5.2.B. SR 09-14-2009ITEM 5.2.B.
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MEMORANDUM
TO: Mayor & City Council
FROM: Catherine Mehelich, Director of Economic Development
DATE: September 14, 2009
SUBJECT: Concept Review -Shepherd's Ridge
In addition to the planning and zoning approvals, staff has received a preliminary request for
Tax Abatement from the developer, RS Eden for the proposed Shepherd's Ridge
development. The developer has identified a financing gap in the amount of $416,000 in
order to purchase the land and requests the City and/or County's consideration of tax
abatement to assist the project.
Following is staff s preliminary analysis of the Tax Abatement request:
1) Amount and Term of Tax Abatement
The developer has estimated the end market value of the project at $4,306,200. Based on
the 2009 tax rates, the project would result in total tax revenues of $75,085. The City's
annual portion would be approximately $23,300 and the County's annual portion
approximately $22,600. The City and County would need to provide up to 10-years of tax
abatement in order to achieve the amount of assistance requested to support the project. If
only the City participates then a minimum of 18-years of abatement would be required.
The financing gap is a result of the requirement to purchase a larger parcel (4.74-acres) than
is necessary to the development (3-acres), as well as the difference between its current
office/commercial value and what the project can afford to pay at amulti-family housing
value. The City's Abatement Policy states that tax abatement will not be used in
circumstances where land and/or property price is in excess of fair market value. If fair
market value were to be applied for the amount of property necessary to the development
the financing gap is roughly $330,000-$360,000 for a minimum abatement term of 8-years
City & County or 15 years City-only.
2) Use of Tax Abatement fox Housing
The City of Elk River Tax Abatement Policy allows for affordable housing-related
applications to be considered on a case-by-case basis and under separate criteria. At a
Concept Review -Shepherds Ridge
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minimum the project must be able to meet one of the public purposes identified in the tax
abatement statute:
• Increase or preserve tax base
• Provide employment opportunities in the city/county
• Provide or help acquire or construct public facilities
• Help redevelop or renew blighted areas
• Help provide access to services fox residents of city/county
• Finance or provide public infrastructure
In addition, Sherburne County has indicated to staff that housing is not considered an
eligible use fox its tax abatement program.
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