Agenda - Council - 11/23/2010 - Laserfiche WebLink

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Kurt Ulrich COR Apartments - Development Proposal and Terns of Development Agreement and Other Obligations November 23, 2010 Page 4 h. Administration Expense Allocation. Currently all TIF calculations show the first 15% of the tax increment being available to the City/HRA to pay for administration or other qualified expenditures within the TIF District (approximately $32,600 annually). TIF Note. The Developer will finance the eligible reimbursement costs up front and will receive tax increment on a Pay -As- You -Go (PAYGO) basis. This means that as they pay their taxes, they will receive a portion of their tax dollars back (approximately $.73 on the dollar). The TIF note is being paid at a 6.25% PAYGO rate, which is based upon their anticipated financing rate. The TIF Note will be issued to the Developer after certification of eligible reimbursement costs to the City/HRA. J. 2. City Loan Business Subsidy Requirements. Housing development is exempt from Business Subsidy requirements. However, since the project does consist of some retail /commercial space and the amount of assistance being provided to that portion exceeds $150,000, the HRA is required to follow the City's Business Subsidy criteria and is required to hold a public hearing on the terms and conditions of the subsidy (hearing is set for December 14, 2010). The City's business subsidy policy requires any development receiving a subsidy create at least one (1) full time equivalent job (including construction jobs) paying at least 70% of the most recent median wage figure for the Twin City 7 County Metro County as published by the Minnesota Department of Employment and Economic Development or such greater amount as the City may require for a specific project. The City/HRA can deviate from its policy of job creation (number and wage). Since creation or retention of jobs is not the primary goal for this particular development but rather for the provision of market rate housing adjacent to the rail station, it is recommended that the wage and job goals be set at zero, after the public hearing. a. Loan Amount. The City is providing the Developer a loan for $1.3 million to assist in the financing of the development to assure it moves forward in a timely fashion. The funds will be advanced from the City's TIF District #1. The Developer is not obligated to pay interest on this loan, but rather will pay the City a fee of $120,000 (total repayment of $1,420,000). b. Loan Repayment. The loan will be repaid to the City from 20% of the annual cash flow generated from the project and/or 20% of the proceeds received from a sale or refinancing of the development. Beginning on April 1, 2014, the Developer is required to have its accountants prepare operating financial statements to detennine the amount of cash flow for the project. To the extent there is available cash flow, 20% will be paid to the City and applied to payment on the City Loan (the remaining 80% will be paid to the equity investors). Based upon current projections, it is estimated that the loan would be repaid within ten (10) years. If the loan is not paid prior to 2024 (10 years), simple interest at a rate of 6.25% will accrue on the unpaid balance from April 1 2024, until the loan is paid in full. If at any time the Developer defaults in timely payment of the loan and the City provides the Developer notice and the Developer does not cure the default within ten (10) days, the unpaid balance will accrue at a twelve (12) percent rate until such time the default is cured.