Agenda - Economic Development Authority - 01/09/2020

Home

• Pool (quasi -community space) • 12FT, 13PT (25 total new jobs) • Sale of a City parcel in the The COR with the City receiving $326,700 in TIF (Est. 9-10 year payback) • Value of land is within the City deal range • Parcel begins to generate taxes (currently tax exempt) • Increased traffic/commerce to The COR In order to ensure that the assistance is truly needed for the project to move forward, the Application has been reviewed/underwritten by Ehlers, the City's Financial Advisor. The underwriting will address whether the rate of return by the Developer is within industry standards, is truly needed for the project to success (satisfy the TIF, "But For" Test) and includes a reasonable return on investment for the City. Ehlers has completed the underwriting including the land write down resulting in a cash return of 4.8% and a cash on cost return of 7% by year 3, which are below industry standards. It is clear that provision of the land cost write down is not unduly enriching the developer, but it is providing enough incentive to draw investment into the City of Ramsey. "But -for" the provision of the incentive, the project would not occur in the City of Ramsey. Deal Structure: The proposed deal structure is similar to projects in Sunfish Lake Business Park and other previous TIF Developments in the City, although it has been a number of years since the City has utilized this structure. Up -front TIF Financing in the form of reduce land sale price is being asked for by the Developer to inject more equity into the project on the front end in order to increase ratios for primary, traditional financing. Rather than the Developer taking a TIF Note as equity in the project to be reimbursed over time and paying for the land up front as is the case with more recent projects in the COR, the Developer is asking the City to receive payment for the land over time. The City will ultimately be made whole on the land transaction and a TIF Agreement and Minimum Assessment Agreement would be drafted to ensure this. Staff estimated 9-10 years of TIF will be sufficient time for the payback. In other words, the City's return on investment would be delayed over time but still achieved. The City's reimbursement would come with property tax collection on the parcel, so there is little risk involved if the City finds the delayed return approach acceptable. The following components of the deal structure are unique to standard Purchase Agreements with the City. • Land Sale Price/Payment • Earnest Money (due to the amount of the Offer Price, the proposal does not include a significant amount of Earnest Money) Based on the Memo by Ehlers, Staff will work with the Developer regarding the potential for look back provisions. Staff will bring the final version of the TIF Agreement back to the EDA at a future meeting for review and formal recommendation to the City Council. Funding Source: This case is being handled as part of normal Staff duties. If financial assistance is provided, TIF District 14 will also be a funding source. Recommendation: Assuming that the EDA is comfortable with the structure of the payment for the land, Staff recommends approval of the Purchase Agreement and Preliminary TIF Agreement Structure for part of Outlot A, COR Stone Brook Academy, subject to City Attorney approval as to legal form. Action: Motion to recommend approval of the Purchase Agreement and Preliminary TIF Agreement Structure for part of Outlot A, COR Stone Brook Academy, subject to City Attorney approval as to legal form. Attachments