Agenda - Economic Development Authority - 12/08/2022

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Economic Development Authority(EDA) 4. 1. Meeting Date: 12/08/2022 By: Sean Sullivan, Community Development III Title, Consider Business Assistance Application for Ramsey Properties, LLC. Purpose/Background: The EDA may choose to go into closed session pursuant to Minnesota Statutes section 13D.05, subdivision 3(c)(3)to consider offers or counteroffers for the purchase or sale of real or personal property. If the EDA chooses to enter into to closed session the statute and reason above needs to be referenced along with legal description (Outlot A, Gigi Addition)and the Anoka County Tax ID number 28-32-25-23-0020. The purpose of this case is to consider a Business Assistance request that involves the sale of Outlot A, Gigi Addition to The Schiebout Family Limited Partnership, LLLP (the "Developer"). The EDA and City Council have previously approved a Purchase Agreement to build an 82 unit Hilton Home 2 hotel and a proposed deal structure involving a TIF land cost write-down of$311,454. Staff has been working with the Developer and Ehlers to complete the Business Assistance application and review. Project costs are coming in higher than the Developer has originally anticipated. The Developer has also adjusted the hotel floor plan/design to add an entrance to Sunwood Drive NW as requested by City planning staff to encourage activity and a connection along Sunwood Drive which have also added to the cost. These additional costs have triggered the request by the Developer for$306,000 in additional TIF assistance which is shown in the attached Business Assistance Application. The Developer has also created a new business entity called Ramsey Properties, LLC and has filled it with the Minnesota Secretary of State, so this will be the entity name moving forward. As with any Business Assistance project,both Staff and Ehler's have completed analysis determined if the amount of assistance provided is appropriate. A summary of this analysis is below and attached in a Memo put together by Jason Aarsvold from Ehlers. In summary,the lower than average projected return on investment means the project does demonstrate a need for assistance. Providing the requested land write-down and PAYGO note will help facilitate development of the hotel without unduly enriching the developer. We estimate the project will generate approximately $105,000 annually(at full build-out) in tax increment within the COR TIF district. Some of that increment can be directed to repay the City's land write-down through an inter-fund loan, and some can be used to repay the PAYGO TIF note.We propose using 40%of the increment generated to repay the City's inter-fund loan with the remaining 60%directed to the PAYGO note payments. Based on this structure,we estimate the PAYGO note could be repaid with 6.5 years of payments, assuming an interest rate on the note of 5%. This,coupled with the land write-down,would push the project's average cash on cash return to 8.8%by year 8 (at which point the TIF payments would stop). Repayment of the City's land though an interfund loan would take an estimated 10.5 years assuming the City charges the maximum interfund land interest rate of 5%. Staff is looking for EDA to provide a recommendation to the City Council in support of the proposed business assistance amount and structure. Notification: Notification is not required.