Agenda - Council - 01/24/2023 - Laserfiche WebLink

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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 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%. There are two items that City Staff is asking the City Council to consider this evening: 1) Approval of the First Amendment to Purchase Agreement which includes a Land cost write down of $434,511 (was previously $311,454 for the smaller site) and contingencies based on approval of a business subsidy to the developer; and; 2) Council feedback showing general support of project and deal structure including the Land Cost Write -down of $434,511 AND Pay -Go TIF Assistance for Site Improvements and Site Development costs of $550,000. It should be noted that the City Council has already approved the initial purchase agreement for the smaller site on August 23, 2022 which included a land cost write down deal structure as evidenced in Resolution #22-185. The revised request outlined this evening is adding $550,000 in Pay -Go Site improvements and Site Development would ba a change in the deal structure and amount of Business Assistance. Notification: Notification is not required. Observations/Alternatives: General Project Description • 98 unit (up from 82), Four Story Hilton Home 2 Hotel with hot breakfast and indoor pool; a Certificate of Occupancy 16 months after Closing. If this is not done, the City may exercise the Right of Re -Entry. • Tax Assessed Value 7.14M (up from 5.9M) • Estimated Taxes - $218,000 annually (up from $180,000) • 22 (up from 21) new jobs to be created paying at least $18.22 / hr • Catalyst project (provides more trips to COR and encourages investment in restaurants/retail) General Terms of First Amendment to Purchase Agreement (and Business Assistance Package) • Parcel: Changed to Part of Outlot A, COR TWO (previously Outlot A, Gigi Addition - +/- 1.43 acres) • Purchase Price and Valuation: The purchase price for the Property is $1.00 on +/- 2.85 acres (124,146 square feet) as outlined in Exhibit A (the "Purchase Price"). The property valuation is $434,511 (increase of $123,057). ($3.50/SF) • $550,000 (increase of $244,000) in Pay -Go TIF Note for Site Development / Improvements (NEW REQUEST) • Inspection Period: Inspection Period ends May 26, 2023 (Extended two months) • Right of Re -Entry Required