2024-06-12 CC Packet - Laserfiche WebLink

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Centerville TIF 1-8 June 5, 2024 Page 3 Exhibit B provides a summary of the estimated tax increment cash flow from the TIF District available to reimburse the Developer and the City for TIF-eligible costs. Exhibit C provides a summary of the current property tax revenue from the Property proposed to be within the TIF District and estimated taxes after completion of the Development. Exhibit D provides a preliminary estimated budget for the TIF District. Review of Application for Assistance Northland completed a review of the Developer’s application for TIF assistance. The Development cost estimates were reviewed to ensure anticipated sources and uses were properly included. See Exhibit E for a pro forma for the Development, as prepared by Northland based on estimates provided by the Developer and estimates for tax increment and real estate taxes prepared independently by Northland. Based on the pro forma for the Development, and under current market conditions, as noted earlier, we find that the Development may not reasonably be expected to occur solely through private investment within the reasonably near future. The Development is feasible only through assistance, in part, from TIF. This conclusion is supported by the following: The Developer plans for approximately $30.2 million of costs for the Development to be funded from a combination of debt (65.0%) and equity (35.0%). The Developer may request an assignment of the TIF Note by the City to a third party (lender) to reduce the equity contribution. Exhibit F includes the estimated construction budget and source of financing. The present value of the estimated future tax increment revenue from the TIF Note payments to the Developer reduces the effective cost of the Development by $2,500,000, or approximately 8.3% of the total cost. The estimated effective annual return without the TIF assistance is not at a level the Development will proceed. The total estimated cost of the Development on a per residential equivalent unit basis is $290,801. The Development will include a mix of unit types with respect to unit size, including number of bedrooms. Based on similar projects and given the location of the Development, we find the estimated cost to be reasonable. The average gross monthly rent for the residential units, in year 2027, is estimated at approximately $1,935 per month. The annual total gross rental income for the Development is estimated at approximately $2,414,646 (year 2027) before adjusting for estimated apartment vacancy and rental loss of 5%, and other sources of rental income. The total annual expense, including operating and non-operating costs, management fees, and real estate taxes and reserves, is estimated at $8,907 per unit (for year 2027). This estimated average cost per unit is reasonable. Annual real estate tax is estimated at an average equivalent cost of $1,669 per unit in 2027 (partial completion) and $3,338 per unit in 2028 (based on project completion in year 2026 for taxes first payable in 2028). The average debt service coverage with tax increment financing is estimated at 1.3X in year five of operations, and without financial assistance is estimated to be 0.9X (which is below bank