rate of 3 .4% times the tax extension rate, which for the City of Mounds View has approximated 138% . The effective local tax rate is determined by multiplying the tax classification rate by the local adjustment factor or tax extension rate. The local adjustment factor or tax extension rate is computed annually by each municipality. Recently, in the City of Mounds View, this rate has approximated 138% . Replacement Reserve The Partnership requires management to create and fund a replacement 110 reserve account for each project. The amount was determined by allocating $200 per unit per year for the senior housing and $1 . 00 per square foot per year for the commercial office building. Monies may be withdrawn from the fund by the partnership to pay extraordinary maintenance, repairs and to pay the costs of renewals , replacements , extensions or additions to the project . • 111 ( 6 ) i CONTRACTOR INFORMATION 0 0 * 1 RECEIVED 1.11 CID COMqr." CIAL OCT 281997 ea4r!tz TOUu o. uiII r rl yes s 110 October 28, 1997 Mr. Todd Umess Winthrop & Weinstine 3000 Dain Bosworth Plaza 60 South Sixth Street Minneapolis, MN 55402 RE: Mounds View Development Dear Todd, Pursuant to our discussion, I have outlined below the approximate number of full time jobs the above referenced development would create for a one (1) year period. 82 Unit Senior Housing 37 Jobs 25,000 sf Office Building 9 Jobs 5,000 sf Office Building 2 Jobs Total Created for One (1)year Period 48 Jobs These calculations were generated to reflect the approximate number of full time positions this development would create during the overall construction period and are broken down into one (1) year increments. These estimations are associated with the construction operation only. Please call with any questions or concerns. Sincerely, SB COMMERCIAL CONSTRUCTION IN :John Arbogast Project Manager 2297 County Road H • New Brighton, MN 55112 • Office 612-786-4909 • Fax 612-786-4908 • • s • .�■ sin _ - . . . :; ,"' ., 1 � -- ;•;.2 "1.: . .. . „ . , • •-i•;..:•:-.--...)1- .. . • . , ul, • r.;$ .-. :.. -- -. .!:•••- .: .. .: ' : •:• •::...,.....,.,,,...,:... , : . COtVrI•t 1 FICIAL eaud.t . . , % -a.1ry August 15, 1997 ' • Mr. Marcel Eibensteiner . 4196 Lexington Avenue • Shoreview, MN 55126 • . :. RE: Silverview Estates Development Dear Marcel, SB Commercial Construction is pleased to present for your review cost estimates on the- above referenced development project. We have included cost breakdowns for the 82 unit • Senior Housing project, the 25,000 sf 2 Story Office and the 5,000 sf Single Story Office. The estimates are presented in the same format as the"Attachment A" as submitted to SB Commercial Construction on August 6, 1997. I have utilized the submitted costs for land, IIIsite improvements, architectural fees and the remaining soft casts. The 82 unit Senior Housing project is presented in two (2)variations. One estimate is based on historical data and one is based on a detailed quantity take-off with unit pricing. The 25,000 sf Office Building and the 5,000 sf Office building are based on a detailed quantity take-off with unit pricing only. We appreciate the opportunity to be of service and look forward to this exiting project. Please contact me should you require additional information or have any questions. Sincerely, ' SB COMMERCIAL CONSTRUCTION • • John Arbogast . Project Manager . . Ali ' .: } '.7::. 297 County Road:H •`New Bci9,hton;,MN 551/2 .•Office 61 �st3q-49 J9 •t=a�r:5'?2`�8 •p&. 1. • , :' .. ....`tel` "N.� . 1 .`r `�7 Z47. • 'j ( _ ...,. :: • 44. • :. Yom:' : .; : .;i:- p ..'a irk `.� . (Attachment"A" Cont.) • 82 UNIT SENIOR HOUSING 6. Estimated Project Costs: (Please enclose construction performa, if available) • a. Land Acquisition $429,000.00 b. Site Preperation $205,000.00 c. Site Utilities $35,000.00 d. Public Improvements $25,000.00 e. Landscaping $105,000.00 f. Hard Building Costs (Historical Data) $4,386,000.00 g. Construction Fee (Included Above) $0.00 h. Architectural Fee $96,000.00 I. Legal Fees $23,000.00 j. Financing Costs $85,000.00 k. Broker Costs $84,000.00 I. Contingencies $55,000.00 m. Equipment $84,000.00 n. Other (Pond Grading) $200,000.00 • $5,812,000.00 Ilcost/ Unit $70,878.05 it HISTORICAL DATA ESTIMATE • 0 . . •. 8/15!97 •,,'-‘:•,;•;.;,:.:: _ - .. ...,...:,. . . • ..,.. ._ .. ... . e .,. .. . ,.... • g,..: , :....• . _ ; .4 .„..:„. • . . .,, : .. T.: . ... .. . .i. Irefiment"A" Cont.) gitiNIT SENIOR HOUSING 6. Estimated Project Costs: (Please enclose construction performa, if available) a. Land Acquisition $429,000.00 . .; b. Site Preperation $205,000.00 c. Site Utilities $35,000.00 d. Public Improvements $25,000.00 e. Landscaping $105,000.00 • f. Hard Building Costs $4,307,899.00 .: '. g. Construction Fee $129,237.00 . '. h. Architectural Fee $96,000.00 I. Legal Fees $23,000.00 j. Financing Costs $85,000.00 k. Broker Costs $84,000.00 I. Contingencies $55,000.00 m. Equipment $84,000.00 1. Other (Pond Grading) $200,000.00 0 $5,863,136.00 licost i Unit $71,501.66 11 SB COMMERCIAL CONSTRUCTION ESTIMATE 0 : , • : -cr.- • --: 7...--.... • rekil5I97 .1"• ..,' :', • ' Y:' ,'.2,.!'• ,i'-.• • .* ': ' . • , . • "*:i:."' 1'..... '. • ::''.''' • - '' '; CT;,-::. 44-,,„.. .., . . - • • . '., -,-. ••.r.,r, , ,..,..,.: :".17- ',.•, •.. .....:4';-11.;$41-:: . . •Tar.ki.' 's — • . _ . . . ---- • (Attachment"A" Cont.) • 25,000 SF Office Building 6. Estimated Project Costs: (Please enclose construction performa, if avaiiabie) a. Land Acquisition $350,000.00 b. Site Preperation $20,000.00 c. Site Utilities $10,000.00 d. Public Improvements $25,000.00 e. Landscaping $28,000.00 f. Hard Building Costs $1,112,795.00 g. Construction Fee $44,512.00 h. Architectural Fee $58,000.00 I. Legal Fees $10,000.00 j. Financing Costs $22,000.00 k. Broker Costs $25,000.00 I. Contingencies $20,000.00 m. Equipment $25,000.00 n. Other $0.00 411 $1,750,307.00 [Cost/SF $70.01 SB COMMERCIAL CONSTRUCTION ESTIMATE S ."� 'L' Yt�" • y rj;` �+'v --.7 �1..-'- r t' +..w,�•'..:,,;:t- t.:. • vN '.i _:•'''7:?;V.,. ='. , ,` s.;- 'J•...1...: _ .i :_ ., 'N 1 `T gi ,•.:4.1.11- ,, -:',-'.0.7.44.:!.,y .?�, , Y.. (Attachment "A" Cont.) l 5,000 SF Office Building 6. E ,timated Project Costs: (Please enclose construction performa, if available) 8. Land Acquisition $100,000.00 b. Site Preperation $15,000.00 c. Site Utilities $5,000.00 -i. Public Improvements $5,000.00 e. Landscaping $8,000.00 f. Hard Building Costs $218,716.00 g. Construction a=ee $10,936.00 h. Architectural Fee $10,000.00 I. Legal Fees $2,000.00 j. Financing Cots $6,000.00 k. Broker Costs $0.00 I. Contingencies $5,000.00 m. Equipment $0.00 n. Other $0.00 • $385,652.00 cost/ SF $77.13 SB COMMERCIAL CONSTRUCTION ESTIMATE 0 ' 1/4 8115197 :', i Z- _ • 4 ,,•*�fA, t,f+t;5311,2 • c:' ,13. " �? 810 T o+•_1•''"w SITE PLAN KISS MONROE , P . A . ATTORNEYS AT L A W ■ James R Casserly Email jamescra)` krassmonroe.com Direct Dial(612)885-1296 MEMORANDUM To: City of Mounds View Attn: Rick Jopke, Community Development Director Chuck Whiting, City Administrator -- From: James R. Casserly Greg D.Johnson Date: February 23, 1998 Re: Tax Increment Assistance for Silverview Estates Projects Our File No. 9806-1 • INTRODUCTION Silverview Estates (the "Redeveloper") is seeking tax increment assistance from the City of Mounds View (the "City") for the construction of various improvements on the southeast quadrant of the intersection of Highway 10 and Silver Lake Road. The contemplated improvements include the following: 1. A gas station/convenience store of approximately 6,820 square feet with an estimated market value of approximately$511,500. 2. A 5,000 square foot office building with an estimated market value of approximately $300,000. 3. A 25,000 square foot two story office building with an estimated market value of approximately$1,375,000. 4. A market rate senior housing rental project comprising 82 units with an approximate market value of$4,305,000. Upon completion the combined estimated market value of all the improvements would be approximately $6,500,000 and would generate estimated taxes in excess of$286,000 (assuming Mr the pay 1998 Class Rates). SUITE 1100 SOUTHPOINT OFFICE CENTER•1650 WEST 82ND STREET•BLOOMINGTON,MINNESOTA 55431.1447 TELEPHONE 6121885-5999•FACSIMILE 612/885-5969 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 UL/13/ats 311. 4 1U:4r PAA. 612 885 5969 KRASS MONROE -4--. MOUNDS VIEW [2004 represent the level of assistance that the City would provide. This level of assistance would be iii the form of a pay as you go revenue note which simply means that the assistance would only c 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 h 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 410 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 Iand 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%). lithe 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 s__ � reauced 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. • •Page 3 02/23/98 MON 10:48 FAX 612 885 5969 BRASS MONROE -+-0-• MOUNDS VIEW Q005 • CONCLUSIONIP In order to obtain the desired redevelopment, the City will need to provide the Redeveloper a certain level of assistance. For the gas station/convenience store, no assistance was requested and none is provided. For the two office buildings comprising 30,000 square feet, the site costs in excess of the land value are reimbursed for a total.of$167,000. For the senior rental project, the site costs and land acquisition of$830,000 are reimbursed. Collectively these projects generate on a present value basis approximately $1.7 million dollars in tax increment and we are suggesting a combined level of assistance of approximately $1,000,000. If we can provide any further help or analysis in these matters,please give us a call. JRC/jrns cc: Silverview Estates Attn: Marcel Eibensteiner Winthrop &Weinstine,P.A. Attn: Todd B.Urness G.W POATAWMgOUNDS VIEWCORUCPKE JRC 2.DCC S • •Page 4 CITY OF MOUNDSVIEW SCHEDULE SILVERVIEW - Combined eGas Station/ 2 OfficeSenior Cony. Store Buildings Housing II TOTALSi� ?URCES Tax Increment Receipts (PV) 146,872 502,673 1,062,238 51,711,783ii Land Sales l' it Gas /Convenience Store 011 Commercial Buildings 300,000 1 300,00011 Senior Housing 287,000 287,0001 TOTAL SOURCES 146,872 802,673 1,349,238 2,298,7831 k }ES II Land Acquisition 300,000 287,000 587,000 35,000 205,000 240,0001 Site Preparation Site Utilities 15,000 35,000 50,000 Public Improvements 30,000 25,000 . 55,0001 Professional Fees 12,000 23,000 35,000 Contingencies 25,000 55,000 80,000 Other(Pond Grading) 50,000 200,000 250,000 •TAL USES . 0 467,000 830,000 1,297,0001 SURPLUS /(DEFICIT) 146,872 335,673 519,238 1,001,783) OTAL USES LESS LAND ACQUISITION 167,000 543,000 1 _ 710,0001 I ver"a.wk4 PREPARED BY KRASS MONROE, P.A. 12/31/97 Adopted 5/12/97 • CITY OF MOUNDS VIEW ECONOMIC DEVELOPMENT CONLMISSION GUIDELINE IN THE ANALYSIS OF APPLICATION • FOR TAX INCREMENT FINANCING ASSISTANCE FOR SILVERVIEW ESTATES, INC 4 NAME OF APPLICANT Note: The EDC acts as an advistory to the 2/23/98 Economic Development Authority who is the governing body, legal and political, for all Date Reviewed disbusements and approvals of tax increment funds. This document serves as a guideline to asstist the EDC in making judgements for the Total Score use of tax increment funds. There may be projects that do not financially score high but meet or exceed the economic development Result of Analysis and redevelopment goals and objectives for the City of Mounds View. There may also be projects that financially score high but do not • meet or are not compatable with the goals and objectives. • Adopted 5/12/97 1. PUBLIC VERSUS PRIVATE INVESTMENT $7,947,959 Private Investment I $1,711,783 TIF/Public Investment $9,659,742 Total Investment 4.64 to 1 Ratio of public vs. private investment Point Private Public Value + 1 Less than$3 to $1 +2 Over$3 to $1 + 3 Over$4 to $1 +4 Over$6 to $1 + 5 Over$8 to $1 2. NUMBER OF EMPLOYEES (Computed as full time equivalent positions) Point Number Value + 1 > 1 - 15 +2 > 16 - 30 + 3 > 31 - 45 +4 > 46 - 75 + 5 > 75 - plus 3 Current Number of Employees 51 Estimated Number of New Employees (within the next 2 years) 54 Total Number of Current and Estimated New Employees S Adopted 5/12/97 3. PUBLIC INVESTMENT PER CURRENT EMPLOYEE • Point Value INVESTMENT 0 $12,500 + + 1 $10,000 - $12,500 +2 $7,500 - $10,000 + 3 $5,000 - $7,500 +4 $2,500 - $5,000 + 5 $ 0 - $2,500 TIF/Public Investment - $1,711,783 Current Number of Employees 54 Investment per Employee = $31,670 4. ANNUL PAY LEVEL OF POSITIONS NO INFO PROVIDED • Point Annual Dollar Total # of Weighted Value Salary Weighting Employees Dollar Amt. 0 $ 0 - 14,999 $10,000 + 1 $15,000 - 24,999 $20,000 + 2 $25,000 -29,999 $27,500 + 3 $30,000 - 44,999 $37,500 + 4 $45,000- 59,999 $52,000 + 5 $60,000 and Over $60,000 Total Full Time Equivalent Weighted Average I Adopted 5/12/97 5. REAL ESTATE/PROPERTY TAXES GENERA 1'ED $286,794 (projected tax revenues should be bases on the existing property tax system and rates plus legislative future changes if subject to estimation.) 410 Point Total Projected Value Annual Taxes + 1 Below$25,000 +2 $25,000 - $49,000 + 3 $50,000 -$99,999 +4 $100,000 - $249,999 + 5 $250,000 and Over 6. SIGNIFICANT IMPACT MULTIPLIER Point * Provide Comments regarding Value Type of Development subjective public benefits of project. + 0 Retail +2 Office S + 3 Office/Service (50/50) +3 Value Added (retail with significant service component) +4 Industrial -2 Activity Not Contributing to Tax Base +1 Company/Corporate Headquarters - location of upper management where decisions are made (add 1 pt to above) +1 Target Business +1 - +3 Elimination of Blight(add points to Iabove value) +2 - Total Point Value • 7. SERVICE IMPACT Adopted 5/12/97 • Point Value Type of Development - 4.0 Retail - 3.5 Office/Warehouse Service - 3.0 Hi Tech - 2.0 Office 8. FORM OF ASSISTANCE REQUESTED (within TIF District 1, 2, and 3) Point Value - 2 Up-Front + 5 Pay-As-You-Go lipFORM OF ASSISTANCE REQUESTED NA (within City but outside of TIF Districts) Point Value - 2 One-Time Payment + 1 3 Annual Payments +2 4 Annual Payments + 3 5 Annual Payments S Adopted 5/12/97 10. WORKSHEET SUMMARY POINT VALUE Public versus Private +3 Staff Pt.Value Number of Employees +4 EDC Pt. Value Public Investment per Employee 0 Pay Level of Positions 0 Comments: Real Estate/Property Taxes Generated +5 Significant Impact Multiplier +2 Service Impact -4 Retail & senior housing require additional services Form of TIF Assistance Required +5 Total Points 15 11. RATING FOR PROJECTS LOCAfhD WITHIN TIF DISTRICTS 1, 2,AND 3 S Point Value Term of Assistance 0-10 0 Years 11 - 13 3 Years - or- Remaining life of 11r District, whichever is less 14 - 16 5 Years - or- Remaining life of TIF District,whichever is less 17 -20 7 Years -or-Remaining life of 1111' District, whichever is less 21 and Over 10 Years -or-Remaining life of in: District, whichever is less 1110 Adopted 5/12/97 12.•RATING FOR PROJECTS IN DEVELOPMENT DISTRICT(OUTSIDE OF TIF DISTRICT) (1) Building Size: Square Foot Cost of Project: (Land & Building) Project (2 ) Per S.F. Cost Per S.F. Allowance $20.00 - $30.00 $3.00 $30.01 - $40.00 $4.00 $40.01 - $50.00 $5.00 OVER$50.01 $6.00 Points (3) Percent of • • Accumulated Assistance 11 - 13 30% 14 - 16 50% 17 - 20 70% 21 & OVER 100% S.F. of Bldg: (1) $ X S.F. Allowance (2) $ X % of Assistance: (3) Equals Amount of Assistance: $ S Adopted 5/12/97 • Tax Increment Policy Mounds View Economic Development Authority Mounds View, Minnesota GENERAL POLICY: The Mounds View Economic Development Authority has the powers under the Minnesota Statute Sections 469.124 through 469.137 and Sections 469.001 through 469.047 to govern and monitor the use of tax increment financing for Mounds View's tax increment districts and the Mounds View development district which encompasses the entire boundaries of the City of Mounds View. It is the responsibility of the Mounds View Economic Development Authority to use tax increment financing as a tool to accomplish the City's economic development and redevelopment goals and objectives. The Mounds View Economic Development Authority understands and abides by the fundamental principal which makes tax increment financing viable to encourage development and redevelopment which would not otherwise occur. The Mounds View Economic Development Authority shall consider tax increment financing in cases that serve to accomplish the City's development goals and activities as hereby defined in projects eligible for tax increment financing. PROJECT ELIGIBLE FOR TAX INCREMENT FINANCING: Pjects eligible for consideration of Tax Increment Financing assistance per the Mounds View Economic IP Development Project Plan dated May 9, 1994 include,but are not limited to (1) the attraction, retention, rehabilitation and preservation of commercial, industrial, retail, residential,recreational and public service facilities; (2) new and rehabilitated public infrastructure; (3) community and other public service centers; (4) . senior/mature adult and/or other housing development partnerships or other multi-use housing projects and facilities; (5) other public utilities (including telecommunications); (6) business incubator loan and other business programs; and (7) transportation systems. More emphasis will be placed on those items which increase the tax base, eliminate blight and meet the City's economic and redevelopment goals. COSTS ELIGIBLE FOR TAX INCREMENT FINANCING: Project costs qualifying for Tax Increment Financing assistance, as defined under the l'l.F Act, include utilities design, landscape design, architectural and engineering fees directly attributable to site work, site related permits, earthwork/excavation, soils correction, landscaping, utilities (sanitary sewer, storm sewer, and water), streets and roads, street/parking lot paving, street/parking lot lights, curb and gutter, sidewalks, land acquisition, special assessment, legal (relating to acquisition, financing, and closing fees), soils tests and envirnnrnental ctiidiec c„rvevc, rnark dediratifee, SAC ' WAC charges, titles insurance and TIF annlication J te__ nn application deposit. • 1 Adopted 5/12/97 • • DETERMINATION OF AMOUNT OF ASSISTANCE TO APPLICANT: Within TIF Districts The amount of Tax Increment Financing provided to an applicant will be based, in part, on the analysis of information provided on the application for Tax Increment Financing assistance (Attachment"A"), amount of increment generated by the project as evaluated by the City's Financial and/or Bond Counsel and the City's economic and redevelopment goals. The level of assistance provided will be evaluated on a case by case basis and may reflect an increase or decrease in assistance dependant upon the level of increasein the tax base, amount of elimination of blight and/or a number of variables that may substantiate the need for assistance. An adjustment in the amount of assistance that can be provided is at the sole discretion of the Board of the Economic Development Authority as long as the requested uses are legal under the Minnesota State Statues for use of tax increment fmancing. Within the Development District (herein referred to as the"City" limits) but outside of TIF Districts The evaluation of Tax Increment Financing assistance that could be provided to an applicant will be based in part on (A) the analysis of information provided on the application for Tax Increment Financing assistance (Attachment"A"), (B) square footage cost of the project, (C) balance available in the Economic • Development Authority excess tax increment fund and(D)proof of need for assistance under the "but for" test for use of tax increment financing. TYPES OF ASSISTANCE Within TIF Districts Tax Increment Financing can be provided in either"pay as you go" or"up front"payments. "Pay as you go" is wherein the Mounds View Economic Development Authority compensates the applicant for a predetermined amount for a predetermined number of years. The applicant pays for(re)development up front and then annual payments are issued to the applicant based on the need for assistance and increment generated from the project. "Up front' payments is wherein the Mounds View Economic Development Authority must issue revenue or general obligation bonds to pay for the (re)development prior to completion of the project. The increment generated from the project is then used for repayment of the bonds. The Mounds View Economic Development Authority gives preference to the use of"pay as you go" assistance to finance private development projects due to the reduced risk to the community. The EDA will consider"up front"payment projects that would benefit the entire community and are not possible to be funded under a "pay-as-you-go" basis. • 2 Adopted 5/12/97 • Within the City but outside of TIF Districts j inancing from the dedicated tax increment fund can be provided in annual installments to the applicant .eased on the positive cash flow balance in the Economic Development Authority's dedicated tax increment lind and need for assistance based on analysis of the "but for"test for the project. The dedicated tax increment fund includes a value based on the use and is adjusted along with the budget process and goals and objectives for economic and redevelopment on an annual basis. APPLICATION FOR TAX INCREMENT FINANCING ASSISTANCE: The Mounds View Economic Development Authority requires that an Application for Tax Increment Financing Assistance (Attachment A) be completed and a deposit be collected from the applicant for the EDA's consultants to investigate the feasibility and need for providing Tax Increment Financing assistance (Attachment B). SUBMITTAL OF APPLICATION FORMS: Applicants requesting Tax Increment Financing assistance within an existing district or in the creation of a new district, shall be required to complete and submit the following: 14110 Application for Tax Increment Financing Assistance 2. Deposit for Review of Tax Increment Financing Assistance • 3 Adopted 5/12/97 • Tax Increment Policy Mounds View Economic Development Authority Mounds View, Minnesota GENERAL POLICY: The Mounds View Economic Development Authority has the powers under the Minnesota Statuce Sections 469.124 through 469.137 and Sections 469.001 through 469.047 to govern and monitor the use of tax increment financing for Mounds View's tax increment dist icts and the Mounds View development district which encompasses the entire boundaries of the City of Mounds View. It is the responsibility of the Mounds View Economic Development Authority to use tax increment financing as a tool to accomplish the City's economic development and redevelopment goals and objectives. The Mounds View Economic Development Authority understands and abides by the fundamental principal which makes tax increment financing viable to encourage development and redevelopment which would not otherwise occur. The Mounds View Economic Development Authority shall consider tax increment financing in cases that serve to accomplish the City's development goals and activities as hereby defined in projects eligible for tax increment financing. PPJECT ELIGIBLE FOR TAX INCREMENT FINANCING: Projects eligible for consideration of Tax Increment Financing assistance per the Mounds View Economic Development Project Plan dated May 9, 1994 include,but are not limited to (1) the attraction,retention, rehabilitation and preservation of commercial, industrial,retail, residential,recreational and public service facilities; (2) new and rehabilitated public infrastructure; (3) community and other public service centers; (4) senior/mature adult and/or other housing development partnerships or other multi-use housing projects and facilities; (5) other public utilities (including telecommunications); (6) business incubator loan and other business programs; and(7) transportation systems. More emphasis will be placed on those items which increase the tax base, eliminate blight and meet the Citv's economic and redevelopment goals. COSTS ELIGIBLE FOR TAX INCREMENT FINANCING: Project costs qualifying for Tax Increment Financing assistance, as defined under the TIF Act, include utilities design, landscape design, architectural and engineering fees directly attributable to site work, site related permits, earthwork/excavation, soils correction, landscaping, utilities (sanitary sewer, storm sewer, and water), streets and roads, street/parking lot paving, street/parking lot lights, curb and gutter, sidewalks, land acquisition, special assessment, legal (relating to acquisition, financing, and closing fees), soils tests and SAC,n w n n charges,titles insurance and TIF application environmental studies, surveys, park dedication fee, SAC, ri AC applica-ion deposit. • 1 Adopted 5/12/97 • DETERMINATION OF AMOUNT OF ASSISTANCE TO APPLICANT: Within TIF Districts The amount of Tax Increment Financing provided to an applicant will be based, in part, on the analysis of information provided on the application for Tax Increment Financing assistance (Attachment"A"), amount of increment generated by the project as evaluated by the City's Financial and/or Bond Counsel and the City's economic and redevelopment goals. The level of assistance provided will be evaluated on a case by case basis and may reflect an increase or decrease in assistance dependant upon the level of increase:in the tax base, amount of elimination of blight and/or a number of variables that may substantiate the need for assistance. An adjustment in the amount of assistance that can be provided is at the sole discretion of the Board of the Economic Development Authority as long as the requested uses are legal under the Minnesota State Statues for use of tax increment financing. Within the Development District (herein referred to as the"City" limits) but outside of HP Districts The evaluation of Tax Increment Financing assistance that could be provided to an applicant will be based in part on (A) the analysis of information provided on the application for Tax Increment Financing assistance (Attachment"A"), (B) square footage cost of the project, (C) balance available in the Economic • Development Authority excess tax increment fund and(D)proof of need for assistance under the "but for" test for use of tax increment financing. TYPES OF ASSISTANCE • Within'1l1- Districts Tax Increment Financing can be provided in either"pay as you go" or"up front"payments. "Pay as you go" is wherein the Mounds View Economic Development Authority compensates the applicant for a predetermined amount for a predetermined number of years. The applicant pays for(re)development up front and then annual payments are issued to the applicant based on the need for assistance and increment generated from the project. "Up front' payments is wherein the Mounds View Economic Development Authority must issue revenue or general obligation bonds to pay for the (re)development prior to completion of the project. The increment generated from the project is then used for repayment of the bonds. The Mounds View Economic Development Authority gives preference to the use of"pay as you go" assistance to finance private development projects due to the reduced risk to the community. The EDA will consider"up front"payment projects that would benefit the entire community and are not possible to be funded under a "pay-as-you-go"basis. • 2 Adopted 5/12/97 • Within the City but outside of TIF Districts Financing from the dedicated tax increment fund can be provided in annual installments to the applicant based on the positive cash flow balance in the Economic Development Authority's dedicated tax increment fund and need for assistance based on analysis of the "but for" test for the project. The dedicated tax increment fund includes a value based on the use and is adjusted along with the budget process and goals and objectives for economic and redevelopment on an annual basis. APPLICATION FOR TAX INCREMENT FINANCING ASSISTANCE: The Mounds View Economic Development Authority requires that an Application for Tax Increment Financing Assistance (Attachment A) be completed and a deposit be collected from the applicant for the EDA's consultants to investigate the feasibility and need for providing Tax Increment Financing assistance (Attachment B). SUBMITTAL OF APPLICATION FORMS: Applicants requesting Tax Increment Financing assistance within an existing district or in the creation of a new district, shall be required to complete and submit the following: 1110 Application for Tax Increment Financing Assistance 2. Deposit for Review of Tax Increment Financing Assistance • 3 j • To: Economic Development Commission Members From: Steve Dorgan, Housing Inspector . M{II0RAMDIJtI Subject: Proposed Loan Programs • Date: February 20, 1998 • BACKGROUND The City Council has recently directed staff to review possible low-interest loan programs which may be offered by the city to residents for home remodeling and renovation. It was suggested that by establishing a low-interest loan program,the city may provide incentives for the remodeling and renovation for much of the city's housing stock. Staff has reviewed loan programs currently offered to Mounds View homeowners through existing agencies and lenders. Most of the existing loan programs offer low-interest rates typically at 2-8%. However, the household income requirements for these programs limit the number of qualifying homeowners for the lower interest rates of 2-6%. Staff has recently discussed possible low-interest loan programs for the city with Western Bank of Mounds View, the Center for Energy and the Environment(CEE) and the Minnesota Housing Finance Agency(MHFA). A list of existing programs as well as possible loan programs have been compiled for the commission's review. EXISTING PROGRAMS Minnesota Housing Finance Agency(MHFA) Great Minnesota Fix-up Fund Qualifying homeowners must have a gross annual income of$49,000 or less. Interest rates are based on the homeowners annual income. Households with an adjusted gross income ($1,000 income deduction for each family member) of$30,000 or more pay an annual percentage rate (APR)of 8%. Qualifying homeowners may borrow up to $25,000. Improvements include basic livability and energy efficiency of the home. Available through participating banks. Revolving Loan Program The household adjusted annual gross income must be less than$18,000. The APR is 3% for a term up to 15 years. The loan may be used for basic improvements for livability including: electrical wiring, plumbing,roofing,heating, energy saving items, improvements specific to disabled persons and code items that require code compliance. Deferred Loan Program The household adjusted annual gross income must be less than$10,000. This loan must only be paid if the home is sold or transferred within 10 years. The loan may be used for basic improvements for livability including: electrical wiring, plumbing,roofing, heating, energy saving items, improvements specific to disabled persons and code items Staff Memo - Proposed Loan Program • February 20, 1998 Page 2 that require code compliance. Home Energy Loan Qualifying applicants must be owner occupants of a single family home. There are no income limitations to be eligible for a home energy loan. A qualifying homeowner may borrow between $1,000 and $5,000 at an APR of 8% for a term not to exceed 5 years. Available through participating lenders. Environment and Energy Resource Center(EERC) • Energy Conservation Deferred Loan Program Provides 10-year deferred payment loans to improve energy efficiency to 1-4 unit owner occupied properties. Loans are restricted to low and moderate income households (generally below$41,000 for a family of four) and must be recommended through an energy audit. Financing for loans up to $5,000 is available for measures which reduce home energy costs, and emphasize fast payback in reduced energy bills such as; high efficiency heating systems- attic, wall and foundation insulation-and weatherization. Home Energy Loan Provides loans from $1,000-8,000 with 8%APR. Loans are approved within 24 hours (one hour approval on no-heat emergencies). Unsecured loan qualification (no second mortgage on home • unless over$5,000). Minimal documentation for approval. Eligible improvements: replacement of furnace, air conditioner and hot water heater, insulation, doors and windows. Home Improvement Loan 2%-8%APR depending on income and number of dependants. Loan amounts of$500-$25,000. Upper income restriction of$46,000 a year adjusted gross annual household income. Loans $5,000 and over are secured by a mortgage on your residence. All home improvements are eligible. Rental Energy Loan 4%APR for loan amounts of$1,000-$10,000. Only rental properties qualify(owner or nonowner occupied). Loans $3,500 and over are secured by a mortgage on the property. Ramsey County Deferred Loan Program Provides a 10-year deferred loans for low income homeowners.Loans are restricted to low income households (generally below$30,400 for a family of four) The loans may be used for basic and necessary improvements that make the home more livable, accessible, and energy efficient. Rental Rehabilitation Provides loans to any private rental property owner providing housing to low-moderate income • households. Loans may be up to $50,000 at 2% interest for 10 years. Improvements include; Staff Memo - Proposed Loan Program • February 20, 1998 Page 3 repair or replacement of mechanical, structural, electrical, plumbing, roofs, foundation, interior and exterior walls, floors and ceilings and improvement to energy efficiency and handicap accessibility. The following table shows the existing housing loan programs provided by various agencies and the respective eligibility requirements. LOAN PROGRAM ELIGIBILITY Lc>s ..Fra .ami......... ... .lhvuer:::<c'< <:> ::: :><'I3ii>rfiTi ::::>:<: <:!ig .f ;>:>:::;>'`::<::>:><::: ><'a :> nt :<: bommigodi IVIHFA Great MN Fix-up Owner $49,000 Basic Livability $25,000 max. 2-8%depending Fund and Energy on income Efficiency Revolving Loan Owner $18,000 Basic Livability $25,000 max. 3% Deferred Loan Owner $10,000 Basic Livability $10,000 max. 10 year deferred Home Energy Owner none Energy $5,000 max. 8%-5 year Loan Efficiency term SliatlEt •EERC Energy Deferred Owner/Rental $41,000 • Energy $5,000 max. 10 year deferred Loan Efficiency Home Energy Owner none Energy $8,000 max. 8% Loan Efficiency Home Owner 546,000 All Home $25,000 max. 2-8%depending Improvement Loan Improvements on income Rental Energy Rental(owner or none Energy $10,000 max. 4% Loan nonowner occup.) Efficiency Ramsey Co. Deferred Loan Owner $30,400 Basic Necessary $25,000' 10 year deferred Improvements Rental Rental Low-moderate All Home, $50,000 max. 2%- 10 year Rehabilitation income renters Improvements term • POSSIBLE PROGRAMS FOR MOUNDS VIEW Minnesota Housing Finance Agency (MHFA) Community Fix-up Fund The City would partner with a local bank or financing provider to establish a loan program to target a specific housing need or area of the city(exp. homes built before 1960). Home improvement loans would be provided for households with incomes of$68,500 or less with APR • of 2%-8%. Households with an adjusted gross income of$30,000 or more pay an APR of 8% Staff Memo - Proposed Loan Program February 20, 1998 Page 4 ($1,000 income deduction for each family member). The MHFA has proposed an amendment to the Community Fix-up Fund program which would allow participating cities to buy down interest rates for their programs. As the program currently stands, interest rates may not be bought down. The MHFA board will review the proposed changes at their March 26th meeting. Center for the Energy and the Environment(CEE) Home improvement loans may be provided at 4-6%with general Ioan funds provided by the City of Mounds View. CEE processes applications, assists in the marketing of the program and provides servicing of the loans through Community Reinvestment, an outside loan servicing company. Remodeling Counselors may also be made available for$75 - $125 per consultation Western Bank Option 1. Rate Buv Down Western Bank uses current underwriting guidelines. The city may adopt parameters for granting loans; i.e. income, type of improvements, etc.. Western Bank provides the funds for loans and the City of Mounds View either keeps money on deposit or pays a fee per loan to by down the interest rate. The city would not have to lend out money. All loan risk, administration, compliance with regulations and collection would be the responsibility of Western Bank. • Program Guidelines: ♦ Maximum of$25,000 loan without regard to equity in the home. Current rates range from 8%- 13%. • Loan minimum for a mortgage is$5,000. Loan minimum for all other loans are $3,000. ♦ Applicants would pay normal closing costs. These may be financed with the loan. Closing cost for a$25,000 loan are typically$195. ♦ Consolidation of other debts are available to accommodate the home improvement payment. Option 2. Revolving Loan Fund The City of Mounds View would set aside a specific amount of funds that.Western Bank would lend according to the bank's parameters. Western would originate and administer the loans, collect and place payments in a separate account and provide monthly reporting. Western Bank and the City of Mounds View would agree to typical collection efforts that Western would provide as it relates to delinquent loans. Interest rates may be set by the city. Option 3. Matching Loan Fund Both the City of Mounds View and Western Bank would set aside an amount of money to lend according to agreed upon parameters. This arrangement could be in full recourse or non- recourse depending on how it is set up. Two loans would be made to the customer. Mounds View's portion would be at a low rate and Westerns portion would be closer to market rate for a • Staff Memo - Proposed Loan Program February 20, 1998 • Page 5 melded rate between 5-6%. Option 4. Originate Only Western Bank would originate the loan for a fee using City of Mounds View funds and assign it to a loan servicer. The city would set the interest rate. DISCUSSION Staff has reviewed loan programs currently offered to Mounds View homeowners. The majority of existing loan programs offer low-interest ranging from 2-8%. However,the household income requirements for these programs limit the number of qualifying homeowners for the lower interest rates of 2-6%. Mounds View homeowners with middle incomes would most likely not qualify for the lower interest rates offered through existing loan programs. Therefore, the city may considerX offering a low interest loan program to a wider range of the city's homeowners to promote remodeling and renovation of the city's housing stock. The proposed programs may be modified to include a variety of scenarios for a low-interest loan program offered by the city. When considering a city sponsored loan program, existing programs offered by other agencies should be considered so that efforts are not duplicated. ACTION TO BE CONSIDERED Provide staff direction to further explore opportunities for creating a low-interest loan program for the city. Specifically, what type of loan would the commission want to see offered through a city sponsored •program. Areas to consider include, interest rates, qualifications for home owners (applicants), income limits,type of improvements. • Steve Dorgan Housing Inspector 717-4023 Attachments: Exhibit A: Letter from Western Bank Exhibit B: Letter form Center for Energy and Environment N:\DATA\GROUPS\ECONDEVNEDA-EDC12 26 98.MEM • WESTERN BANK EXHIBIT A Member FDIC Equal Housing Lender t5J • February 5, 1998 Mr. Steve Dorgan Housing Inspector City of Mounds View 2401 Highway 10 Mounds View, MN 55112-1499 Dear Steve: I would like to thank you and Rick Jopke for meedng with us regarding a home improvement loan program for the residents of Mounds View. Cindy Carlson, Jeanne Kassim and I were interested in the ideas you presented for improving and stabilizing the housing stock in Mounds View. A free remodeling counselor is a great idea. As we discussed, in this letter we will outline some possible ideas for your program and how Western Bank may be involved. 1. Rate Buydcwn Western Bank would use current underwriting guidelines and fund home improvement • loans using your income and other parameters. The City of Mounds View could compensate Western by several options including keeping money on deposit at a lower than market rate or by paying a fee per loan to buy dawn the rate. Either, keeping deposits at Western or paying a fee per loan to buy down the rate, would require some mathematical calculations to determine the appropriate amount This option would not involve lending out City of Mounds View money. All loan risk, administration, compliance with all regulations and collection would be the responsibility of Western. Basic Program Guidelines • • Gross debt to income ratio of 40% (this ratio is determined by dividing the normal monthly debt by the applicant's gross monthly income). • Our current rates vary by the amount of equity in the home. In addition, we offer a • loan program in which we can lend up to $25,000 without regard to equity in the home. Our current rates range from 7.99% to 12.75%APR and change an a weekly basis. • Applicant's should have satisfactory credit and a stable source of income. • • Applicant's should not have excessive credit card debt. • • Loan minimum for a mortgage is$5,000. Loan minimum for any other loan is $^ 000 • Applicant's would pay normal closing costs which can be financed in the loan. Typical closing costs for a 325,000 loan would be approximately $195.00. Note: We can consolidate other debt to accommodate the new home improvement • payment • 663 University Avenue 1740 Rice Street 7035 10th Street Norm 2711 N.E Highway 10 3033 University Avenue S.E. St.Paul.MN 55104 Maolewootl.MN 55113 Oakaale.MN 55128 Mounds View.MN 55112 Minnnanniic 1A J et 161717on_R1nn 2. Revolving Loan Fund The City of Mounds View,would set aside a specific amount of money in'a fund that Western Bank would lend according to your parameters. Western would originate and administer loans, collect and place payments in a separate account and provide monthly reporting. Western and the City of Mounds View would agree to typical collection efforts that Western would provide as it relates to delinquent loans. 3. Matching Loan Fund Both the City of Mounds View and Western Bank would set aside an amount of money to lend according to agreed upon parameters. This arrangement could be full recourse or non-recourse depending on how it is set up. Two loans would be made to the customer. Mounds View's pardon would be at a low rate and Western's portion would be closer to market rate for a melded rate of between 5 and 6%. 4. Originate Only Another option would be for Western Bank to originate the loan for a fee using City of Mounds View funds and assign it to a loan servicer. As we thought through these options, we realized there are so many ways your program can be designed. Each of the four options above can be restructured in many different ways. As you have a chance to think about your requirements and goals for this program, we cart begin to get more specific about the details. Thank you for the opportunity to work with the City of Mounds View. We look forward to your • progress in this program. If you have any questions, please don't hesitate to call me. Please don't hesitate to call me at 290-8105 or Jeanne Kassim at 290-7870 if we can be of any assistance. Sincerely, Vicki Grant Vice President • • • • • •• EXHIBIT B i CENTER FOR ENERGY AND ENVIRONMENT January 23, 1998 Mr. Steve Dorgan, Housing Inspector City of Mounds View 2401 Highway 10 Mounds View, NiN 55112 Dear Steve: First of all, thank you for meeting with me to discuss the housing needs of the City of Mounds View and the potential creation of a home improvement pro2.am to address these issues. I felt the discussion was very productive and find it encouraging the City of Mounds View is taking the initiative to research all possible options available. As you already know, CEE is able to offer Mounds View property owners a variety o f low- interest financing programs to compliment Mounds View's upcoming home improvement program. In addition, CEE can address the unique needs of rental property owners through innovative programs offered exclusively by CEE. As we discussed, the Center for Ener 1111 gy and Environment can essentially offer an ala carte approach to your housing programs. Whether its marketing therogram design and delivery a financing initiative, or providing rehabilitation cotmse�gassistance, CEE ccan expedite ea hof stage of the process to provide convenience to the customer and the City of Mounds View. It was a pleasure meeting with yourself and Rick. I realize we discussed several options for a home improvement program, therefore, I would Like to emphasize that if you would like further clarification on any portion of our discussion on the various services CEE is able to provide, please contact me at 335-5889. Again, thank you for your time and for considering (;.JE as a potential partner in delivering Mounds View's Home Improvement Program. I look forward to hearing from you Sincerely, • • David King • • - : Financial Programs,Manages . . • Equal mployer 10 North 6th Street, Suite 412A A Minneapolis, Minnesota 55403-1520 A Phone: (612) 335-5858 ♦Fax: 612) 335-588 � 8