3.1. JFC SR 06-15-2020
Meeting of the Elk River Joint Finance Committee
Held at Elk River City Hall
Held Via Zoom Meeting
Tuesday, May 26, 2020
Members Present: Dan Tveite, Larry Toth, Ryan Hardin, Nate Ovall, Rhonda Magnussen, Chad
Vitzthum, and Michelle Eder
Members Absent: None
Staff Present: Amanda Othoudt, Economic Development and Colleen Eddy, Economic
Development Specialist
Others Present: Dan Walsh, Community Housing Development Corporation
Mikaela Huot, Baker Tilley Municipal Advisors, LLC
1. Call Meeting to Order
Pursuant to due call and notice thereof, the meeting of the Elk River Joint Finance
Committee was called to order by Dan Tveite at 7:35 a.m.
2. Consider Agenda
Motion by Ovall and seconded by Toth to approve the May 26, 2020, Joint Finance
Committee agenda.
Motion carried 7-0.
3. Consent Agenda
Motion by Ovall and seconded by Eder to approve the May 26, 2020 Joint Finance
Committee consent agenda:
3.1. August 27, 2019 Joint Finance Committee meeting minutes
3.2. Revolving Loan Fund Balance report
Motion carried 7-0.
4.1 Housing TIF Application for Hillside Heights Apartments
Ms. Othoudt presented the staff report. The commission discussed various items; income
guidelines and rent levels, timing of the application as it coincides with the state tax credit
request, housing needs/quota, length of TIF funds, land use requirements for the area
proposed, and the need of a letter of support that would be included in the Tax Credit
request.
Ms. Huot presented her financial analysis. The developer’s application includes an
approximate $16.9 million project that would be funded by an estimated $11.9 million of tax
credits, $3.29 million of debt financing, rebates, deferred developer fee and TIF mortgage.
The developer has asked for annual tax increment revenues generated by the new project to
finance a gap of approximately $780,000.
Ms. Huot noted that through the submission of the tax increment financing application and
supporting financial information, the developer has indicated that the project would not
occur as proposed without financial assistance from the city due to the reduced rents for all
55 housing units. Using the developer’s assumptions, Ms. Huot stated that with assistance,
the project would be able to obtain sufficient financing to support total project costs. She
further indicated that using the same assumptions, without assistance, the project is expected
to have a financial gap of $780,000. The developer has stated that applying the city’s tax
increment revenues to the project would provide the funding levels necessary to close that
gap.
Ms. Huot explained that the projected rental rates are based on approximate 50% AMI
affordability levels for 100% of the units. The TIF statute requires at least 20% of the units
at 50% AMI or 40% of the units at 60% AMI, putting this project at a higher level of
affordability than what is statutorily required for the tax increment financing tool. LIHTC
project requirements include 100% of the units at 60% AMI and this project proposal also
exceeds those affordability requirements.
Hardin questioned whether the developer could increase the annual rental rates up to 60%
AMI and, if so, whether or not there would be a need for TIF.
Ms. Huot stated that an increase in annual rental rates up to 60% AMI is projected to have a
similar impact of providing additional cash flow as would annual tax increment revenues and
would eliminate the need for assistance. Actual performance would be subject to market and
developer’s ability to receive the required funding sources and levels.
Ms. Huot reviewed the maximum term of assistance pursuant to the city’s policy is 15 years
and based on current revenues, the actual term of assistance is projected to be closer to 10
years. The term of the bonds for the project is based on 40 years and LIHTC requirements
for affordability would be 30 years. The term of the tax increment financing would be for a
much shorter period than projected debt payments, which may lead to cash flow
considerations subject to restructuring. Consistent with development projects, including
affordable housing LIHTC projects, a developer fee has been included in the project costs.
The developer is deferring just over 50% of those costs to provide additional upfront
funding.
At the request of the committee, Ms. Othoudt presented the developers site plan, renderings
to the group.
Motion by Hardin to recommend approval of TIF funding in the amount of $780,00
for the maximum term of 15 years contingent of the creation of the TIF district and
securing state tax credits to the HRA and seconded by Magnussen. Motion carried 7-
0.
5.1 Announcements
Ms. Othoudt notified the committee that there is a vacancy on the committee left by Jim
Gromberg, if members know anyone interested they should send Ms. Othoudt their names.
6. Adjournment
There being no further business, Mr. Tveite adjourned the meeting at 8:54 a.m.
Minutes prepared by Colleen Eddy.
_____________________
Tina Allard
City Clerk
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Amanda Othoudt
Economic Development Director