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7.2 SR 01-03-2022Request for Action To Item Number Mayor and City Council 7.2 Agenda Section Meeting Date Prepared by Public Hearing January 3, 2022 Brent O'Neil, Economic Development Director Item Description Reviewed by TIF 28 Jackson Hills Residential Suites 2nd Cal Portner, City Administrator Reviewed by Action Requested There are two actions requested for this item: 1) open the posted hearing for public comment 2) approve, by motion, the resolution creating Tax Increment Financing (TIF) District No. 28 and corresponding TIF Plan. 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. This cost is estimated at $850,000. 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 butfor the use of TIF due to the extraordinary costs related to site development and soils correction. The project has been reviewed by the HRA-EDA Joint Finance Committee and recommended for approval, with a final recommendation expected from the HRA at its January 3, 2022, meeting. Following consideration of this resolution, additional actions of the city will be necessary for implementation. An agreement between the city and developer formalizing specific terms, conditions, and obligations of the TIF is expected to be brought forth at a The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperzly. M TUREJ Updated.• August 2020 subsequent meeting. Additionally, the project may be subject to other city processes such as zoning amendment applications. Finally, the developer is looking to apply for other forms of public assistance, notably federal and state programs. In the event the project is awarded additional funds, the city will conduct a review of the updated project financials to ensure prudent use of TIF. Financial Impact The project is requesting TIF at the maximum allowed by city policy for a housing district. The developer would receive up 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 ■ Resolution Establishing Tax Increment District No. 28 ■ Application Information ■ Draft Minutes from November 30, 2021, Joint Finance Committee ■ Review Memo from Baker Tilly ■ TIF District No. 28 Program and Plan ■ Comments received from Sherburne County City of Elk River City of Elk River City Council Resolution 22- A Resolution of the City Council of the City of Elk River ADOPTING A MODIFICATION TO THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO. I AND ESTABLISHING TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28 (JACKSON HILLS APARTMENTS PHASE II HOUSING PROJECT) THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN THEREFOR WHEREAS, the City Council of the City of Elk River (the "City') has heretofore established Development District No. 1 and adopted a Development Program therefor. It has been proposed that the City adopt a Modification to the Development Program (the "Development Program Modification") for Development District No. 1 (the "Development District") and establish Tax Increment Financing District (Housing) No. 28 (Jackson Hills Apartments Phase II Housing Project) (the "District") therein and adopt a Tax Increment Financing Plan (the "TIF Plan") therefor (the Development Program Modification and the TIF Plan are referred to collectively herein as the "Program and Plan"); all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.124 to 469.133 and Sections 469.174 to 469.1794, all inclusive, as amended (the "Act"), all as reflected in the Program and Plan, and presented for the Council's consideration; WHEREAS, the City has investigated the facts relating to the Program and Plan and has caused the Program and Plan to be prepared; WHEREAS, the City has performed all actions required by law to be performed prior to the establishment of the District and the adoption and approval of the proposed Program and Plan, including, but not limited to, notification of Sherburne County and Independent School District No. 728 (Elk River) having taxing jurisdiction over the property to be included in the District, a review of and written comment on the Program and Plan by the City Planning Commission, and the holding of a public hearing upon published notice as required by law; WHEREAS, certain written Materials, materials and information (the "Materials") relating to the Program and Plan and to the activities contemplated therein have heretofore been prepared by staff and consultants and submitted to the Council and/or made a part of the City files and proceedings on the Program and Plan. The Materials include data, information, an application, project sources and uses, a pro forma, and other information supplied by The Briggs Company (or an affiliate thereof, the "Developer"), as to the activities contemplated therein, and information constituting or relating to (1) why the assistance satisfies the so-called "but for" test and (2) the bases for the other findings and determinations made in this resolution. The Council hereby confirms, ratifies, and adopts the Materials, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein.. The Council hereby confirms, ratifies and adopts the Materials, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein; and WHEREAS, the City is not modifying the boundaries of Development District No. 1, but is however, modifying the Development Program therefor to incorporate the TIF District. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River, Minnesota, as follows: Section 1. Findings for the Adoption and Approval of the Development Program Modification. 1.01. The Council approves the Development Program Modification, and specifically finds that: (a) the land within the Development District would not be available for redevelopment without the financial aid to be sought under this Development Program; (b) the Development Program Modification will afford maximum opportunity, consistent with the needs of the City as a whole, for the development of the Development District by private enterprise; and (c) that the Development Program Modification conforms to the general plan for the development of the City as a whole. Section 2. Findings for the Establishment of Tax Increment Financing District (Housing) No. 28. 2.01. The Council hereby finds that Tax Increment Financing District (Housing) No. 28 is in the public interest and is a "housing district" under Minnesota Statutes, Section 469.174, Subd. 11 of the Act. 2.02. The Council further finds that the proposed development would not occur solely through private investment within the reasonably foreseeable future and, therefore, the use of tax increment financing is deemed necessary; that the Program and Plan conform to the general plan for the development or redevelopment of the City as a whole; and that the Program and Plan will afford maximum opportunity consistent with the sound needs of the City as a whole, for the development or redevelopment of the District by private enterprise. 2.03. The Council further finds, declares and determines that the City made the above findings stated in this Section and has set forth the reasons and supporting facts for each determination in writing, attached hereto as Exhibit A. The provisions of Exhibit A are hereby incorporated by reference into and made a part of the TIF Plan and the findings set forth in the TIF Plan, in particular Section J, are hereby incorporated by reference into and made a part of this Resolution Section 3. Public Purpose. i 3.01. The adoption of the Program and Plan conforms in all respects to the requirements of the Act and will help fulfill a need to develop an area of the City which is already built up, to provide a range of housing opportunities in the City, to improve the tax base and to improve the general economy of the State and thereby serves a public purpose. For the reasons described in Exhibit A, the City believes these benefits directly derive from the tax increment assistance provided under the TIF Plan. A private developer will receive only the assistance needed to make this development financially feasible. As such, any private benefits received by a developer are incidental and do not outweigh the primary public benefits. Section 4. Approval and Adoption of the Program and Plan. 4.01. The Program and Plan, as presented to the Council on this date, including without limitation the findings and statements of objectives contained therein, are hereby approved, ratified, established, and adopted and shall be placed on file in the office of the City Administrator. 4.02. The City elects to retain all of the captured tax capacity to finance the costs of the TIF District and the Development District 4.03. The staff of the City, the City's advisors and legal counsel are authorized and directed to proceed with the implementation of the Program and Plan and to negotiate, draft, prepare and present to this Council for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. The City Council, staff and its consultants are authorized to negotiate the terms of any development agreement, if necessary, with developers in connection with the establishment of the TIF District. 4.04 The Auditor of Sherburne County is requested to certify the original net tax capacity of the District, as described in the Program and Plan, and to certify in each year thereafter the amount by which the original net tax capacity has increased or decreased; and the City is authorized and directed to forthwith transmit this request to the County Auditor in such form and content as the Auditor may specify, together with a list of all properties within the District, for which building permits have been issued during the 18 months immediately preceding the adoption of this resolution. 4.05. The City Administrator is further authorized and directed to file a copy of the Program and Plan with the Commissioner of the Minnesota Department of Revenue and the Office of the State Auditor pursuant to Minnesota Statutes 469.175, Subd. 4a. Passed and adopted this day of 2022. John J. Dietz, Mayor i ATTEST: Tina Allard, City Clerk i EXHIBIT A The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for Tax Increment Financing District (Housing) No. 28, as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as follows: 1. Finding that Tax Increment Financing (Housing) District No. 28 is a housing district as defined in M.S., Section 469.174, Subd. 11. TIF District (Housing) No. 28 consists of one parcel. The development will consist of approximately 44 units of low- and moderate -income rental housing in the City. All or a portion of which will receive tax increment assistance and will meet income restrictions described in M.S. 469.1761. At least 20% (9 units) of the units/homes receiving assistance will have incomes at or below 50% of county median income. Section E of the TIF Plan contains background for the above finding. 2. Finding that the proposed development, in the opinion of the City Council, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The proposed development is expected to consist of approximately 44 newly constructed housing units. The City's finding that the proposed development would be unlikely to occur solely through private investment within the reasonably foreseeable future is based on an analysis of the project pro forma and other materials submitted to the City by the developer. These documents have indicated that the costs of constructing the new project, in addition to the significant soils corrections and site improvement costs will result in debt service coverage and returns that are not sufficient to support development, thereby making this housing development infeasible without public assistance. Therefore, the developer has indicated in communications with the City and submitted financial data that the development as proposed would not move forward without tax increment assistance. 3. Finding that the TIF Plan for Tax Increment Financing (Housing) District No. 28 conforms to the general plan for the development or redevelopment of the municipality as a whole. The reasons and facts supporting this finding are that the Planning Commission of the City has found this TIF Plan consistent with the general plan for development of the City as a whole and will generally complement and serve to implement policies adopted in the City's comprehensive plan. 4. Finding that the TIF Plan for Tax Increment Financing (Housing) District No. 28 will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of Development District No. 1 by private enterprise. i Through the implementation of this TIF Plan, the City will provide an impetus for the construction of an apartment project, of which all or a portion of the units will be affordable for occupants at or less than 50% or 60% median income. The project will complement the overall housing needs of the City and helps support other private types of development by providing a range of housing opportunities for residents and workers within the City. i 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. 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. 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 Mississppi 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. 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 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 often 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. 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) 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. 7. Developers receiving TIF assistance shall provide a minimum often 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 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. 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). 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 Phone Fax Email Accountant Name Don Myers Address Phone 763-370-2038 Fax Email Contractor Name The Briggs Companies 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 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 pro) ectwill be: Owner Occupied X Leased Space 3. Project Address 726 6"' 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 $, Public Improvement Site Improvement 15 dears & 90% 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 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 D. SOURCES & USES SOURCES NAME Bank Loan First Bank & Trust Other Private Funds Owner Owner Cash Equity Fed Grant/Loan State Grant/Loan FDA Micro Loan Tax Increment ID Bonds TOTAL USES Land Acquisition Site Development Construction Machinery & Equipment Architectural & Engineering Fees Legal Fees Interest During Construction Debt Service Reserve Contingencies AMOUNT $6,000,000.00 $2,588,174.00 $8,588,174.00 AMOUNT $400,000.00 $850,000.00 $6,828,174.00 $75,000.00 $10,000.00 $175,000.00 $0 $250,000.00 TOTAL $8,588,174.00 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. 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 C aftich-&Wi Date 10-1-21 Tax Increment Financing Policy History Adopted by: On date Item # City Council 12/4/2017 EDA 11 /20/2017 HRA 11 /6/2017 PROJECT TITLE JACKSON HILLS RESIDENTIAL SUITES (44-Unit Apartment Building with Indoor Parking) 726 6th Street Elk River MN 55330 CODE SUMMARY APPLICABLE ON 2020 MINNESOTA BUILDING CODE PRINCETON CITY CODE 202D MI—IM, State Building Code (MSBC), MN Rules Chapter 1305, which edI no mends Ne 2020em1ntb—I BUiltling Code (IBC) 2020 Mechanical and Fuel Gas Code, MN R.I.. Chapter 1346 2020 National Elechical Code. MN Rules CI1315 2015 Mlnnesda Plumbing Cotle, MN Rules ChaDtar4714 2020 Minnas.. SEE. Rre Code, MN Rules Chapter T511 2020 Minnesota maid-11 EDelgy Cotle, MN Rules Chapter 1322 2.0 Minnesota Commercial Energy Cotle, MN Rules Chapter 1323 2020 Minnesota Accessibility COEE, MN Rules Chapter 1341 OCCUPANCY REQUIREMENTS' BUILDING OCCUPANCY GROUPR-26&1 CONSTRUCTION TYPE(SPRINKLED) TYPE V-A ALLOWABLE AREA PER FLOORI: BASIC ALLOWABLI E R-2 AREA TABLE 503; 12,000 SF AREA MODIFICATIONS FROM SECTION 560: EQUATION 5-1 A=12,000+[12.D 6311[12,000 x 21 PARKING REQUIREMENTS jx11ALa ECA... LNIT., wz sraLLs T«?roT.LUNna (.1 aORFACE IAII6TALLA 1 a RFAp6aT4LLa aR�(PAR��a, CODE SUMMARY (cont'd) UNIT COUNT TYPE QUANTITY TABLE C40P.1.WI ULATON AND FENESTRATION REQUIREMENTS BY COMPONENT FENESTRATION "U°-FACTOR MINIMUM 0.32 GLAZED FENESTRATION SHGC-NOT REQUIRED CEILING R-VALUE- 49 WOOD FRAME W LL R-VALUE 20 Tnro e6o FLOOR R VALUE 30,(OR INSUUTETO FILL FRAMING CAVITY,R-19 MINIMUM TMREEe EOR FOUNDATION WALL, (MINIMUMR7.5 REQUIRED), INSTALL THE SPECIFIED R-10 TO MATCH R-2 PORTIONS OF BUILDING TOTAL RIMJOISTS R-30 R402.1.1.6 SPRAY -APPLIED I NTERIOR FOAM INSULATION. FOAM INSULATION WITH INTEGRAL VAPOR/AIR GENERAL REQUIREMENTS BARRIERTYMCALAY ISTS EGRESSWIDTII: FIRST FLOOR 52> .2 = IOW GENERAL ELEVATION NOTES: UNIT PLAN GENERAL NOTES: SECOND FLOOR 90 X.3=27.9' 1 - 0w —MEET MINIMUM A-1 eneer arwLrvoT THIRD FLOOR 90..3=2].0' fi4.4 REOUREO sxAUHAVEA HEAR OPENxO WOTN of z.IR 2 EXITS DRS ® 42" = 84.0" x w liEnalomc.® q pu>ui F=IE o�nvAF TeweIMo coo. PROJECT TEAM RER.MpwETHERe RRIERa mERE LeE 1 THE a. ETONTOPOF Ul VOT UMITeoio3� A = 43,560 SF ARCHITECT: GENERAL PLAN NOTES: BASIC ALLOWABLE Si AREA TABLE 503; 9,0005E 1. 11-1IONSAREFROM CENTER or a]uo To 1ENT11 or c— FOR SEcuamoR INTERCOM ar3TE11 R-L AREA MODIFICATIONS FROM SECTION 560; EQUATION 5-1 DOUGUS A. MOE 16— VALE STREET A = 9,000+[9,O0Ox.59]+ [9,000><21 ELK RIVER, MN 55330 A=32,31D SF STRUCTURALENGINEER: ACTUAL AREA: ACTUAL 1-2 AREA 10,560 SF (GROUNDFLOOR) 18,504 SF (2ND83R0 FLOOR EA.) OUFFV ENGINEERING AND ASSOCIATES 35D HIGHWAY 10 SOUTH MAK ALLOWABLE 43,560 SF ST. CLOUD. MN SE304 ACTUAL S-1 AREA .I ALLOWA9LE 184 4,8 SF 2310 SF 3.82<1 TELEPHONE: (320)259.8575 CONTACT: ISEAVERT RATIO: A1(R-2)+.41(&1) OWNER, BUILDINGTNG: R-2: NPFA 13 JACKSCN HILLS RESIDENTIAL SUITES &1'. NFPA 13 UNITS: 43 TYPE B UNITS (ACCESSIBLE) 1 TYPE A UNIT NNIT 10&1BR) 44 TOTAL UNITS 1ST FLOOR ID.WD SF- 52 2N0 FLOOR 1e.504 SF - 90 3RD FLOOR 18,504 SF - 90 242 TOTAL FIRE RESISTANT CONSTRUCTION: R-2: 1 HOUR &1: 1 HOUR NON -SEPARATED 2020 MINNESOTA ENERGY CODE -ZONE (8)WOOD FRAME CONSTRUCTION GROUP 'A-2' APARTMENT COMPONENT OF MIXED USE PROJECT CHAPTER 4 [RE] RESIDENTIAL ENERGY EFFICIENCY FOR LOW RISE APARTMENT BULDINGSTHREE STORIES OR LESS. ALL CONSTRUCTION, INSULATION SYSTEMS. MECH SYSTEMS, ELEC SYSTEMS TO MEET THE REQUIREMENTS OF THIS CODE SECTION. 'U"-FACTOR MINIMUM 0.32 CEILING R-VALUE- 49 WOOD FRAME WLL R-VALUE 20 FLOOR R VALUE 30. (OR INS LATETO FILL FRAMING CAVITY, R-19 MINIMUM FOUNDATION WALL, R-10 RIM JOISTS. R-30 R402.1.1.6 SPRAY -APPLIED INTERIOR FOAM INSULATION. CLOSED CELL SPRAY FOAM INSULATION WITH INTEGRAL VAPOWAIR GROUP 'S-2' COMPONENT OF MIXED USE PROJECT CHAPTER 4 [CEI COMMERCIAL ENERGY EFFICIENCY PRIVATE PARKING GARAGE ALL CONSTRUCTION. INSULATION SYSTEMS, MECH SYSTEMS. ELEC SYSTEMS TO MEET THE REQUIREMENTS OF THIS CODE SECTION. RENDERING (Fod SHEETINDEX GENERAL GOO COVER SHEET Go.1 ACCESSIBILITY AND GENERAL REQUIREMENTS GO G0.3 GENERALINFORMATION EGRESS PLANS ARCHITECTURAL A1.0 ARCHITECTURAL SITE PLAN A2.0 FIRST AND SECOND FLOOR PLANS A2.1 THIRD FLOOR PLAN AND ROOF PUN A3.0 EXTERIOR ELEVATIONS AO.D BUILDING SECTIONS A4.1 BUILDING SECTIONS A4.2 SECTIONS AS UNIT PLANS AS, UNIT PLANS AS A6.3 UNIT PLANE UNIT PLANS AS UNIT PLANS AS AS UNIT PLANS UNIT PLANS A6.] UNIT PLANS AS. ASS UNIT PUNS UNIT PUNS A8.0 SCHEDULES STRUCTURAL S1 GENERAL NOTES AND SPECIFICATIONS 52 FOUNDATION AND LEVEL2 FRAMING PUNS S3 54 S5 LEVELS NO ROOF FRAMING PUN DE AILS DETAILS CIVIL C1 SITEANDUTILI C2 GRADING — SHEET AS NOTED 1 G0.0 7 R,GOS CONST RJCTION gRlGGS pROpERT Prequal Package Must Include: Apart THE B F:r [ G C= S C O M PA ICI [ E S Loan Request Summary Form -MORT q gR G Pictures - Mounted Financing Date: 9/6/2021 Sworn Orig. Agent Name: Pat Briggs Cashflow with TIFF 15 yr Principal: xxx 6th Street Telephone #: Regestered Abstractors Facsimile #: COMPLETE THIS SECTION IN ITS ENTIRETY NAME OF PROPERTY Briggs Companies NAME OF BORROWER SUBJECT PROPERTY ADDRESS PROPERTY TYPE MULTIFAMILY Market Rate high density Housing TIFF Elk River, MN AGE New Construction Income restricted 80/20 Housing lackson Hill Residential Suites Monthly Rent Total Monthly Total Annual Unit Type #of units Unit Size Per Unit Rent-1 st year Rent-1 st year Studio 8 545 $1,000 $8,000 $96,000 1 Bedroom 1A 12 745 $1,100 $13,200 $158,400 1 Bedroom 1B 2 960 $1,175 $2,350 $28,200 1 Bedroom ADA 1 D(H C) 1 745 $1,100 $1,100 $13,200 1 Bedroom 1C 4 856 $1,150 $4,600 $55,200 1 Bedroom 1E 2 960 $1,200 $2,400 $28,800 2 Bedrooms 1Bath 2A 9 1050 $1,400 $12,600 $151,200 2 Bedrooms 1Bath 2B 4 1281 $1,600 $6,400 $76,800 2 Bedrooms $0 $0 2 Bedrooms 1 3/413ath $0 $0 2 Bedrooms 2B 1 3/4Bath $0 $0 3 Bedrooms 3A 2 1246 $1,600 $3,200 $38,400 Garages 44 $50 $2,200 $26,400 Lockers $0 $0 Total 44 $56,050 $672,600 1.83 1.48 1.22 1.48 1.34 1.25 1.33 1.25 #DIV/0I #DIV/0I #DIV/0I 1.28 CONDITION OF PROPERTY New Construction SURROUNDING PROPERTIES General Occupancy Residential COMPLETE THIS SECTION IF PURCHASE SALES PRICE Price per unit $ 214,704.35 $ 8,588,174 #REF! REQUESTED 1ST T.D. $ 15o,000.00 $ 6,000,000 70% SECONDARY FINANCING $ - 0% CASH DOWN PAYMENT $ 2,588,174 30% TERMS 100% CASH FLOW ANALYSIS GROSS ANNUAL INCOME $ 672,600 VACANCY 5% $ 33,630 EFFECTIVE GROSS INCOME $ 638,970 EXPENSES 42% $ 282,492 $ 7,062.30 NET OPERATING INCOME $ 356,478 DEBT SERVICE 1STT.D.@ 4.000% $ (380,043) $ 380,043 2ND T.D. @ 0.0% $ - $31,670.21 NET CASH FLOW $ (23,565) DEBT COVERAGE RATIO 1ST T.D. 0.94 COMBINED DEBT COVERAGE RATIO W/2ND T.D. 0.94 LOAN QUOTE LENDER Lakewood Mortgage LOAN AMOUNT $ B,000000 FLOOR/CEILING PROPERTY RATING: A, B, C, D B AMORT./TERM LOAN PROGRAM: MO.ARM, NO-NEG ARM, 3/1, 5/1, 7/1, 10/1 TYPE OF PREPAYMENT INDEX: 12MAT, COFI, CMT, LIBOR RECOURSE CURRENT INDEX RATE EST. FUNDING LOAN MARGIN START RATE COMMENTS FULLY INDEXED RATE UNDERWRITING RATE REVIEWED AND ACCEPTED FOR SUBMISSION OF FULL CREDIT PACKAGE. Financing A B C D E 1 2 3 FINANCING PERFORMA 4 5 Jackson Hills 40 unit 6 7 8 9 10 Square Ft: 24,394 11 12 Category: 13 14 Total Project Cost $ 8,588,174 15 16 Equity Contributions $ 2,588,174 17 18 Funding Requirement $ 6,000,000 19 20 Rate Assumption 4.00% 21 22 Term Assumption ( in years) 300 23 24 JAnnual Debt Service $ 380,043 25 26 Monthly Debt Service $ 31,670 27 28 Operating Income $ 638,970 29 30 Operating Expense $ 282,492 31 32 Income From Operation $ 356,478 33 34 Debt Service Ratio 0.94 Without Tiff 35 36 Cash Available For ROI $ (23,565) 37 38 ROI (cash on cash) -0.91 % 39 40 41 Cap Rate 4.15% Page 2 Cash Flow With TIFF A B C D E F G 1 REVISED 911312021 Monthly Rent Total Monthly Total Annual 2 Unit Type # of units Unit Size Per Unit Rent-1 st year RentA st year 3 Studio income restricted 8 519 $900 $7,200 $86,400 $1.73 4 1 Bedroom 1A 12 715 $1,100 $13,200 $158,400 $1.54 5 1 Bedroom 1B 2 924 $1,175 $2,350 $28,200 $1.27 6 1 Bedroom ADA 1D NC) Income restncted 1 715 $1,000 $1,000 $12,000 $1.40 7 1 Bedroom 1C 4 820 $1,150 $4,600 $55,200 $1.40 8 1 Bedroom 1E 2 924 $1,250 $2,500 $30,000 $1.35 9 2 Bedrooms 1 Bath 2A 9 915 $1,400 $12,600 $151,200 $1.53 10 2 Bedrooms IBath 2B 4 934 $1,600 $6,400 $76,800 $1.71 11 $0 $0 #DIV/0' 12 $0 $0 #DIV/01 3 $0 $0 #DIV/01 14 13 Bedrooms 2 1216 $1,600 $3,2001 $38,400 $1.32 15 9x20 $0 $0 16 Garages 44 9x20 $50 $2,200 $26,400 17 18 Total 44 $55,250 $663,000 19 20 21 % Year 22 Year 2023 2024 2025 2026 2027 2028 23 Gross Income 24 Potential Gross Rent $198,900 $663,000 $669,630 $676,326 $689,853 $689,853 25 Less: 5%Vacancy -$9,945 -$33,150 -$33,482 -$33,816 -$34,493 -$34,493 26 Less: Collection Loss $0 $0 $0 $0 $0 $0 27 Net Rent $188,955 $629,850 $636,149 $642,510 $655,360 $655,360 28 Other Income $0 $0 $0 $0 $0 $0 29 Effective Gross Income $188,955 $629,850 $636, 149 $642,510 $655,360 $655,360 30 31 Annual Expenses 32 Administrative 33 Management Fee-6% $9,448 $44,090 $44,530 $44,976 $45,875 $45,875 34 On Site Manager & caretaker $5,500 $60,000 $61,800 $63,654 $65,564 $67,531 35 Legal/Accounting $4,000 $4,500 $4,635 $4,774 $4,917 $5,065 36 jAdvertising $5,500 $6,299 $6,361 $6,425 $6.554 $6,554 37 IMisc Admin $3,000 $3,000 $3,090 $3,183 $3,278 $3,377 38 Operatina 39 Electric $6,524 $9,225 $9,502 $9,7871 $10,080 $10,383 40 Heat $7,650 $12,500 $12,875 $13,261 $13,659 $14,069 41 Insurance $8,900 $17,500 $18,025 $18,566 $19,123 $19.696 42 Sewer & Water $4,752 $10,825 $11,150 $11,484 $11,829 $12,184 43 Elevator $1,000 $2,500 $2,575 $2,652 $2,732 $2,814 7 Fire protection $500 $1,050 $1,082 $1,114 $1,147 $1,182 45 lGarbage $7,615 $7,843 $8,079 $8.321 $8,571 46 livaintenance 47 Snow Removal $5,000 $6,500 $6.695 $6,896 $7,103 $7,316 48 Repair & Maintenance $3,000 $9,560 $9,847 $10,142 $10,446 $10.760 49 Grounds Maintenance $5,200 $5,356 $5,517 $5,682 $5,853 $6,028 50 Taxes 51 Real Estate Less TIF Total Annual Expenses $4,500 $88,000 $88,880 $89,769 $90,666 $91,573 -$79,200-$79,200-$79,200-$79,200-$79,200 5T 53 $74,474 $209,319 $215,207 $221,244 $227,948 $233,776 54 55 Expenses Per Unit $1,862 $5,233 $5,380 $5,531 $5,699 $5,844 56 57 Cash Flow Before Debt Service $114,481 $420,531 $420,942 $421,266 $427,413 $421,584 58 59 Replacement Reserves -2%ofrent $3,978 $13,260 $13,393 $13,527 $13,797 $13,797 60 61 Net Operating Income $110,503 $407,271 $407,549 $407,740 $413,616 $407,787 62 63 Debt Service (T Source 1 ($6,000,000 @ 4%, 25 yrs) $148,523 $380,043 $380,043 $380,043 $380,043 $380,043 65 Source 2 $0 $0 $0 $0 $0 $0 66 Total Cash Flow -$38,020 $27,228 $27,507 $27,697 $33,573 $27,745 67 68 DCR 0.74 1.07 1.07 1.07 1.09 1.07 69 Cash on Cash (down=$1,800,000.00) -3.24% 2.32% 2.35% 2.36% 2.86% 2.370% 70 The data and calculations presented herein, while not guaranteed, have been obtained from sources we believe to be reliable. 71 72 Income and Expense Growth Rate Assumptions 73 Rental Income 1.0% 74 Expenses 3.0% Page 4 Kraemer Trucking & Excavating Inc. Jackson Residential Suites Elk River, Minnesota Proposal 4-17-20 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 WA City of Elk River Members Present: Members Absent: Staff Present: Others Present: Elk River Joint Finance Committee Held at Elk River City Hall Tuesday, November 30, 2021 Charlie Blesener, Ryan Hardin, Rhonda Magnussen, Dan Tveite, Nate Ovall, Larry Toth and Jim Gromberg Chad Vitzhum Brent O'Neil, Economic Development Director Mikaela Huot, Baker Tilly (via phone conference) and Patrick Briggs, Briggs Companies 1. rCaWlleeting to"ftrder 2. 3. A r Pursuant to due call and notice thereof, the meeting of the Elk River Joint _ Committee was called to order by Chair Tveite at 7:38 a.m. Consider Agenda Motion by Blesener and seconded by Gromberg to approve the Joint Finance Committee agenda. Motion carried 7-0. Consent Agenda Motion by Hardin and seconded by Ovall to approve the October 26, 2021, Joint Finance Committee meeting minutes. Motion carried 7-0. 4.1 TIF Application Jackson Hills Second Addition Mr. O'Neil introduced Mikaela Huot and Patrick Briggs to present on the TIF application for Jackson Hills II. Mr. Briggs spoke to the site and his vision for the project. Ms. Huot gave a presentation summarizing the project and her analysis of the request. Ms. Huot highlighted the qualifications of the project as a Housing TIF district, the use of funds, and the "but -for" analysis. The analysis indicated soil conditions necessitating remediation are the major contributor to extraordinary project costs anticipated for the project up to $850,000. The developer could be reimbursed for those costs over the life of a 15-year TIF. It also found that the project could not support debt service payments without TIF, and the debt service coverage ratio and projected returns are under market standards. Several elements of the project were discussed by the committee. Site layout was confirmed to be on the southern portion of the property, immediately across 6"' Street from Jackson Hills I. Mr. Briggs confirmed that approximately six feet of peat, on average, would need to 6I! 6. be removed and refilled on site. He also indicated that current pavement of 6"' Street would remain, without additional improvements needing to be made. Ms. Huot was asked about project viability and debt coverage ratios, and she indicated that the project is feasible with TIF, but project returns and debt coverage ratios are below prevailing standards. Mr. Briggs indicated that Jackson I reached stabilization a little slower than expected and current occupancy is about 90 percent. He also indicated the likely construction schedule would be summer of 2022. Mr. Briggs also stated that the project is subject to volatility in the construction market and he is also looking at other possible programs to strengthen the feasibility of the project. Motion by Oval and seconded by Blesener to recommend approval of the application to the Housing and Redevelopment Authority. Motion carried 7-0. Announcements Adjournment There being no further business, Mr. Tveite adjourned the meeting at 8:11 a.m. prepare y Brent O'Neil. Tina Allard City Clerk Brent O'Neil Economic Development Director bakertl*40 Memo To: City Council of the City of Elk River Brent O'Neil, City of Elk River From: Mikaela Huot, Director Date: January 3, 2022 Subject: Proposed Tax Increment Financing Plan for Tax Increment Financing (Housing) District No. 28 (Jackson Hills Phase II Project) Action Item The City of Elk River received a request for tax increment financing assistance from The Briggs Company (the developer) related to construction of an approximate 44-unit multifamily housing project with adjacent parking. The developer has requested tax increment assistance through the establishment of a Housing TIF District to assist with financing a portion of the extraordinary project costs related to site development and soils correction to allow for construction of the proposed new housing development. The City Council is being asked to open and hold the public hearing on Monday, January 3 to consider approval of the TIF Plan and Tax Increment Financing (Housing) District No. 28. Tax increment financing has been identified as a financing tool to assist with offsetting a portion of the extraordinary costs based on the incremental new taxes generated by the development. The TIF Plan for the proposed TIF District provides the City with the authority to use tax increments from the new project on eligible expenditures. The projected public costs as listed in the TIF Plan are based on projected available tax increment revenues generated over 15 years to be consistent with the City's TIF policy relative to the maximum term of increment collections from a housing TIF district. The statutorily required maximum term of a housing TIF District is up to 26 years. The purpose of the TIF Plan including the budget for revenues and project costs is to provide authority for the City to use tax increments generated by the project on eligible project costs of the district. Tax increment revenues may be spent within the boundaries of the TIF District and Project Area (with some limitations) to support extraordinary costs associated with construction of the housing project. Multiple steps need to be taken prior to establishing a TIF District, including notifications to the County and School District, Planning Commission review, HRA review and recommendation, publication of a public hearing notice, and the holding of a public hearing. To comply with the statutory requirements and work towards the January 3 public hearing date, notices have been sent to the County Commissioner on November 18 and County and School Board (draft TIF Plan and fiscal and economic impacts) on December 3. Publication of the hearing notice for the TIF District creation was Saturday, December in Elk River Star News. Pursuant to the City's procedures for reviewing TIF requests, the project and application was introduced to the Joint Finance Committee for review and recommendation at its October and November meetings and to the HRA on December 4. Planning Commission review was December 21. Following review by the HRA on January 3, it is recommended the City Council act on the TIF District following the public hearing on January 3. The public hearing date is the time in which City Council would take any public comment, and after the hearing, consider the adoption of a resolution approving the TIF District. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP 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. Process for TIF District Establishment A TIF District is established within a Project Area. The City is considering the establishment of a new TIF District to facilitate development of the property to include new residential housing, of which a portion would be affordable. A map showing the boundaries of the proposed Tax Increment Financing District No. 28 (Jackson Hills Phase II Project) and Development District No. 1 (Project Area) are included as Exhibit I in the draft TIF Plan. Pursuant to MN Statutes 469.175, Subd. 3, the City needs to make certain findings that include the following: 1. The TIF District qualifies as a housing district; 2. The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future; 3. The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for development of the Project Area by private enterprise; and 4. The TIF Plan conforms to general plans for development of the City as a whole. Next Steps The potential terms of financial assistance between the City and developer are still being discussed and are determined based on financial need, feasibility and capacity. The developer has requested approximately $850,000 to assist with significant soils correction and site development costs. The developer is in the process of updating those cost estimates based on revised plans for soils correction needs and dewatering of the site. The Contract for Private Development between the City and developer will include the provisions of TIF financial assistance and include the recommended level to be provided through tax increment financing based on the actual amounts of soils correction and site development costs. Thank you for the opportunity to be of assistance to the City of Elk River. Please contact me at 651-223-3036 or mikaela.huota-bakertilly.com with any questions or to discuss. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP i� bakertitty MUNICIPAL ADVISORS Memo for Review Members of the City Council of the City of Elk River To: Members of the HRA of the City of Elk River Brent O'Neil, City of Elk River From: Mikaela Huot, Director Date: January 3, 2022 Subject: Financial Needs Analysis for proposed Tax Increment Financing Housing (TIF) District No. 28 (Jackson Hills Phase II 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 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 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 0 $6,300,000 0 44 new units at $143,182/unit • Classification for all units as rental 0 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 0 Election to delay first increment by up to 4 years • Net present value (discount) rate of 4% • 1 % 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) $94,995 Estimated Total Gross Increment $1,588,062 Estimated City Retainage (10%) $158,806 Estimated Total Net Increment (90%) $1,429,256 Estimated Developer Principal TIF Note (Maximum) $850,000 Estimated Developer TIF Note Interest at 4% $339,454 Estimated Total Payments on TIF Note $1,189,454 Estimated Number of Years 15.5 years Estimated Surplus Revenues ($1,429,256 - $1,189,454) $239,802 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 Developer Developer Projected Performance Metrics * Without With Modified With Assistance Assistance 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.huota-bakertily.com with any questions or comments. CC bakertilly Tax Increment Financing Plan for Tax Increment Financing (Housing) District No. 28 (Jackson Hills Apartments Phase II Housing Project) City of Elk River, Minnesota Prepared by Baker Tilly Municipal Advisors, LLC Final Draft Dated: January 3, 2022 Anticipated Review by HRA Board: January 3, 2022 Anticipated Approval by City Council: January 3, 2022 Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly -owned subsidiary of Baker Tilly US, LLP, an accounting firm. Baker Tilly US, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. TABLE OF CONTENTS SECTION I — MODIFICATION TO THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO. 1 Foreword...................................................................................................... 1 SECTION II —TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28 Section Page(s) A. Definitions.............................................................................................. 1 B. Statutory Authorization........................................................................... 2 C. Statement of Need and Public Purpose ................................................. 2 D. Statement of Objectives......................................................................... 2 E. Designation of the TIF District as a Housing District .............................. 2 F. Duration of the TIF District..................................................................... 3 G. Property to be Included in the TIF District .............................................. 3 H. Property to be Acquired in the TIF District ............................................. 3 I. Specific Development Expected to Occur Within the TIF District .......... 3 J. Findings and Need for Tax Increment Financing ................................... 4 K. Estimated Public Costs.......................................................................... 5 L. Estimated Sources of Revenue.............................................................. 5 M. Estimated Amount of Bonded Indebtedness .......................................... 6 N. Original Net Tax Capacity...................................................................... 6 O. Original Tax Capacity Rate.................................................................... 6 P. Projected Retained Captured Net Tax Capacity and Projected Tax Increment 7 Q. Use of Tax Increment............................................................................. 7 R. Excess Tax Increment............................................................................ 8 S. Tax Increment Pooling and the Five Year Rule ..................................... 8 T. Limitation on Administrative Expenses .................................................. 9 U. Limitation on Property Not Subject to Improvements - Four Year Rule. 9 V. Estimated Impact on Other Taxing Jurisdictions .................................... 9 W. Prior Planned Improvements.................................................................. 10 X. Development Agreements...................................................................... 10 Y. Assessment Agreements....................................................................... 11 Z. Modifications of the Tax Increment Financing Plan ............................... 11 AA. Administration of the Tax Increment Financing Plan ............................. 11 AB.Filing Financial Reporting and Disclosure Requirements ...................... 12 Map of the Tax Increment Financing District and Project Area ............................... EXHIBIT I TIF District Assumptions Report............................................................................. EXHIBIT II Projected Tax Increment Report............................................................................. EXHIBIT III Estimated Impact on Other Taxing Jurisdictions Report ......................................... EXHIBIT IV Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly -owned subsidiary of Baker Tilly US, LLP, an accounting firm. Baker Tilly US, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. City of Elk River, Minnesota SECTION I — MODIFICATION TO THE DEVELOPMENT PROGRAM FOR DEVELOPMENT DISTRICT NO. 1 Foreword The following text represents a Modification to the Development Program for Development District No. 1. This modification represents a continuation of the goals and objectives set forth in the Development Program for Development District No. 1. The changes generally include the establishment of Tax Increment Financing (Housing) District No. 28. For further information, a review of the Development Program for Development District No. 1 is recommended. It is available from the City Administrator at the City of Elk River. Other relevant information is contained in the Tax Increment Financing Plans for the Tax Increment Financing Districts located within Development District No. 1. SECTION II —TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28 Introduction The following text represents the Tax Increment Financing Plan for Tax Increment Financing District No. 28. Section A Definitions The terms defined in this section have the meanings given herein, unless the context in which they are used indicates a different meaning: "City" means the City of Elk River, Minnesota; also referred to as a "Municipality". "City Council" means the City Council of the City; also referred to as the "Governing Body". "County" means Sherburne County, Minnesota "Development District" means Development District No. 1 in the City, which is described in the corresponding Development Program. "Development Program" means the Development Program for the Development District. "Project Area" means the geographic area of the Development District. "School District" means Independent School District No. 728, Minnesota. "State" means the State of Minnesota. "TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive. "TIF District" means Tax Increment Financing (Housing) District No. 28. "TIF Plan" means the tax increment financing plan for the TIF District (this document). Baker Tilly Municipal Advisors, LLC Page 1 City of Elk River, Minnesota Section B Statutory Authorization See the Development Program for the Development District. Section C Statement of Need and Public Purpose See the Development Program for the Development District. Section D Statement of Objectives See the Development Program for the Development District. Section E Designation of the TIF District as a Housing District Pursuant to the TIF Act, the City seeks to create Tax Increment Financing (Housing) District No. 28 and adopt a TIF Plan for the TIF District. The City will review this TIF Plan prior to City adoption. The TIF District is a housing district. Housing districts are a type of tax increment financing district that consist of a project intended for occupancy, in part, by persons or families of low and moderate income. Low and moderate income is defined in federal, state, and municipal legislation. A project does not qualify if more than 20% of the square footage of buildings that receive assistance from tax increments consist of commercial, retail or other nonresidential use. In addition, housing districts are subject to various income limitations and requirements for residential property. For owner occupied residential property, 95% of the housing units must be initially purchased and occupied by individuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under section 143(f) of the Internal Revenue Code. For residential rental property, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(d) of the Internal Revenue Code. The TIF District meets the above qualifications for these reasons 1. The planned improvements consist of the following: a. Approximately 44 total units, for which one of the following will apply: o at least 20% of the dwelling units shall be available for rent by persons whose incomes do not exceed 50% of areawide median family income, as adjusted for family size or o at least 40% of the dwelling units shall be available for rent by persons whose incomes do not exceed 60% of areawide median family income, as adjusted for family size. 2. No improvements are planned other than housing and therefore no more than 20% of the square footage of buildings included in the TIF District will consist of commercial, retail, or other nonresidential uses. 3. The City will require in the development agreement that the income limitations for the rental units in the apartment buildings will apply for the duration of the TIF District. Baker Tilly Municipal Advisors, LLC Page 2 City of Elk River, Minnesota Tax increments derived from a housing district must be used solely to finance the cost of housing projects as defined in section 469.174, subd. 11 and 469.176, subd. 4d of the TIF Act. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the City may be included in the cost of a housing project. The City anticipates using tax increment revenues to finance the costs of TIF eligible and development costs related to construction of the new multifamily housing units within the TIF District. Section F Duration of the TIF District Housing districts may remain in existence 25 years from the date of receipt of the first tax increment. Modifications of this TIF Plan (see Section AB) shall not extend beyond these limitations. Pursuant to Minnesota Statutes section 469.175, subd. 1(b), the City specifies 2024 as the first year in which it elects to receive tax increment from the TIF District, which is no later than four years following the year of approval of the TIF District. Thus, the City may collect increment from the TIF District through December 31, 2050 but anticipates the TIF District being decertified following December 31, 2039 (see Section R) (up to 15 years of collection to meet the City's Tax Increment Policy). All tax increments from taxes payable in the year the TIF District is decertified shall be paid to the City. Section G Property to be Included in the TIF District The TIF District comprises of one parcel that is approximately 6.64 acres. A map showing the location of the TIF District is shown in Exhibit I. The boundaries and area encompassed by the TIF District are described below: Parcel Number Legal Description PARCEL D-N. THAT PT OF THE FOLLOWING DESC 75-134-2305 PARCEL D LYING N OF WLY EXTENSION OF THE CTR LINE OF 6TH ST (FORMERLY PLATTED AS 8TH ST) The area encompassed by the TIF District shall also include all street or utility right-of-ways located upon or adjacent to the property described above, as illustrated in the boundary map included in Exhibit I. Section H Property to be Acquired in the TIF District The City may acquire and sell any or all of the property located within the TIF District; however, the City does not anticipate acquiring property. Section I Specific Development Expected to Occur Within the TIF District The project as proposed by The Briggs Company is anticipated to include the construction of approximately 44 rental housing units comprising studio, 1, 2- and 3-bedroom units with supporting garages. In order to qualify as a housing district, at least 20% of the units will be occupied by persons or families at 50% of area median or 40% of the units will be occupied by persons or families at 60% of area median income. As proposed, the project is expected to include 20% of the units not to exceed 50% of the area median income. The City anticipates Baker Tilly Municipal Advisors, LLC Page 3 City of Elk River, Minnesota using tax increment revenues to finance eligible costs associated with development of the housing project site including primarily soils correction and site development costs, as deemed a barrier to development of the property, as well as related administrative expenses. The project is expected to start construction in 2022 and continue construction through 2023 and be 100% complete as of January 2, 2024 for taxes payable 2025. Section J Findings and Need for Tax Increment Financing In establishing the TIF District, the City makes the following findings: (1) The TIF District qualifies as a housing district. See Section G of this TIF Plan for the reasons and facts supporting this finding. (2) The proposed development, in the opinion of the City, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The proposed development is expected to consist of approximately 44 newly constructed housing units. The City's finding that the proposed development would be unlikely to occur solely through private investment within the reasonably foreseeable future is based on an analysis of the project pro forma and other materials submitted to the City by the developer. These documents have indicated that the costs of constructing the new project, in addition to the significant soils corrections and site improvement costs will result in debt service coverage and returns that are not sufficient to support development, thereby making this housing development infeasible without public assistance. Therefore, the developer has indicated in communications with the City and submitted financial data that the development as proposed would not move forward without tax increment assistance. (3) The TIF Plan conforms to the general plan for development or redevelopment of the City as a whole. The reasons and facts supporting this finding are that the Planning Commission of the City has found this TIF Plan consistent with the general plan for development of the City as a whole and will generally complement and serve to implement policies adopted in the City's comprehensive plan. (4) The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development or redevelopment of the Project Area by private enterprise. Through the implementation of this TIF Plan, the City will provide an impetus for the construction of an apartment project, of which all or a portion of the units will be affordable for occupants at or less than 50% median income. The project will complement the overall housing needs of the City and helps support other private types of development by providing a range of housing opportunities for residents and workers within the City. Baker Tilly Municipal Advisors, LLC Page 4 City of Elk River, Minnesota Section K Estimated Public Costs The estimated public costs of the TIF District are listed below. Such costs are eligible for reimbursement from tax increments of the TIF District. Estimated Project Costs Land/Building acquisition $0 Site Improvements/Preparation costs $850,000 Utilities $0 Other public improvements $579,256 Construction of Affordable Housing $0 Administrative expenses $158,806 Estimated Tax Increment Project Costs $1,588,062 Estimated Financing Costs Interest Payments $0 Total Estimated Project/Financing Costs to be Paid from Tax Increment $1,588,062 The City anticipates using tax increment revenues to finance eligible costs associated with development of the housing project site including primarily site development, soil remediation, and other extraordinary affordable housing costs, as well as related administrative expenses. The City reserves the right to administratively adjust the amount of any of the items listed above or to incorporate additional eligible items, so long as the total estimated public cost ($1,588,062) is not increased. The City also reserves the right to fund any of the identified costs with any other legally available revenues, such as grants and/or loans, but anticipates that such costs will be primarily financed with tax increments. Section L Estimated Sources of Revenue Tax Increment revenue $1,588,062 Interest on invested funds Land Sale Proceeds Other Total $1, 588, 062 The City anticipates providing financial assistance through the terms of a pay -as -you go note in which the developer will finance costs upfront. As tax increments are collected from the TIF District in future years, a portion of these taxes will be used by the City to reimburse itself for public costs incurred (see Section M). The City reserves the right to finance any or all public costs of the TIF District using pay-as-you- go assistance, internal funding, general obligation or revenue debt, or any other financing mechanism authorized by law. The City also reserves the right to use other sources of revenue legally applicable to the Project Area to pay for such costs including, but not limited to, special assessments, utility revenues, federal or state funds, and investment income. Baker Tilly Municipal Advisors, LLC Page 5 City of Elk River, Minnesota Section M Estimated Amount of Bonded Indebtedness The maximum principal amount of bonds (as defined in the TIF Act) secured in whole or part with tax increment from the TIF District is $1,588,062. The City plans to finance the project through pay-as-you-go financing to finance housing development and other eligible costs associated with providing long-term affordable workforce housing within the TIF District. The City reserves the right to issue bonds in any form, including without limitation any interfund loan with interest not to exceed the maximum permitted under Section 469.178, subd. 7 of the TIF Act. Section N Original Net Tax Capacity The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts certified between July 1 and December 31, inclusive, this value is based on the current assessment year. The Estimated Market Value of all property within the TIF District as of January 2, 2021, for taxes payable in 2022, is $233,700. Upon establishment of the TIF District and subsequent reclassification of property, the estimated original net tax capacity of the TIF District is expected to be $2,921. This assumes the property is classified as residential rental. Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as a result of: (1) changes in the tax-exempt status of property; (2) reductions or enlargements of the geographic area of the TIF District; (3) changes due to stipulation agreements or abatements; or (4) changes in property classification rates. Section O Original Tax Capacity Rate The County Auditor shall also certify the original tax capacity rate of the TIF District. This rate shall be the sum of all local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the original net tax capacity. In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of (a) the sum of the current local tax rates at that time or (b) the original tax capacity rate of the TIF District. The County Auditor shall certify the sum of all local tax rates that apply to property in the TIF District for taxes levied in 2021 and payable in 2022 as the original tax capacity rate of the TIF District. Because those rates are not available at the time of drafting of the plan, the sum of the local tax rates for taxes levied in 2020 and payable in 2021 of 124.436% have been used and shown below. Baker Tilly Municipal Advisors, LLC Page 6 City of Elk River, Minnesota Taxing Jurisdiction City of Elk River Sherburne County ISD #728 Other Total 2020/2021 Local Tax Rate 44.556% 45.835% 31.717% 2.328% 124.436% Section P Projected Retained Captured Net Tax Capacity and Projected Tax Increment Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax capacity of the TIF District. The estimates shown in this TIF plan assume that residential rental class rates remain at 1.25% of the estimated taxable value and assume 1 % annual increases in market values. The County Auditor shall certify to the City the amount of captured net tax capacity each year. The City may choose to retain any or all of this amount. It is the City's intention to retain 100% of the captured net tax capacity of the TIF District. Such amount shall be known as the retained captured net tax capacity of the TIF District. Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the anticipated life of the TIF District. Section Q Use of Tax Increment Each year the County Treasurer shall deduct 0.36% of the annual tax increment generated by the TIF District and pay such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of financial reporting and auditing of tax increment financing information throughout the State. Exhibit III shows the projected deduction for this purpose over the anticipated life of the TIF District. The City has determined that it will use 100% of the remaining tax increment generated by the TIF District for any of the following purposes: (1) Pay for the estimated public costs of the TIF District (see Section M) and County administrative costs associated with the TIF District (see Section V); (2) pay principal and interest on one or more pay-as-you-go notes, tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; (3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to finance the estimated public costs of the TIF District; (4) pay all or a portion of the county road costs as may be required by the County Board under Minnesota Statutes section 469.175, Subd.1a; or Baker Tilly Municipal Advisors, LLC Page 7 City of Elk River, Minnesota (5) return excess tax increments to the County Auditor for redistribution to the City, County and School District. Tax increment from property located in one county must be expended for the direct and primary benefit of a project located within that county, unless the county board involved waives this requirement. Tax increment shall not be used to circumvent levy limitations applicable to the City. Tax increment derived from the TIF District must be used solely to finance the cost of housing projects (including administrative expenses and public improvement costs) as defined in Section 469.174, Subdivision 11 of the TIF Act and subject to the requirements set forth in Section 469.1761 of the TI F Act. Tax increment shall not be used to finance the acquisition, construction, renovation, operation, or maintenance of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the State or federal government. Further, tax increment may not be used to finance: a commons area used as a public park; facilities used for social or recreational purposes (whether public or private); or publicly -owned facilities used for conference purposes; provided that tax increment may be used for a privately owned conference facility, and for parking structures whether public or privately owned and whether or not they are ancillary to one of the otherwise prohibited uses described above. If there exists any type of agreement or arrangement providing for the developer, or other beneficiary of assistance, to repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject to all of the restrictions imposed on the use of tax increments. Assistance includes sale of property at less than the cost of acquisition or fair market value, grants, ground or other leases at less then fair market rent, interest rate subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the developer or beneficiary. Section R Excess Tax Increment Beginning with the sixth year after certification of the TIF District, any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated public costs authorized by the TIF Plan, the City shall use the excess tax increments to: (1) prepay any outstanding tax increment bonds; (2) discharge the pledge of tax increments thereof; (3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds; or (4) return excess tax increments to the County Auditor for redistribution to the City, County and School District. The County Auditor must report to the Commissioner of Education the amount of any excess tax increment redistributed to the School District within 30 days of such redistribution. Section S Tax Increment Pooling and the Five -Year Rule As permitted under Minnesota Statutes section 469.1763, subd. 2(b) and subd. 3(a)(5), any expenditures of increment from the TIF District to pay the cost of a "housing project" as defined in Minnesota Statutes section 469.174, subd. 11 will be treated as an expenditure within the Baker Tilly Municipal Advisors, LLC Page 8 City of Elk River, Minnesota district for the purposes of the "pooling rules" and the "five-year rule". The City anticipates that tax increments will be spent outside the TIF District (including allowable administrative expenses), and such expenditures are expressly authorized in this TIF Plan. The City does not anticipate that allowable pooling expenditures will be made outside of the TIF District, but such expenditures are expressly authorized in this TIF Plan. Section T Limitation on Administrative Expenses Administrative expenses are defined as all costs of the City other than: (1) amounts paid for the purchase of land; (2) amounts paid for materials and services, including architectural and engineering services directly connected with the proposed development within the TIF District; (3) relocation benefits paid to, or services provided for, persons or businesses residing or located within the TIF District; or (4) amounts used to pay interest on, fund a reserve for, or sell at a discount, tax increment bonds. Administrative expenses include amounts paid for services provided by bond and other legal counsel, fiscal consultants, planning or economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax increment may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total tax increment expenditures authorized by the TIF Plan or (b) 10% of the total tax increments received by the TIF District. Section U Limitation on Property Not Subject to Improvements - Four Year Rule If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualified improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial reconstruction or rebuilding of an existing street. The City must submit to the County Auditor, by February 1 of the fifth year, evidence that the required activity has taken place for each parcel in the TIF District. If a parcel is excluded from the TIF District and the City or owner of the parcel subsequently commences any of the above activities, the City shall certify to the County Auditor that such activity has commenced and the parcel shall once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as most recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the TIF District. Section V Estimated Impact on Other Taxing Jurisdictions Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The City believes that there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed development would not have Baker Tilly Municipal Advisors, LLC Page 9 City of Elk River, Minnesota occurred without the establishment of the TIF District and the provision of public assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the development therein becomes part of the general tax base. The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota Statutes section 469.175, subd. 2, are listed below. The total amount of tax increment that will be generated over the life of the TIF district is estimated to be $1, 593, 798. 2. To the extent the project in the TIF District generates any public cost impacts on City - provided services such as police and fire protection, public infrastructure, and the impact of any general obligation tax increment bonds attributable to the TIF District upon the ability to issue other debt for general fund purposes, such costs will be levied upon the taxable net tax capacity of the City, excluding that portion captured by the TIF District. The City anticipates financing the project through the issuance of a tax increment financing note supported by future tax increments. The City also reserves the right to use internal financing or bonding, as necessary, to finance a portion of the project costs attributable to the TIF District. Tax increment project revenues from the TIF District and project will repay any issued obligations. 3. The amount of tax increment over the life of the TIF District that would be attributable to school district levies, assuming the School District's share of the total local tax rate for all taxing jurisdictions remained the same, is estimated to be $406,237. 4. The amount of tax increment over the life of the TIF District that would be attributable to county levies, assuming the County's share of the total local tax rate for all taxing jurisdictions remained the same is estimated to be $587,062. 5. No additional information has been requested by the County or School District that would enable it to determine additional costs that will accrue to it due to the development proposed for the TIF District. Section W Prior Planned Improvements The City shall accompany its request for certification to the County Auditor (or notice of district enlargement), with a listing of all properties within the TIF District for which building permits have been issued during the 18 months immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the TIF District by the net tax capacity of each improvement for which a building permit was issued. There have been no building permits issued in the last 18 months in conjunction with any of the properties within the TIF District. Section X Development Agreements If within a project containing a housing district, more than 10% of the acreage of the property to be acquired by the City is purchased with tax increment bonds proceeds (to which tax increment from the property is pledged), then prior to such acquisition, the City must enter into an agreement for the development of the property. Such agreement must provide recourse for the City should the development not be completed. Baker Tilly Municipal Advisors, LLC Page 10 City of Elk River, Minnesota The City anticipates entering into an agreement for development. Section Y Assessment Agreements The City may, upon entering into a development agreement, also enter into an assessment agreement with any person, which establishes a minimum market value of the land and improvements for each year during the life of the TIF District. The assessment agreement shall be presented to the County or City Assessor who shall review the plans and specifications for the improvements to be constructed, review the market value previously assigned to the land and so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate, shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the office of the County Recorder and/or Registrar of Titles of each county where the property is located. Any modification or premature termination of this agreement must first be approved by the City, County and School District. The City does not anticipate entering into an assessment agreement with the developer Section Z Modifications of the Tax Increment Financing Plan Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the amount of bonded indebtedness to be incurred; increase in the amount of capitalized interest; increase in that portion of the captured net tax capacity to be retained by the City; increase in the total estimated capital and administrative costs; or designation of additional property to be acquired by the City shall be approved only after satisfying all the necessary requirements for approval of the original TIF Plan. This paragraph does not apply if: (1) the only modification is elimination of parcels from the TIF District; and (2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of those parcels in the TIF District's original net tax capacity, or the City agrees that the TIF District's original net tax capacity will be reduced by no more than the current net tax capacity of the parcels eliminated. The City must notify the County Auditor of any modification that reduces or enlarges the geographic area of the TIF District. The geographic area of the TIF District may be reduced but not enlarged after five years following the date of certification. Section AA Administration of the Tax Increment Financing Plan Upon adoption of the TIF Plan, the City shall submit a copy of such plan to the Minnesota Department of Revenue and the Office of the State Auditor. The City shall also request that the County Auditor certify the original net tax capacity and net tax capacity rate of the TIF District. To assist the County Auditor in this process, the City shall submit copies of the TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned improvements. The City shall also send the County or City Assessor any assessment agreement establishing the minimum market value of land and improvements in the TIF District and shall request that the County or City Assessor review and certify this assessment agreement as reasonable. The County shall distribute to the City the amount of tax increment as it becomes available. The amount of tax increment in any year represents the applicable property taxes generated by the Baker Tilly Municipal Advisors, LLC Page 11 City of Elk River, Minnesota retained captured net tax capacity of the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other development, inflation of property values, or changes in property classification rates or formulas. In administering and implementing this TIF Plan, the following actions should occur on an annual basis: (1) prior to July 1, the City shall notify the County Assessor of any new development that has occurred in the TIF District during the past year to ensure that the new value will be recorded in a timely manner. (2) if the County Auditor receives the request for certification of a new TIF District, or for modification of an existing TIF District, before July 1, the request shall be recognized in determining local tax rates for the current and subsequent levy years. Requests received on or after July 1 shall be used to determine local tax rates in subsequent years. (3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF District. The amount certified shall reflect any changes that occur as a result of the following: (a) the value of property that changes from tax-exempt to taxable shall be added to the original net tax capacity of the TIF District. The reverse shall also apply; (b) the original net tax capacity may be modified by any approved enlargement or reduction of the TIF District; (c) if the TIF District is classified as an economic development district, then the original net tax capacity shall be increased by the amount of the annual adjustment factor; and (d) if laws governing the classification of real property cause changes to the percentage of estimated market value to be applied for property tax purposes, then the resulting increase or decrease in net tax capacity shall be applied proportionately to the original net tax capacity and the retained captured net tax capacity of the TIF District. The County Auditor shall notify the City of all changes made to the original net tax capacity of the TIF District. Section AB Filing TIF Plan, Financial Reporting and Disclosure Requirements The City will comply with all reporting requirements for the TIF District under Minnesota Statutes section 469.175, subds. 5 and 6. Baker Tilly Municipal Advisors, LLC Page 12 Exhibit 1 MAP OF PROPOSED TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 28 Within DEVELOPMENT DISTRICT NO. 1 i�JJIJJJiJJJJJiJJiiJiJiiiiiJJiiJJiJJiiiiJJ�JJJiJJiiiJJiJJiJJIJJJJiiiiiiJiJJlliJi P• I� SCHOM ST Mad ' 91 Baker Tilly Municipal Advisors, LLC Page 13 Exhibit 11 Assumptions Report City of Elk River, Minnesota Tax Increment Financing (Housing) District No. 28 Jackson Hills Phase 2 Housing Draft TIF Plan Exhibits: Based on 44 Units Valued at $6.3M Type of Tax Increment Financing District Maximum Duration of TIF District Projected Certification Request Date Decertification Date Base Estimated Market Value" Parcel I D : 75-134-2305 . Values provided by County Original Net Tax Capacity Housing 25 years from 1st increment Assume 1st Increment is 2024 06/30/22 12/31/39 (16Years of Increment) 211, /UU 2,921 Assessment/Collection Year 2022/2023 2023/2024 2024/2025 2025/2026 Base Estimated Market Value $233,700 $233,700 $233,700 $233,700 Estimated Increase in Value - New Construction 0 3,546,300 6,129,300 6,192,930 Total Estimated Market Value 233,700 3,780,000 6,363,000 6,426,630 Total Net Tax Capacity $2,921 $47,250 $79,538 $80,333 Payable 2021 City of Elk River 44.556% Sherburne County 45.835% ISD 728 31.717% Other - 2.328% Local Tax Capacity Rate 124.436% Estimated Frozen Tax Capacity Rate 124.436% Fiscal Disparities Contribution From TIF District NA Administrative Retainage Percent (maximum = 10%) 10.00% Pooling Percent 0.00% Bonds Projected PayGO Note Bonds Dated TBD Loan Dated 08/01/22 Bond Issue @ 0.00% (NIC) TBD Loan Rate 4.00% Eligible Project Costs TBD Loan Amount $850,000 Present Value Date & Rate 08/01/22 4.00% PVAmount $968,279 Notes No adjustments made to future class rates or tax rates Includes 1 % annual market value inflator to allow for future growth Total taxable value based on $143,182/unit for new construction Baker Tilly Municipal Advisors, LLC Page 14 Exhibit 111 Projected Tax Increment Report City of Elk River, Minnesota Tax Increment Financing (Housing) District No. 28 Jackson Hills Phase 2 Housing Draft TIF Plan Exhibits: Based on 44 Units Valued at $6.3M Annual Period Ending 1 Total Market Value (1) 2 Total Net Tax Capacity (2) 3 Less: Original Net Tax Capacity (3) 4 Retained Captured Net Tax Capacity 6 Times: Tax Capacity Rate (4) 7 Annual Gross Tax Increment 8 Less: State Aud. Deduction 0.360% 9 Subtotal Net Tax Increment 10 Less: Admin. Retainage 10.00% 11 Annual Net Revenue 12 P.V. Annual Net Rev. To 08/01/22 4.00% Estimated Total Taxes Property and SD MVR 12/31/22 233,700 2,921 2,921 0 124.436% 0 0 0 0 0 0 0 12/31/23 233,700 2,921 2,921 0 124.436% 0 0 0 0 0 0 4,350 12/31/24 3,780,000 47,250 2,921 44,329 124.436% 55,161 199 54,962 5,496 49,466 44,993 70,362 12/31/25 6,363,000 79,538 2,921 76,616 124.436% 95,338 343 94,995 9,500 85,495 74,773 118,443 12/31/26 6,426,630 80,333 2,921 77,412 124.436% 96,328 347 95,981 9,598 86,383 72,644 119,627 12/31/27 6,490,896 81,136 2,921 78,215 124.436% 97,328 350 96,978 9,698 87,280 70,575 120,823 12/31/28 6,555,805 81,948 2,921 79,026 124.436% 98,337 354 97,983 9,798 88,185 68,564 122,032 12/31/29 6,621,363 82,767 2,921 79,846 124.436% 99,357 358 98,999 9,900 89,099 66,610 123,252 12/31/30 6,687,577 83,595 2,921 80,673 124.436% 100,387 361 100,026 10,003 90,023 64,713 124,485 12/31/31 6,754,453 84,431 2,921 81,509 124.436% 101,427 365 101,062 10,106 90,956 62,869 125,729 12/31/32 6,821,997 85,275 2,921 82,354 124.436% 102,478 369 102,109 10,211 91,898 61,077 126,987 12/31/33 6,890,217 86,128 2,921 83,206 124.436% 103,539 373 103,166 10,317 92,849 59,335 128,257 12/31/34 6,959,119 86,989 2,921 84,068 124.436% 104,611 377 104,234 10,423 93,811 57,644 129,539 12/31/35 7,028,711 87,859 2,921 84,938 124.436% 105,693 380 105,313 10,531 94,782 56,001 130,835 12/31/36 7,098,998 88,737 2,921 85,816 124.436% 106,786 384 106,402 10,640 95,762 54,404 132,143 12/31/37 7,169,988 89,625 2,921 86,704 124.436% 107,890 388 107,502 10,750 96,752 52,852 133,464 12/31/38 7,241,688 90,521 2,921 87,600 124.436% 109,006 392 108,614 10,861 97,753 51,345 134,799 12/31/39 7,314,104 91,426 2,921 88,505 124.436% 110,132 396 109,736 10,974 98,762 49,880 136,147 $1,593,798 $5,736 $1,588,062 $158,8061 $1,429,256 $968,279 $1,981,273 " election to delay receipt of first increment until 2026 (up to 4 years from approval date) (1) Total estimated market value based on information provided by County Assessor ($143,182/unit) very preliminary and subject to further review. Includes 1 % annual market value inflator (2) Total net tax capacity based on residential rental market rate class rate of 1.25% (3) Original net tax capacity based on existing land & building value (4) Total local combined tax rate available for taxes payable 2021 rates Baker Tilly Municipal Advisors, LLC Page 15 Exhibit IV Estimated Impact on Other Taxing Jurisdictions Report City of Elk River, Minnesota Tax Increment Financing (Housing) District No. 28 Jackson Hills Phase 2 Housing Draft TIF Plan Exhibits: Based on 44 Units Valued at $6.3M Without Project or TIF District With Project and TIF District Projected Hypothetical 2020/2021 2020/2021 Retained New Hypothetical Hypothetical Tax Generated Taxable 2020/2021 Taxable Captured Taxable Adjusted Decrease In by Retained Taxing Net Tax Local Net Tax Net Tax Net Tax Local Local Captured Jurisdiction Capacity (1) Tax Rate Capacity (1) + Capacity = Capacity Tax Rate (*) Tax Rate (*) N.T.C. (*) City of Elk River 29,409,713 44.556% 29,409,713 $88,505 29,498,218 44.422% 0.134% 39,316 Sherburne County 114,209,977 45.835% 114,209,977 88,505 114,298,482 45.800% 0.035% 40,535 ISD 728 44,486,959 31.717% 44,486,959 88,505 44,575,464 31.654% 0.063% 28,015 Other (2) --- 2.328% --- 88,505 --- 2.328% --- --- Totals 124.436% 124.204% 0.232% * Statement 1: If the projected Retained Captured Net Tax Capacity of the TIF District was hypothetically available to each of the taxing jurisdictions above, the result would be a lower local tax rate (see Hypothetical Adjusted Tax Rate above) which would produce the same amount of taxes for each taxing jurisdiction. In such a case, the total local tax rate would decrease by 0.232% (see Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that the Retained Captured Net Tax Capacity of the TIF District would generate is also shown above. Statement 2: Since the projected Retained Captured Net Tax Capacity of the TIF District is not available to the taxing jurisdictions, then there is no impact on taxes levied or local tax rates. (1) Taxable net tax capacity = total net tax capacity - captured TIF - fiscal disparity contribution, if applicable. (2) The impact on these taxing jurisdictions has not been calculated. They represent 1.87% of the total tax rate. Baker Tilly Municipal Advisors, LLC Page 16 Board of Commissloliers Barbara Biii-andt. District I Raccanne I)anielowski. District 2 "I'Mi Dolan. District 3 1'ehx Schinlesing, Dism'ct 4 1.1sa A., Fol. be, District � December 21. 2021 Ms. Mikaela Huot Baker Tilly Mmucipal Advisers 380 Jackson Street Suite 300 St. Paul. NIN' 55101-2887 Re: City of Elk River TIF District #28 Dear Ms,. Hulot. Thatik, you for the opportunity to provide comments concerning the establishment of tax increment financing (TIF) district #28, Sherburne Comity adopted air economic development strategic plan in 20M That plan identifies the I couritv*s intent to support the economic development efforts of our cities and other partners that help enhance the quality of life for all residents, create and sustain living wage jobs, expand the county's property tax base. and allow the county to be a partner with other public agencies and private sector stakeholders. Pursuant to Minnesota Statute 479,175. subdivision 2. and consistent with the county's econolilic development strategic plan, Sherburne County submits the following continents: I. The County Board supports the city's, effort to encourage and facilitate the development of the 44-unit multi -family housing project. The development, \vllen complete, is prqjected to add more than S6,200.000 in taxable value. Sherburne County supports housing strategies that provide life cycle housing opportunities available to liouseliolds of all incomes, As with all projects. we encourage local cities to continue, to work mith County staff in the planning stages of any potential development to explore the best project financing options. The TIF district proposal has been revieNved by our County Attorney staff and the proposed project is consistent with the County's stated ol:1jective in tile TIF Review Policy, 3. The TIF district proposal has been revieNved by our Taxation Division staff and there were no administrative issues identified. 4. The TIF district proposal has been revleivecl by our Public Works Depailinent and no issues were identified. Nk,e apprecicite the Opportunity to provide comments on the proposed district. We request that these comments be incorporated into the recorcl at the public hearing on Ranuary 3, 2022, Sincerely, Dan \Veber Assistant County Administfator Cc: her County Board cof Coniumssiollel's Cat Portner, City Admullsingtor TIF Application - Jackson Hills II TIF 28 — Support a housing development on a property at 6" Street and Jackson Ave. Soils require significant remediation in order to support development. Location at 6t"and Jackson Street `) LINCOLN ELK RIVER ELEMENTARY HIGH SCHOOL $ SCHOOL SCHOOL ST V)o z o px w = Jci a 8th ST Cn D 7th S Q 7th ST 8th S 5th ST 5 > 5 1 2 Site and Project PROPSED 3 STORY APARTMENT BUILDING AREA = 26 116 13 OM9VM�TCM IOCi�. 5, 22 ri Site and Project Site and Project City of Elk River City Council Public Hearing Proposed Tax Increment Financing (Housing) District No. 28 Jackson Hills Phase II January 3, 2022 C'r* bakertitty MUNICIPAL ADVISORS r bakerti ll y now, for tomorrow New Proposed Housing TIF District: Jackson Hill Phase 11 Project Introduction 44-unit rental apartment housing project Creation of proposed 'Housing' TIF District • Assist with financing of extraordinary costs • Soils correction and site development • Maximum 26-year term • City policy limits term to 75 years of collection • Pay-as-you-go financing • Project financed entirely upfront by developer • Eligible costs are reimbursed over term of district bakerti ll y now, for tomorrow New Proposed Housing TIF District: Jackson Hill Phase 11 Project Project Summary Housing TIF District Requirements • at least 20% of the rental units will be occupied by persons or families with incomes no greater than 50% of county median income • No more than 20 percent of the square footage of buildings that receive assistance from tax increments may consist of commercial, retail, or other nonresidential uses • income limitations for the rental units in the housing project will apply for the duration of the TIF District bakerti ll y now, for tomorrow New Proposed Housing TIF District: Jackson Hill Phase 11 Project Financial Review Prior to establishing a TIF district, the following findings are to be made by the City that include- 1) determination that the project qualifies as a TIF district, 2) determination that the project as proposed would not proceed without public assistance (meeting the "but -for" test), and 3) increased market value of the property to be developed is greater with TIF than if no public assistance is provided. 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 bakerti Ll y novj, for ton-nr-nay. New Proposed Housing TIF District: Jackson Hill Phase 11 Project Financial Review • Request for financial assistance • Assist with extraordinary soils correction costs • Estimated to be in the range of $850,000 - $1,062,800 • Increase from original with additional due diligence • Annual tax increment revenues provides additional cash flow to support debt repayment • Letter provided by lender • Up to maximum term of 15 years to meet request New Proposed Housing TIF District: Jackson Hill Phase 11 Project Financial Review First Mortgage (70%) Equity (30%) $6,000,000 Acquisition $2,588,174 Construction Site Development Arch. & Eng. Fees Legal Fees Contingencies bakerti Ll y novj, for ton-nr-ow, $400,000 $6,828,174 $850,000 $75,000 $10,000 $250,000 Total $8,588,174 Total $8,588,174 New Proposed Housing TIF District: Jackson Hill Phase 11 Project Tax Increment Revenue Estimates Existing Base Value Estimated Total Taxable Value Estimated Annual Available Increment Total Gross Tax Increment (over 15 years) Less City Retained (10%) Net Amount Available for Development (90%) Estimated Present Value at 4% $233,700 $6,300,000 $94,995 $1,588,062 $7 58,806 $1,429,256 $968,000 bakerti ll y now, for tomorrow bakerti ll y now, for tomorrow New Proposed Housing TIF District: Jackson Hill Phase 11 Project Financial Needs Analysis Purpose of financial review is 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 is necessary, to determine the appropriate amount and terms of public assistance. Determination of extraordinary costs not supported by project New Proposed Housing TIF District: Jackson Hill Phase 11 Project Financial Needs Analysis Cash on Cash Return (stabilized) Debt coverage (net operating income / annual debt service payment) bakerti Ll y novj, for ton-nr-ow, Developer r•• -• -0.91 % 2.32% 1.51 % 94x 1.07x 1.04x bakerti ll y now, for tomorrow New Proposed Housing TIF District: Jackson Hill Phase 11 Project Conclusion Without financial assistance, the project does not appear to be feasible • rate of returns and debt coverage ratios are below industry standards With financial assistance, the project performance is projected to improve • returns and coverage ratios increase — to moderate level 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. Assistance through TIF provides additional annual cash flow to the project bakerti ll y now, for tomorrow New Proposed Housing TIF District: Jackson Hill Phase 11 Project Conclusion Parameters for an appropriate level of public assistance that were considered when identifying the extraordinary costs: • 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 11 ('rV bakerti ll y now, for tomorrow New Proposed Housing TIF District: Jackson Hill Phase II Project Action Item: Consideration of Approval of TIF Plan and TIF District • Provides City with authority to use tax increments • Proposed purpose • Proposed boundaries (1 parcel) • Proposed budget • Estimated public costs and sources of revenue bakerti ll y now, for tomorrow Questions Mikaela Huot, Director Baker Tilly 380 Jackson Street, Suite 300 St Paul, MN 55101 Phone: 651-223-3036 (office) 651-368-2533 (cell) Email: Mikaela.Huot@bakertilly.com