Agenda - Council - 12/21/1999 - Special

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Pertains to Case #3 MEMORANDUM DATE: December 21, 1999 TO: The Honorable Mayor and City Council FROM: James E. Norman, City Administrator RE: TIF Assistance for Ramsey B&B LLC The City Council first became aware of the proposed development project along Highway #10 at the former "Lighthouse Bar" site during an informal Council discussion at the close of their regular scheduled meeting of July 23, 1999. The proposed project is a 42,000 square foot multi- tenant retail/warehouse commercial facility, of which the major tenant will be B&B Carpet of downtown Anoka. The developer requested business subsidy assistance in the form of Tax Increment Financing (TIF) due to the high costs for redevelopment of the site. The site currently contains the building that formerly was the Lighthouse Bar, and a vacated residential building also exists. Demolition of the two buildings will be costly due to the fact that the former Lighthouse Bar contains asbestos. The staff has determined that "be it not for the business subsidy agreement, this project would not be financially feasible." Providing business subsidy assistance to the project would allow the City to accomplish several things on the site. The City would require a quality building with a landscape plan to set the tone roi' other new sites along the corridor. The City would require the developer to set aside 40 feet of right-of-way in front of the building for a frontage road. And, the City would require the installation of City sewer and water to the site. The developer has indicated willingness to work with the City on all these matters. Development Agreement. Staff has been negotiating with the developer and builder of the project in order to determine the amount of business subsidy agreement provided to the Ramsey B&B LLC project. The County Assessor's Office has placed the estimated market value on the property at $!,910,900 and estimates that the annual real estate tax payments for the property will amount to $78,313 (see attached letter from County Assessor's Office). The developer and staff believe that the estimate was based on some false assumptions, and the County Appraiser has revised the estimate to $2,620,000. Economic Development Consultant Mike Mulrooney has put together a tax increment financing project schedule and determined that the project will have an estimated annual cash flow of $47,378. The developer has requested assistance in the amount of $420,000 in a pay-as-you-go £ashion, where the City pays the developer as the TIF revenues are paid. Staff has negotiated the project with the developer and has reached a tentative agreement with the developer to provide assistance in the amount of $372,043 in accumulative net present value for the project and that the City will implement some type of assessment project for the installation of sewer and water to the Ramsey B&B LLC facility. Page 1 of 2