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Economic Development Manager Sullivan presented the staff report. <br />Member Kuzma asked if the funds recouped through TIF for the purchase of the land would be <br />restricted. <br />Economic Development Manager Sullivan explained that the funds recouped for the purchase <br />price would go back into the Cityhase the land within The COR. <br />Jason Aarsvold, Ehlers, stated that Ehlers reviewed the proposal including development costs, <br />operating costs and returns on investment, noting that all the numbers fall within the expected <br />range. He stated that the land write down would still provide a return on investment below what <br />would be expected for a hotel in this market. He stated that a recommendation in his <br />memorandum would include a lookback period to ensure that project costs were as presented and <br />that the actual rate of return still fell within industry standards. He stated that the hotel would <br />generate about $45,000 annually into the TIF District. <br /> <br />Chairperson Steffen asked for additional input on the lookback period. <br /> <br />Mr. Aarsvold provided additional details relating to a possible lookback provision for project <br />costs and stabilized performance. He stated that once the project is completed and up and <br />running, you could look back to ensure that the project cost as much as projected to develop. He <br />stated that another way would be to review the returns on investment once stabilized. He stated <br />that the lookback provision could then include adjustments. He stated that the projected returns <br />are well below the market. <br />Member Burandt asked how common it is to use TIF to assist in hotel financing. <br />Mr. Aarsvold stated that Ehlers has participated in several TIF deals with hotels, especially <br />further outside of main cities such as Minneapolis. <br />Economic Development Manager Sullivan stated that staff is looking to find the comfort level of <br />the EDA related to the proposed deal. He explained that the TIF agreement will come back to <br />the EDA for final approval, which will then include the negotiated agreement that could include <br />a lookback provision. <br /> <br />Chairperson Steffen asked if 60 percent occupancy is a general goal for hotels when starting out. <br />Mr. Aarsvold stated that they would generally like to see that above 68 percent but believed that <br />to be in line with the market. <br />Economic Development Manager Sullivan explained that the land cost write down through TIF <br />is only a small part of the owner equity, as the developer is bringing an additional $2.6M cash to <br />the deal. <br /> <br />Economic Development Authority/ January 9, 2020 <br />Page 2 of 7 <br /> <br />