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11-30-2021 JOINT FINANCE COMMITTEE PACKET Meeting of the Joint Finance Committee AGENDA Tuesday, November 30, 2021 7:30 a.m. Elk River City Hall Upper Town Conference Room 1. CALL MEETING TO ORDER 2. CONSIDER AGENDA 3. CONSENT AGENDA Considered to be routine and noncontroversial by the Economic Development Finance Committee and will be approved by one motion. There will be no separate discussion of these items unless a Committee member, staff member, or citizen so requests, in which case the item will be removed from the consent agenda and considered under the regular agenda. 3.1 October 26, 2021, Meeting Minutes 4. GENERAL BUSINESS 4.1 TIF Application Jackson Hills Second Phase 5. ANNOUNCEMENTS 6. ADJOURNMENT Meeting Protocol No sidebar discussions No interruptions State your concern Ensure you understand Don’t take things personally Adhere to time limits Come prepared Ensure all are heard The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To Joint Finance Committee Item Number 4.1 Agenda Section General Business Meeting Date November 30, 2021 Prepared by Brent O’Neil, Economic Development Director Item Description TIF Application Jackson Hills Second Edition Reviewed by Cal Portner, City Administrator Reviewed by Action Requested Review application and analysis and recommend support, by motion, to the Housing and Redevelopment Authority (HRA). Background/Discussion The city received an application for Tax Increment Finance (TIF) from Briggs Companies to complete a multifamily housing project known as Jackson Hills II at Jackson Avenue and Sixth Street. The project is similar in size and design to the Jackson Hills apartment project which recently opened and received approval of TIF in 2019. Key parameters of the project and summary of the TIF request are stated below:  44-unit apartment building with a mix of studio, 1-, 2-, and 3-bedroom units.  Twenty percent of units are proposed as income restricted, primarily studio units.  88 total parking spaces, one-half indoors and one-half surface parking.  Project budget of $8.59 million - $6 million in financing, $2.59 million from equity sources.  Current taxes are at $4,400. Developer projects taxes after completion at $88,000. Based on preliminary taxable value estimates from the county, actual taxes may exceed $110,000.  TIF request: 15 years at 90% increment capture during that period.  Overall site excavation and grading is in excess of typical costs and is due to extraordinary mitigation for unbuildable soils. Baker Tilly has been engaged to provide a review and analysis of the request. The attached memo summarizes Baker Tilly’s review and contains its evaluation of cost and revenue assumptions, qualifications as a housing TIF district, and financial need. The analysis includes TIF participation in the project at $850,000 (principal value). The analysis indicates the project would not move forward but for the use of TIF due to the extraordinary costs related to site development and soils correction costs. The committee may recommend the use of TIF as presented, recommend with modifications, or recommend TIF not be utilized for this project. N:\Departments\Community Development\Economic Development\EDA\Administrative\Agenda\Joint Finance Committee Agenda Packets\2021\11-30-2021\4.1 sr TIF Application Jackson Hills II use.docx Following the JFC recommendation, the application will be reviewed by the Planning Commission for conformance to the Comprehensive Plan, and HRA for a final recommendation to the City Council for consideration of approval. Financial Impact The project is requesting TIF at the maximum allowed by city policy for a housing district. The developer would receive 90% of the tax increment generated from the project during the entirety of the TIF district. Mission/Policy/Goal The request meets the city’s TIF policy criteria including public purpose criteria and overall policy statements. Attachments  Submitted TIF Application  Memorandum from Baker Tilly Memo To: Members of the Joint Finance Committee Brent O’Neil, City of Elk River From: Mikaela Huot, Director Date: November 29, 2021 Subject: Financial Needs Analysis for proposed Tax Increment Financing Housing (TIF) District No. 28 (Jackson Hills Housing Project) Executive Summary The City of Elk River received an application from The Briggs Company for financial assistance through Tax Increment Financing (TIF) to assist with financing the construction of a new 44-unit affordable housing development referred to as Phase 2 of Jackson Hills Residential Suites. The project is proposed to include 20% of the units as affordable to occupants with incomes no greater than 50% of the area median income. The request is for 90% of the incremental revenues for the maximum term allowable by City policy of 15 years. The current taxable value of the project is $233,700. The estimated taxable value of the project upon construction completion is estimated to be approximately $6,300,000. Included within the application are identified TIF-eligible expenditures in the range of $760,000-$850,000 related to site development and soils corrections work. The applicant has indicated in the request that the project would be unable to proceed without City financial assistance due to inability of the project to support those extraordinary costs. The project financing includes a provision and need for 15 years of tax increment assistance as an additional source of revenue to repay the debt obligation. Based on current tax increment projections, as further described in this memo in Table 2 on page 3, it is estimated to take approximately 15 years of increment collections to fulfil the request. The applicant would finance the total development costs of $8.5 million (further described in Table 1 on page 2) upfront with debt and equity and would be reimbursed for a portion of those costs on an annual basis using future tax increment revenues. Background The purpose of this memorandum is to provide a summary of Baker Tilly’s review of the development project costs and operating pro forma as provided by the applicant (The Briggs Company) to assist the City with making a determination 1) if the project as proposed would be unlikely to proceed “but-for” the requested Tax Increment Financing (TIF) assistance, and 2) if assistance was necessary, to determine the appropriate amount and terms, if any, of public assistance. Prior to establishing a tax increment financing district, there are findings that need to be made by the City that include: 1) determination that the project qualifies as a TIF district and 2) determination that the project as proposed would not proceed without public assistance (meeting the “but-for” test). When reviewing requests for financial assistance it is important to understand how the level of financial assistance would impact the ability of the project to proceed as proposed and maximize new value created on the current project site. Project Summary and Qualifications The project is proposed to include the construction of 44 residential apartment buildings comprising of studio, 1, 2- and 3-bedroom units with separate garages. In order to qualify for inclusion within a housing TIF district, one of the two following income qualifications need to be met by the residents: • at least 20% of the units must be occupied by persons or families at 50% area median income or • at least 40% of the units must be occupied by persons or families at 60% area median income. The project as proposed would provide for at least 20% of the units being occupied and affordable to persons at 50% area median income. The applicant would need to annually certify the project qualifies for the duration of the TIF district. This income requirement would allow for the establishment of a Tax Increment Financing Housing District. Tax increment financing is a tool the City may consider using to support financial assistance for the project, subject to meeting the but-for test and need for public financial participation. Applicant Request for Assistance Financial assistance through pay-as-you-go tax increment financing from the City of Elk River has been requested to provide additional revenues to support the required level of debt and project cash flow to repay annual debt service payments. The request is for 90% of incremental revenues for up to 15 years related to the extraordinary development costs of the project site that include site development and soils corrections in an estimated amount of $760,000-$850,000. The application includes an approximate $8.5 million project funded through a combination of debt and equity. The applicant’s supporting financial information includes sources and uses of funds with 70% as debt financing and 30% as private equity. Debt repayment would be supported by annual cash flows of the project and would also require additional revenues through tax increment financing. The applicant has provided a letter from its potential lender indicating that 15 years of TIF revenues would be needed to support the project financing. Typical extraordinary development costs that cannot be supported solely by the project alone could justify the need for public financial assistance and allow the project to proceed as proposed to provide appropriate upfront funding and meet the minimum debt coverage requirements. The applicant has indicated the receipt of City financial assistance is necessary for the project to proceed. Table 1: Sources and Uses of Funds Sources Amount Uses Amount First Mortgage $6,000,000 70% Acquisition (2) $400,000 5% Equity $2,588,174 30% Site Development $850,000 10% Deferred Developer Fee Construction $6,828,174 79% TIF (1) Arch & Eng. Fees $75,000 1% Legal Fee $10,000 .12% Construction Interest $175,000 2% Contingency $250,000 3% Total $8,588,174 Total $8,588,174 (1) Tax increment financing has been requested as pay-as-you-go and would not be an upfront funding source (2) Acquisition price includes entire 6.64-acre site. Only portion of property to include the proposed project would be included within the TIF District Project Financing There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay- as-you-go basis. With upfront financing, the City would finance a portion of the applicant’s initial project costs through the issuance of bonds or as an internal loan. Future tax increment would be collected by the City and used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the applicant would finance all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for repayment to the applicant. If tax increment revenues are less than originally projected, the applicant receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt service payments and would have to use other sources to fill any shortfall of tax increment revenues. With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying itself in full if tax increment revenues are not sufficient. The project financing as requested includes pay-as-you- go for reimbursement of eligible costs. Tax Increment Revenue Assumptions To estimate the amount of available TIF revenues generated by the proposed project, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms. • Total existing value of $233,700 o Parcel ID: 755-134-2305 o Base value as of Jan. 1, 2021 o Original net tax capacity (ONTC) of $2,921 o Assuming classification as residential rental  Rental classification is 1.25% • Estimated total market value upon completion o $6,300,000 o 44 new units at $143,182/unit • Classification for all units as rental o Rental class rate (1.25% per unit) • Incremental value based on difference between existing and new land/building value • Construction commences in 2022 and is completed in 2023 o Project values 60% complete for assess 2023 and taxes payable 2024 o Project values 100% complete for assess 2024 and taxes payable 2025 • First increment collected in 2024 o Election to delay first increment by up to 4 years • Net present value (discount) rate of 4% • 0% annual market value inflation Table 2: Tax Increment Revenue Estimates Scenario 1 Existing ‘Base’ Value $233,700 Estimated Total Taxable Value $6,300,000 Estimated Annual Increment (full buildout 2025) $94,018 Estimated Total Gross Increment $1,371,214 Estimated City Retainage (10%) $137,124 Estimated Total Net Increment (90%) $1,234,090 Estimated Developer Principal TIF Note (Maximum) $850,000 Estimated Developer TIF Note Interest at 4% $356,708 Estimated Total Payments on TIF Note $1,206,708 Estimated Number of Years 15 years Estimated Surplus Revenues ($1,234,090 - $1,206,708) $27,382 Financial Needs (Pro forma Analysis) including But-For Upon approval of a TIF district and project, the City must make several findings, including the “but for” test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The applicant has stated that but for the provision of tax increment financing, the project as proposed would not occur. Based on the applicant’s stated position relative to the need for tax increment financing assistance, the City could make its “but for” finding and provide tax increment assistance. We recommend, however, that the City review the provided assumptions to consider if the project meets the but-for test and, if so, what an appropriate level and type of TIF assistance may be based on the information submitted by the applicant. Following thorough evaluation of the project as provided allows the City to be prepared to make an informed “but-for” decision based on the likelihood of the project needing assistance, as well as the appropriate level of assistance. To complete this analysis, we reviewed the applicant’s provided operating proforma and constructed similar ten-year project proformas, showing a result if the project received financial assistance as pay-as-you-go (reimbursement for TIF eligible costs) and showing a result if the project did not receive assistance. Our analysis of the proformas include a review of the development budget, projected operating revenues and expenditures, and the project’s capacity to support annual debt service on outstanding debt. The purpose of evaluating the operating proformas is to understand the potential cash flow performance through initial development of the project and the annual operations of the project over a 10-year period to assist with determining if the project is financially feasible and in need of public participation. Measuring project feasibility is typically accomplished by analyzing a combination of 1) projected rate of return – both annual and cumulative and 2) estimated debt coverage ratio (DCR). Rate of return analysis illustrates the projected return to the investor using the available cash flow after payment of operating expenses and debt as a measurement to the initial equity investment. Industry standards for development types indicate the level of investment a developer is willing to make based on projected returns from the project. Should the projected annual and cumulative returns fall below those standards, the project would require a reduced level of equity participation and/or increased cash flow to be feasible. Debt Coverage Ratio (DCR) is a calculation detailing the ratio by which operating income exceeds the debt payments for the project. If the DCR is greater than 1.0 it indicates the project has operating income that is greater than the debt-service payment by some margin; conversely if the DCR is less than 1.0, it indicates the project is incapable of meeting its debt-service payment and would need to seek additional revenue sources in order to pay its debt. Typical lending standards will require a DCR of greater than 1.0 as a measure of cushion in the event actual revenues and expenses are different than projected. We reviewed the financial information as provided by the applicant to assist with making the determination 1) that tax increment assistance is necessary and 2) what is an appropriate level of assistance. We analysed the financial information as provided by the applicant including total development costs as compared to operating income to estimate both the projected rate of return and debt coverage ratios. The level of debt financing the project can obtain and support is based on the net operating income (NOI) and approximately 70% of total project costs. The annual lease and other (parking) revenues and operating expenses have been provided by the applicant to project the stabilized NOI. Review of the operating proformas based on with assistance as pay-as-you-go and with no assistance provides the range of financial feasibility for this project and what the estimated gap would be without assistance. It is important to note that certain assumptions were made based on the applicant’s provided information and market industry standards for annual lease rates, vacancy rates and annual revenue and operating expense inflators in order to understand the project performance. Adjustments made to those assumptions assist in understanding potential impact on project performance and what a required level of assistance (number of years and total amounts) may be. Below is a summary of the applicant’s financial assumptions related to the operating proforma: 1) 2% annual revenue and 2% expense inflator 2) 5% vacancy rate 3) 45% operating expense ratio 4) 44 rental units average $1.47/SF rent 5) Parking income a. $50/garage per month (44 spaces) To understand viability of the project and need for an appropriate level of public assistance, we provided a sensitivity analysis to the proformas with adjustments made to the total project costs (including land/building acquisition, construction costs, soft costs, developer and other related construction management fees and contingency) and corresponding funding sources, as well as projected annual lease rates and operating expenses. Realizing any adjustments is all subject to market conditions. The purpose of the sensitivity analysis is to test the level of assistance that may be needed using those assumptions to understand if the recommended level of assistance could be consistent with the City’s objectives resulting in less assistance than what has been requested. The below table is a summary of the projected performance of the project based on current assumptions: Table 3: Estimated Developer Returns Projected Performance Metrics * Developer Without Assistance Developer With Assistance Modified With Assistance Cash-on-Cash -0.91% 2.32% 1.51% Debt Coverage Ratio .94x 1.07x 1.04x * calculated using stabilized net operating income and net project costs financed by the developer Conclusion The applicant has requested financial assistance related to construction of 44 units of apartment units, of which 20% would be affordable to occupants with incomes no greater than 50% area median income. There are significant site development and soils corrections costs necessary to allow for development to occur on the site. Through submission of the tax increment financing application and supporting financial information, the applicant has indicated that the project would not occur as proposed without financial assistance from the City due to below market rates of return. Based on financial analysis of the provided assumptions, without financial assistance, the project does not appear to be feasible. Without assistance, the projected annual and cumulative rate of returns and debt coverage ratios are well below industry standards for this type of project. With financial assistance from the City through tax increment financing, the project performance is projected to improve and may be closer to achieving marketable returns and coverage ratios, as needed to obtain debt financing and attract equity investors. The financial analysis indicates that the project is not expected to be viable without one or more of the following: 1) reduction in project costs 2) additional annual cash flow, and/or 3) additional upfront funding sources. Parameters to consider when determining an appropriate level of public assistance include the following: • Return on Investment • Purchase price and other development costs • Public to private investment • Public assistance (TIF) and private equity • Extraordinary costs • Financial gap • Term of collection (district) • Other necessary public improvements The applicant has requested tax increment financing from the City to provide additional cash flow revenues that is required to achieve financial feasibility. The request is for 90% of the tax increments generated over 15 years and would equate to total tax increment revenues of approximately $1.2M (up to $850,000 principal to support actual extraordinary site development costs plus interest at 4%). The project will be privately financed through debt and equity and the increment would provide additional annual revenues to enhance cash flow. Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651.368.2533 or Mikaela.huot@bakertily.com with any questions or comments. FTia 2 Tax Increment Financing Policy Purpose The purpose of this policy is to ensure development receiving Tax Increment Financing (TIF) is consistent with the long-term city Comprehensive Plan, Strategic Plan, Mississippi Connections Plan and/or most recent Housing Study. This is a guide for processing and review of TIF applications. The City of Elk River shall utilize TIF to encourage desirable development or redevelopment that would not otherwise occur but for TIF. The city is empowered to utilize TIF by the Minnesota Tax Increment Financing Act, as amended in Minnesota Statutes 469-174 through 469-1794. The city provides the minimum amount of TIF at the shortest term required for a project to proceed. The city reserves the right to approve or reject projects on a case-by-case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Projects meeting policy criteria are not guaranteed the award of TIF. Approval or denial of a certain project is not a precedent for approval or denial of another project. The City Council and Economic Development Authority and the Housing and Redevelopment Authority can deviate from this policy for projects that supersede the objectives identified herein. Authority Minnesota Statutes 469-174 through 469-1794 govern the use of TIF and exceed any issues that conflict with this policy. Public Purpose The City of Elk River will consider TIF for projects that achieve one or more of the following: 1. Demonstrate long-term benefits to the community. 2. Retain local jobs and/or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits through:  Diversification of the local economy  Significant addition of permanent, high-wage, full-time jobs  Addition of jobs attractive to those unemployed or underemployed 3. Significantly increases the city’s commercial and industrial tax base. 3 4. Demonstrates the ability to encourage unsubsidized private development through “spin off” development. 5. Facilitates the development process and achieves development on sites that would not develop “but for” the use of TIF. 6. Removes blight and/or encourages redevelopment of commercial and industrial areas resulting in high quality redevelopment and private reinvestment. 7. Offsets redevelopment costs (i.e. contaminated site cleanup) over and above the costs normally incurred in development. 8. Aids the implementation of the Mississippi Connections Plan. Policy Statements 1. The primary intent of TIF is direct funding for public improvements and secondarily for developer assistance. 2. The use of TIF shall be in accordance with state law. The more restrictive language will apply when a conflict exists between this policy and state law. 3. Projects must be consistent with the Comprehensive Plan and/or the Mississippi Connections Plan. 4. Projects must be consistent with the Strategic Plan for Economic Development and/or the most recent Housing Study. 5. Preferred projects promote the completion of major public improvement projects within the city such as the installation of trunk sewer and water lines and major transportation projects. 6. The level of assistance provided will be determined on a case-by-case basis as referenced in Public Purpose. Based on the extent to which the project achieves the policy statements (1-6 above), the city will consider TIF for projects in the following categories:  Manufacturing  Major office warehouse/production facilities  Research and development  Commercial projects encouraging substantial redevelopment of substandard properties  Housing needs identified in the most recent city housing study 4 1. Assistance for TIF is required to meet the uses identified by statute including, but not limited to the following:  Public improvements  Land acquisition and land write down  Loans  Site preparation and improvement  Demolition  Legal, administration, and engineering 2. The preferred method of TIF is pay-as-you-go for eligible costs as reimbursement, upfront financing maybe considered on a case-by-case basis. 3. A maximum of ten percent (10%) of any tax increment received from the district shall be retained by the city to reimburse administrative costs. 4. All TIF assistance must be accompanied by a signed development agreement including a minimum assessment value. The developer must provide additional financing guarantees to ensure completion of the project, including, but not limited to: letters of credit, personal guarantees, corporate guarantees, etc. 5. TIF District’s shall be limited to the minimum term necessary to meet the project needs. Only projects exceeding the objectives identified in this policy will be considered to exceed the following general thresholds:  Redevelopment District 15 Years (Max is 26)  Housing District 15 Years (Max is 26)  Soils Condition District 15 Years (Max is 21)  Renewal and Renovation District 10 Years (Max is 16)  Economic Development District 8 Years (Max is 9) 6. Policy Considerations  Each project is required to meet the “but-for” test to determine the need for and level of assistance. This test and the amount of tax increment generated determines the district’s term. It is difficult to facilitate a redevelopment, housing or soils condition district for less than the maximum term as the extraordinary costs involved are usually significant.  The term of the district could coincide with the amount of tax increment the city has to spend on its priorities within a project area.  Of all the TIF districts, the Economic Development District is most often the one limited to a lesser term. Economic Development Districts are really “incentive” districts where it is not so much the extraordinary costs as it is an “incentive” to get a business to locate in a community. In the other districts, the costs are easily identifiable and usually significant such as demolition, relocation, environmental remediation, and the cost differential between market rate and income/rent restricted housing. 5 7. Developers receiving TIF assistance shall provide a minimum of ten percent (10%) cash equity investment in the project. TIF will not be used to supplant cash equity. 8. TIF will not be used in circumstances where land and/or property price is in excess of fair market value. A third-party appraiser agreed upon by the city and developer will determine the fair market value of the land. 9. The developer shall demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. 10. The developer shall adequately demonstrate, to the city’s sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. 11. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the city or its consultants. 12. The city of Elk River shall only use TIF to encourage economic growth and development within the city limits. Application Process 1. Applicant submits a complete application and a $10,000 application deposit by the first Monday of the month. The application deposit will be used toward the cost of services provided in the evaluation of financial feasibility, establishment or modification of the district, and preparation of legal documents and agreements. An additional deposit of $10,000 shall be required for projects requiring statutory redevelopment substandard tests. The applicant shall reimburse the city for professional services in excess of the initial deposit. Deposit portions not utilized shall be refunded. 2. City staff reviews the application for completeness and submits the application to the city’s financial consultant for review and preparation of a financial analysis. 3. The Joint Finance Committee shall review the proposal’s financial strength and make a recommendation to the appropriate commission with findings of fact. 4. The appropriate authority reviews the proposal and the recommendation to determine conformance with this policy. The authority makes a recommendation to the City Council. 5. After meeting the statutory requirements for establishing the Tax Increment District, the City Council holds a Public Hearing and takes action on the proposal (Approximately 45-60 days). 6 APPLICATION FOR TAX INCREMENT FINANCING A. APPLICANT INFORMATION Name of Entity The Briggs Companies Address PO Box 719 Big Lake, MN 55309 Primary Contact Patrick Briggs Address PO Box 719 Big Lake, MN 55309 Phone 612-919-1961 Fax 763-633-1430 Email pat@thebriggscompanies.com Brief description of the entity business, including history, principal product or service: Build, develop and manage apartment buildings Brief description of the proposed project: Phase 2 of Jackson Hills Residential Suites, 44 units, 80% market rate, 20% income restricted Attorney Name n/a Address Phone Fax Email Accountant Name Don Myers Address Phone 763-370-2038 Fax Email Contractor Name The Briggs Companies Address Phone 763-633-1080 Fax 763-633-1430 Email Engineer TBD Address Phone Fax Email Architect Name Douglas A. Moe Architects Incorporated Address Phone 763-441-5469 Fax Email 7 B. PROJECT INFORMATION 1. The project will be: Redevelopment District X Housing District X Soils Condition District Renewal and Renovation District Economic Development District 2. The project will be: Owner Occupied X Leased Space 3. Project Address 726 6th Street Elk River, MN 55330 Legal Description & Parcel Identification Number(s) 75-134-2305 PARCEL D-N. THAT PT OF THE FOLLOWING DESC PARCEL D LYING N OF WLY EXTENSION OF THE CTR LINE OF 6TH ST (FORMERLY PLATTED AS 8TH ST) AS DEDICATED IN THE PLAT OF BURRELL'S ADDTION SUBJ TO EASEMENTS OF RECORD. PARCEL D:THAT PT OF SW 1-4 OF NW 1-4 DESC AS COMM AT THE POINT OF INTERSECTION OF THE CTRLINE OF JACKSON AVE (FORMERLY KNOWN AS STATE TRUNK HIGHWAY NO.201 & "OLD HIGHWAY NO.169") WITH THE S LINE OF SAID SW 1-4 OF NW 1-4;THENCE W ALONG SAID S LINE FOR 200.00 FT;THENCE N PARA WITH SAID CTRLINE FOR 285.70 FT TO A POINT TO BE HERE- AFTER KNOW AS POINT "A" FOR THE PURP OF THIS DESC;THENCE E PARA WITH SAID S LINE OF SW 1-4 OF NW 1-4 FOR 150.00 FT TO INTERSECT WITH THE W LINE OF R-O-W OF SAID JACKSON AVE BEING A LINE 50.00 FT,AS MEASEURED AT RT ANGLES, W OF & PARA WITH SAID CTRLINE SAID POINT OF INTERSECTION ALSO BEING THE ACTURAL POB OF THE LAND TO BE HEREBY DESC;THENCE RETURN W PARA WITH SAID S LINE OF SW 1-4 OF NW 1-4 FOR FOR 150 FT TO SAID POINT "A";THENCE N PARA WITH SAID CTRLINE FOR 14.30 FT,MORE OR LESS, TO INTERSECT N LINE OF S 300 FT,AS MEAS AT RT ANGLES,OF SAID SW 1-4 OF NW 1-4;THENCE W ALONG SAID N LINE OF S 300.00 FT FOR 200.01 FT,MORE OR LESS, TO INTERSECT A LINE 400.00 FT W OF,AS MEAS AT RT ANGLES TO SAID CTRLINE OFJACKSON AVE;THENCE N PARA WITH SAID CTR- LINE FOR 1039.77 FT,MORE OR LESS,TO INTERSECT THE N LINE OF SAID SW 1-4 OF NW 1- 4;THENCE E ALONG SAID N LINE FOR 350.03 FT,MORE OF LESS, TO INTERSECT SAID W LINE OF THE R-O-W OF JACKSON AVE;THENCE S ALONG SAID W LINE OF THE R-O-W FOR 1056.71 FT,MORE OR LESS, TO POB. 4. Site Plan and Preliminary Construction Plans Attached: X Yes No 5. Amount of Tax Increment Requested for: Land Purchase $ 0 Public Improvement $ 0 Site Improvement 15 years @ 90% 6. Current Real Estate Taxes on Project Site: $ 4396 Estimated Real Estate Taxes upon Completion: Phase II $ 88,000 Phase III $ 7. Construction Start Date: April 2022 Construction Completion Date: May 2023 If Phased Project: Year % Completed Year % Completed 8 C. PUBLIC PURPOSE It is the policy of the City of Elk River that the use of Tax Increment Financing should result in a benefit to the public. Please indicate how this project will serve a public purpose. X Job Creation/Retention: 2 Number of existing jobs Number of jobs created by project Average hourly wage of jobs created/retained New industrial development, which will result in additional private investment in the area. X Enhancement or diversification of the city’s economic base. X The project contributes to the fulfillment of the City’s Plan. X Removal of blight or the rehabilitation of a high profile or priority site. X Significantly increase the City’s tax base. X Other: Unbuildable site based on soil conditions 9 D. SOURCES & USES SOURCES NAME AMOUNT Bank Loan First Bank & Trust $6,000,000.00 Other Private Funds Owner $2,588,174.00 Owner Cash Equity $ Fed Grant/Loan $ State Grant/Loan $ EDA Micro Loan $ Tax Increment $ ID Bonds $ TOTAL $8,588,174.00 USES AMOUNT Land Acquisition $400,000.00 Site Development $850,000.00 Construction $6,828,174.00 Machinery & Equipment $ Architectural & Engineering Fees $75,000.00 Legal Fees $10,000.00 Interest During Construction $175,000.00 Debt Service Reserve $0 Contingencies $250,000.00 TOTAL $8,588,174.00 10 E. ADDITIONAL DOCUMENTATION AND CHECKLIST Applicants will also be required to provide the following documentation. X A) Written business plan, including a description of the business, ownership/management, date established, products and services, and future plans X B) Financial Statements for Past Two Years Profit & Loss Statement Balance Sheet X C) Current Financial Statements Profit & Loss Statement to Date Balance Sheet to Date X D) Two Year Financial Projections X E) Personal Financial Statements of all Major Shareholders Current Tax Return F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Timeline X G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project X H) Application deposit of $10,000, with any unused portion to be refunded. X I) Construction Plans and Itemized Project Construction Statement X J) Attach the following documentation as Exhibits Exhibit A – Entity Documents Exhibit B – Description of Project Exhibit C – List of Shareholders/Partners Exhibit D – But-For Analysis Exhibit E – List of Prospective Lessees Exhibit F – Legal Description and PID Number(s) Note: All Major shareholders will be required to sign personal guarantees if up front financing of the project is required. 11 The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned’s knowledge. The undersigned authorizes the City of Elk River to check credit references and verify financial and other information. The undersigned also agrees to provide any additional information as may be requested by the City after the filing of this application. Applicant Name Patrick Briggs Date 10-1-21 12 Tax Increment Financing Policy History Adopted by: On (date) Item # City Council 12/4/2017 EDA 11/20/2017 HRA 11/6/2017 Complete site excavating for the Phased 2020 Jackson Hills Residential Suites Phase 2 to include the following items: - Mobilization - Obtain and manage SWPPP - Install perimeter erosion control and rock entrance - Clear and Grub trees and brush - Strip and salvage Black Dirt for respread - Remove all unsuitable soils within Building and Parking lot per soil borings - Import and place clean sand to replace unsuitable soils - Subgrade site per plan - Dig and Backfill footings - Install drain tile around elevator pit and daylight into pond - Install Sewer and Water per plan with dewatering - Install Storm Sewer per plan (PVC pipe figured where storm crosses water) - Install 4" Radon Rock after plumbing underground - Import, Place and Tolerance Class 5 for pavement - Final Grade all green spaces - Infiltrometer Tests in Infiltration Pond Phase 2 785,000.00$ - Wet tap included for water connection in street - No concrete or asphalt replacement included for water and sewer connections - No detour included if required by city for street closure PLEASE NOTE: - NO Bond fees, Permit fees, Staking, Surveying, or Testing included - Dewatering for footing installation not included - No surveying included for monitoring settlement from dewatering process - No Temporary or Permanent stabilization included - Price good for 1 year from date of proposal - Estimated increase of 5-10% after 1 year Proposal 4-17-20 Kraemer Trucking & Excavating Inc. Jackson Residential Suites Elk River, Minnesota