Agenda - Council - 04/28/2020 - Laserfiche WebLink

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Observations: The request for a Business Subsidy in the form of a land write -down (reduced sales price) triggers the need for business subsidy analysis. The Anoka County Assessor reviewed the proposed project and has it valued at $4.275M. There are many positive components to construction of a 60 Unit, 4-Story Hotel with Restaurant that address EDA, City Council and community goals. They include, but are not necessarily limited to the following. • Estimated Tax Assessed Value $4.275M (Minimum Assessment Agreement in TIF Development Agreement) • Estimated Annual Property Taxes $137,000 • Estimated Annual TIF for District 14 (COR) $72,800 (1.1M m TIF from 2023-2040) • Filling demand for more lodging in the City of Ramsey • High -Quality Full -Service Restaurant • Pool for Hotel Guests • 12FT, 13PT (25 total new jobs) • Sale of a City parcel in the The COR with the City receiving $311,020 (Est. 5-6 year payback based on TIF Run) • Parcel begins to generate taxes (currently tax exempt) • Increased traffic/commerce to the COR/City Project Analysis - Public Hearing - Need for Subsidy - TIF Development Agreement The City is proposing a land cost write -down business subsidy of $311,020. A public hearing is required as part of this business subsidy process. In order to ensure that the assistance is truly needed for the project to move forward, the Business Assistance Application has been reviewed/underwritten by Ehlers, the City's Financial Advisor. The underwriting will addresses 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. In April2020, Ehlers has reviewed the sworn construction statement and has provided an updated analysis memo that still supports the initial findings and also has a quicker reimbursement period (5-6 years of TIF) of the land cost for the City. The TIF Agreement includes a Minimum Assessment Agreement (4.275M) which solidifies the timing of the city reimbursement. Both memos are attached. 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. Interfund Loan The City is required to adopt an inter fund loan resolution allow the city to reimburse eligible costs with TIF revenue. The eligible costs include $311,020 (land cost write -down) and $25,000 (Administrative and legal costs) and they are included i the attached resolution for Council consideration. Land Sale - Right of Re -Entry Agreement: The request to close on the land prior to site plan approval requires the City to put in place agreements that guarantee that the City interest in the land and quality of the project are protected. The City typically uses a Right of Re -Entry Agreement and Purchase Agreement to assure that the Developer obtains required City approvals, constructs the project to city standards and completes the project on time. This also reserves the City's right to take back the land if the developer does not perform. City Attorney Langel and Staff have worked together to draft a more restrictive Right of Re -Entry Agreement that protects the City's interest in the event that the Developer does not deliver on the project. The Developer and Lender have reviewed to th attached Right of Re -Entry Agreement and are comfortable executing and filing it at the simultaneous closing of the land and financing and it is authorization is included in teh attached resolution for City Council consideration. In addition, there will be future documents from Community Development that outline processes moving forward relating to the platting and associated development fees, and sureties. Key terms of the Right of Re -Entry Agreement include the following: • Seller shall have the right, but not the obligation, to either impose a penalty against the Property pursuant to Paragraph 3 of the Purchase Agreement, or to re-enter and take possession of the Property pursuant to Paragraph 4 of the Purchase Agreement, in the event that any of the following Conditions are not satisfied by