Agenda - Council - 06/13/2023 - Laserfiche WebLink

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of assistance provided is appropriate. A summary of this analysis is below and attached in a Memo put together by Jason Aarsvold from Ehlers: The proj ect's average cash on cash return (annual cash flow / equity) without any assistance is 5.2% in year three and increases to 7.7% by year 10. Hotel developer / owners would like to see a cash -on -cash return of 8% to 10%. 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 $129,43 5 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 for $434,511 with the remaining 60% directed to the PAYGO note payments for the $550,000 in Site Improvement reimbursement. 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 %. Interfund Loan The City is required to adopt an inter fund loan resolution allows the city to reimburse eligible costs with TIF revenue. The eligible costs include $434,511 (land cost write -down) and $25,000 (Administrative and legal costs) and they are included in the attached resolution for Council consideration. Alternatives Include: 1) Adopt Resolution #23-126 Approving Business Subsidy and Authorizing Execution of a Tax Increment Financing (TIF) Agreement and Approving Terms of an Interfund Loan (as presented); subject to TIF Attorney Review 2) Adopt Resolution #23-126 Approving Business Subsidy and Authorizing Execution of a Tax Increment Financing (TIF) Agreement and Approving Terms of an Interfund Loan (with changes); subject to TIF Attorney Review 3) Something Else 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: The EDA has formally recommended approval of the proposed Business Subsidy included in the proposed TIF Development Agreement at the January 12, 2023 EDA meeting. The EDA Minutes are attached to the case. Action: Motion to adopt Resolution #23-126 Approving Business Subsidy and Authorizing Execution of a Tax Increment Financing (TIF) Agreement and Approving Terms of an Interfund Loan (as presented); subject to TIF Attorney Review Attachments