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ain thou iU l a a OVAL : DATE : APPR December 6; 1991 TO : Mayor and Councilmembers FROM : Thomas D. Burt, City Manager =TENT : LANEL TAX INCREMENT REQUEST The Autumn Woods project is an asset to the City of St. Anthony. Before the completion of this project, the area was problematic to the City, as well as difficult to develop land that was not generating revenue to the City. The City Council created a tax increment district to promote the development of this land. The City actively pursued developers to commit to a successful, attractive project. Two developers were nearly committed but backed out at the last minute. Fortunately, LaNel agreed to commit to a redevelopment project right before the tax increment district expired. Tax increment financing made it possible for LaNel to complete a redevelopment project of the caliber that was done. Both the City and LaNel calculated projections of necessary tax increment to be generated to ensure that the City and taxpayer backed bonding would be retired. The 1991 projection was$211,000, and the 1992 projection is$221,100. In actuality, the amount of generated tax increment was $290,784 in 1991, and the 1992 generated tax. increment is projected to be $275,586. The tax increment discussed is obtained from property tax. The initial property tax per unit projected was $1,100 per unit in 1991. The per unit property tax projections were made with 1988 State Legislature property tax class rate classifications. Since 1988,the Legislature has changed and manipulated this system. The result has been an increase in per unit property tax expenses. The extra expense of property tax per unit for this project has placed excessive and unforeseen burdens on operating expenses. The strain on operating expenses has placed the success of this project in jeopardy. LaNel is concerned that any additional increases in rent will increase the vacancy rate and-bring about a revenue loss. Due to the facts cited above, LaNel has requested from the City the infusion of $50,000 per year of the excess generated tax increment into the operating expenses of the project. The City does not believe in the guarantee of the infusion of$50,000 per year of excess generated tax increment. However, the case is clear for an infusion of $50,000 per year for 1991 and 1992, with a annual review until the bonds and the tax increment district are retired. This infusion is necessary to ensure the continuity of operations, as well as protecting the taxpayers from possible default.