CC PACKET 12121989 - Laserfiche WebLink

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City of St. Anthony, Minnesota November 22, 1989 Page 3 • The projection prepared by LaNel using a tax per unit of $1,750 gives an assessed value of $8,579,268, using the old 4.1% class rate. Using the new 3.6% class rate, the total tax is reduced to$308,854, or$1,537 per unit. This reduces the negative cash flow to around $10,100, or $50 per unit, or $4 per unit per month. A copy of the legislation and related documentation showing the change in class rates is also attached to this memorandum. Findings The reduction in class rates will reduce the amount of tax payable for the complex. This reduction should allow LaNel to maintain a positive cash flow with only a small adjustment in rents. Even after adjusting rents, the project rents will remain within the projected rents for comparable projects, as computed by LaNel. In the event that the assessed value of the completed project still causes excessive taxes, LaNel should first exhaust all administrative and legal remedies to obtain a reduction in the assessed value prior to asking the City of St. Anthony to subsidize the taxes. The Redevelopment Contract in Article VI, Section 6.2 only prohibits the Redeveloper from seeking administrative or judicial review of the assessment in the event that the adjusted assessment would be contrary to the minimum value of$1,100 in the agreement. It does not prohibit administrative or judicial action on the part of the redeveloper to reduce taxes that • are in excess of the minimum amount. At the conclusion of the tax increment district, the City subsidy (if one is granted) would cease. Then LaNel would be required to pay the full tax liability. Their remedy would be to raise rental rates to recoup the additional tax cost. This would put them in no different position than if they raised rental rates in 1992 and paid the full amount of taxes then due and owing. The City subsidy would only delay the date when rental rates would have to be raised. As is shown above, the reduced class rate should result in a minimal rent increase to compensate LaNel for its increased costs. Even with a rent increase, the projected 1992 rents are not higher than the comparable ones shown by LaNel themselves. We have provided this information to LaNel for their comment. After their review, we were informed by Mr. Greg Bronk of LaNel that their position has not changed and that they would like to see taxes to be held to a per unit basis of$1,200. Conclusions The City of St. Anthony should decide if it wants LaNel to pay the minimum tax amount of $1,100 as stipulated in Article VI, Section 6.1 of the Developers Agreement. LaNel should be notified of any decision the City makes on this issue. In a letter dated August 31, 1989, we described a brief history of the HRA projects and responses to certain questions posed by the Council. As was noted in that letter, there is sufficient minimum tax revenue from the LaNel project to meet the payment schedule of the tax increment bonds issued for the project.