2A, Presbyterian Homes Tax Increment Financing Contract

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Since the December 6 meeting, Presbyterian Homes has notified the City that a 1% lump sum fee cannot be supported by their proforma. They have budgeted for a 0.25% lump sum fee, or approximately $100,000. The proforma review completed by Ehlers shows an issuance fee of $100,250 (Attachment Q. Staff and consultants have researched conduit debt issuance fees in Twin Cities communities (Attachment D). While lump sum fees of 1% are common in surrounding communities, cities which commonly have large bonding requests have mechanisms in their policies to mitigate the size of fees for large projects. Those cities have determined that the administrative costs of conduit debt issuance for larger bonds are not significantly higher than for smaller bonds to justify larger fees. The Developer has indicated that it cannot proceed with the TIF package as proposed if the conduit debt fee remains at 1%. Because the tax increment is structured as pay-as-you-go, the Developer bears the risk of tax increment being less than projected due to tax law or value changes. Between the risk associated with the pay-as-you-go note and the expenses and/or liabilities that the Developer will incur related to the negotiated TIF package, the Developer stipulates that a 1% lump sum fee diminishes the value of the TIF package to the point where it is no longer useful to the Developer. Value of Tax Increment Package to the City of Arden Hills The TIF package negotiated includes several items of value to the City of Arden Hills as summarized below. Cost estimates for the value of the triangle parcel and potential redevelopment costs are conservative budget numbers for costs that the City would incur if it chose to acquire the property in an arm's-length transaction. Sewer improvement $65,000 Reconstruction of County Rd D $75,000 Value of Triangle Parcel (2010 assessed value) $268,000 Potential Triangle Redevelopment Costs $150,000 (cleanup, title, clearance, etc) TIF Administration and Pooling $414,000 Conduit Debt Fee (as proposed by PH) $100,000 Total Value of TIF Package to Arden Hills $1,072,000 Additional Information To assist with Council analysis, the assumptions, rates, base value information, and tax calculations are provided in Attachment E. The 14-year TIF model as discussed on December 6 is included in Attachment F. Responses from Stacie Kvilvang, Ehlers and Associates, to Council questions regarding County road improvements, private financing, and calculation of an on- going 1/8 of 1% issuance fee are provided in Attachment G. City of Arden Hills City Council Special Work Session December 13, 2010 Page 3 of 4