Agenda - Economic Development Authority - 09/17/2015

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PSD LLC Project: Request for City Assistance STAFF NOTES (1) Can PSD I IChn frig i actually e t ; PSD LLC completed a "subsidy application" via the City's financial advisor Ehlers. This process was a $7,000 cost for PSD LLC. The purpose of this application, and subsequently underwriting process is to get a third party professional's opinion (EhIerr,sebsit. ^). Attached to this case is a MEMO from Ehlers (executive summary of their review). In summary, Ehlers feels the requested $500,000 is reasonable and justifiable. (2) is this red. yest real ,nal le in n , ,thher r, t 'nthe 'TC Ehlers provided the City of Ramsey with an analysis of 16 other large scale, quality, apartment complexes recently completed in the Twin Cities area. In summary, City assistance ranged from 3%-12% or $7,000-$20,000 per unit. The requested PSD LLC assistance is $500,000. At $500,000, this breaks down to about $4,100 per unit; or about 2.5% of project costs (assuming the estimated $20M project cost provided by PSD LLC is accurate). (3) FinancianyLidJ,e tivestake sense "r the City.J "° ,° ur In comparison to other projects, Staff believes the proposed project (and request for assistance) results in a favorable pay -back period for the City. It is estimated $500,000 could be paid back within four years in present value terms (4.0% discount rate); or about three and a half years in future value terms with tax increment financing (TIF). It is estimated, the proposed project would generate about $224,000 in total property taxes annually; and about $156,000 in NET TIF annually. The proposed project would result in about $3.5M in NET TIF over the course of TIF District #14. This project will pay about $1.3M in city development fees (including over $300,000 to parks and trails). 4 D ,es the CIA, have real ,nal le fundinfis ,w:r the rer. yestec assn t nce?° Several funding sources exist. The two that Staff believes are most reasonable include: tax increment financing (TIF) and the Anoka County Housing & Redevelopment Authority (ACHRA) account. TIF could be drawn from the City's TIF District #14 (The COR TIF district). The ACHRA account has a balance of about $1M. (5) f d t,tJhe s This question has two answers: :gin nc P QUALITATIVE POLICY Attached to this case is a Staff MEMO, which outlines our review of the PSD LLC application. In summary, Staff believes the proposed project complies with the City's housing assistance policy. Although the proposed project does not score highly, it's score is competitive and reasonable considering the level of assistance requested. FINANCIAL POLICY From a financial perspective, the Council recently directed Staff to utilize a MEMO produced from Ehler's to evaluate housing assistance requests. In summary, the Ehler's MEMO suggested the City consider about a $10,000 per unit, or about 10% of total development costs, as maximum thresholds. From this perspective, the proposed request appears to comply. REVIE Df;l;'(.IMEfI I, ! "IERNGES MR0')/11/ 015 Page 1 of 4