Agenda - Economic Development Authority - 05/11/2023

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Economic Development Authority (EDA) Meeting Date: 05/11/2023 Submitted For: Sean Sullivan, Community Development By: Sean Sullivan, Community Development 4. 1. Title: Consider Recommendation for approval of TIF Agreement and Use Restriction with Ramsey Properties, LLC (A portion of this meeting may be closed to public) 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 closed session the statute and reason above needs to be referenced along with legal description (Part of Outlot A, COR TWO to be platted as Lot 1, Block 1, Ramsey Properties Addition) and the Anoka County Tax ID number 28-32-25-22-0058. The purpose of this case is to review the TIF agreement based on the Business Assistance request that involves the sale of a portion of Outlot A, COR TWO (to be platted as Lot 1, Block 1, Ramsey Properties Addition) to Ramsey Properties, LLC (the "Developer"). The EDA and City Council have previously approved a Purchase Agreement and a First Amendment to Purchase Agreement to build a 98 unit Hilton Home 2 hotel including a proposed deal structure involving a TIF land cost write -down of $434,511 and $550,000 in Pay -GO TIF Assistance for Site Improvement (referenced in Resolution #23-034). Staff and Ehler's have completed analysis determined if the amount of assistance provided is appropriate. A summary of this previous 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 $129,435 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 10 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 9.9% by year 11 (at which point the TIF payments would stop). Repayment of the City's land though an interfund loan would take an estimated 12.5 years assuming the City charges the maximum interfund land interest rate of 5%. The next step in the process is to review the TIF Agreement to ensure it encapsulates the terms previously discussed by the EDA and City Council. Once the document is acceptable by both parties, a Public Hearing will be held at the City Council Meeting to consider approval of the TIF Agreement and awarding of the business subsidy. Taft Law has worked with City Staff and Ehlers to put together a draft TIF Agreement for review. In addition to the TIF Agreement the Developer has asked the City to consider a Deed Use Restriction/Agreement on the remnant Outlot A, Ramsey Properties Addition to help with the establishment and successful operation of the new Hotel. The heart of the restriction request is as follows and is included in the attached draft agreement: