2A, Presbyterian Homes Tax Increment Financing Discussion

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Memo To: Pat Klaers—City Administrator From: Stacie Kvilvang Date: December 6,2010 - Subject: Term Sheet--Presbyterian Homes Redevelopment On October 18, 2010, the Council met with Presbyterian Homes to discuss the project and to provide guidance on key terms for inclusion in the Development Agreement. Guidance was given on the following key items: 1. Shorter term for the district(not full sixteen years) 2. Conveyance of the"triangle"parcel to the City with buildings demolished 7 3. Developer payment and completion of improvements to County Road D and the sanitary sewer lines along the Lake Based upon guidance from the Council we have incorporated the above three (3) items into the attached term sheet for review and consideration (along with the other major terms for the development agreement). Please note that for item#1, the term for payment on the obligation will be twelve (12) years. As noted, Presbyterian Homes will receive a TIF note in the principle amount of$1,115,000. This will be paid on a pay-as-you-go basis after they have proved up qualified expenditures for this amount(note will bear an interest rate of 6.25%). As noted on the term sheet, the City is only utilizing ten (10) percent of the increment generated for administrative and pooling purposes, with the remaining ninety (90) percent going to reimburse Presbyterian Homes for qualified costs. This equates to approximately $207,000 over the term of the obligation and $17,000 annually being available to the City for administrative or pooling uses. When a TIF district is established the City has the ability to utilize up to ten (10) percent of the increment generated for administrative costs. In addition TIF districts can utilize up to an additional ten (10) to fifteen (15) percent for pooling outside of the TIF district for qualified costs that meet the requirements of the TIF district from which you are pooling funds from. What this means is that a City can utilize up to twenty-five (25) percent of the TIF generated from a district for administrative and pooling purposes. For renewal and renovation districts, this legal administrative and pooling amount is twenty (20) percent. Based upon the proposed redevelopment by Presbyterian Homes, the maximum amount the City could utilize for this purpose is approximately $414,000 ($34,000 annually). E H L E RS 3060 Centre Pointe Drive Roseville, MN 55113-1105 LEADERS IN PUBLic rINANCE Phone:651-697-8506 Fax: 651-697-8555 skvilvang@ehlers-inc.com