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Home My WebLink About2A, Presbyterian Homes Tax Increment Financing Discussion ,-A�EN HILLS Request for Council Review 2A Prepared By: Jill Hutmacher Worksession Date: December 6,2010 Community Development Director Presbyterian Homes Tax Increment Financing Discussion Discussion Topic: Consideration of terms for a proposed Presbyterian Homes Tax Increment Financing District, Supoorting Documents: 1. Memorandum dated December 6,2010 from Stacie Kvilvang, Ehlers &Associates. 2. Term Sheet 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 Pat Klaers Term Sheet--Presbyterian Homes Redevelopment December 6, 2010 Page 2 In discussions with Presbyterian Homes, they are open to allowing the City to take the maximum administrative and pooling amount, as long as they can receive ninety (90) percent for the first five (5) years. To achieve the maximum amount (20%), starting in year six (6) the amount available to the City would increase to twenty-five (25) percent. This would leave seventy-five (75) percent available to reimburse Presbyterian Homes for qualified cost. If the City would choose to move forward with this approach, it would extend the term of the obligation from twelve (12) years to fourteen (14) years. However, it should be noted that the _ principal amount of the TIF Note will stay the same but would be paid over a longer period of time since the percentage of TIF they receive on an annual basis is reduced from 90%to 75%. Please contact me at 651-697-8506 with any questions. TERM SHEET CONTRACT FOR PRIVATE DEVELOPMENT BETWEEN CITY OF ARDEN HILLS AND PRESBYTERIAN HOMES OF ARDEN HILLS, INC. 1. Minimum Improvements Phase IA: 54 units independent living 36 units assisted living - 18 units memory care Phase IB: 40 units of assisted living 1 S units of memory care Phase 11: 36 units of independent living (brownstones) Utility Improvements (sanitary sewer repair on the lake) County Road D Improvements 2. Required Construction Timelines Phase IA: Commence by December 31, 2011 Complete by December 31, 2013 Phase IB Commence by May 1, 2013 Complete by December 31, 2014 Phase II Commence by December 31, 2014 Complete by December 31, 2016 Utility Improvements: Same as Phase 113 County Road D Improvements: Same as Phase 11 Demolition: Must demolish Lakeview within 6 months after the first certificate of occupancy for Phase IA. Must demolish Sutton Place within 6 months after the first certificate of occupancy for Phase 11. 3. Conveyance of Triangle Parcel. Developer must convey one parcel in the triangle south of Lake Johanna Blvd(the "Triangle Parcel")to the City, for$1.00. Site must be cleared and seeded. Closing is contingent on typical title and environmental reviews by the City. Closing must occur by June 30, 2012. 4. Tax Increment Assistance. City will reimburse qualified costs through issuance of a "pay as you go" note (the "TIF Note") in maximum principal amount of$1,115,000. Note will be paid with 90% [subject to discussion; see separate memo] of the tax increment from Minimum Improvements for 12 years (starting in 2014), with =- interest at 6.25%, accrued from delivery of the TIF Note. TIF Note will be issued and delivered when Developer has submitted evidence that it has spent$1,115,000 in qualified costs. Default under the Contract (or under the separate city Development Agreement) will allow the City to withhold tax increment payments under the TIF Note until default is cured. 5. Lookback. The Contract will include a mechanism for comparing projected costs with final actual costs, and potentially reducing the amount of the TIF Note if there are sufficient cost savings. 6. City Administrative Costs. Developer deposits $10,000 to pay City's out of pocket costs (legal, financial advisor, etc). Developer obligated to pay all such costs (even if more than $10,000) through approval and execution of the Contract. After that, City will pay ongoing administrative costs from its withheld share of tax increment. 7. Conduit Bond Financing. City will issue housing revenue bonds (so-called conduit bonds), in one or more series over time, to finance construction of the Minimum Improvements. Such bonds will be issued in accordance with the City's usual policies regarding conduit bonds (including issuer fees). 378995v2 SJB AR200-10 2