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30 percent of the units are occupied by individuals whose incomes are 80 percent or less of the area 31 median income (50-80 test). State legislation has eliminated the 50-80 test; thus a project must 32 meet either the 20-50 or 40-60 test. 33 34 Although Aeon does not anticipate beginning construction on the new building (Phase 2) until 35 2011, the developer has requested the creation of the TIF district at this time in order to capture 36 the new value created from both the Phase 1 and Phase 2 elements of its project. In order to 37 capture this future value, the TIF plan must be approved and the district certification request 38 submitted to Ramsey County prior to the issuance of building permits. The rehabilitation of the 39 existing buildings (Phase 1), which received final land use approvals on June 8, 2009, is 40 anticipated to commence in August 2009. 41 42 Springsted, the City's financial consultant, has reviewed the detailed project information 43 provided by the developer to determine if the project qualifies as a housing TIF district and 44 developed a TIF plan for the proposed district, including the "but-for" test and financial 45 projections. (See Attachment C to review the TIF Plan.) Mikaela Huot, a financial planner with 46 Springsted, will make a brief presentation to the City Council on these findings. 47 48 49 50 51 52 53 54 A. Housing District Qualification: Springsted has determined that the 168 housing units within proposed TIF District No. 18 will meet either the 20-50 test or the 40-60 test with at least 20 percent of the units being affordable to persons at 50 percent of area median income or 40 percent of the units being affordable to persons at 60 percent of inedian income. The City will require formalization of the affordability mix as part of a future development agreement. 55 S. Sut-For Test: Springsted has conducted the "but-for" analysis for this project and has 56 determined that it meets both statutory requirements. They conclude that the proposed 57 development would not reasonably be expected to occur solely through private 58 investment within the reasonably foreseeable future, and the increased market value of 59 the site that could reasonably be expected to occur without the use of t� increment 60 would be less than the increase in market value estimated to result from the proposed 61 development after subtracting the present value of the projected t� increments for the 62 m�imum duration of the TIF District permitted by the TIF Plan. 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 C. Financial Projections: The 2009 assessed value for the Har Mar Apartments is $5,000,000. Sased on the rehabilitation of the 120 one-bedroom units in the five existing buildings and the construction of the new 48 two- and three-bedroom units, the estimated market value is $12.2 million, which is based on a preliminary review of proposed development by a Ramsey County assessor. The $7.2 million increase in market value translates into approximately $2.2 million of potential increment over the life of the district. If the City Council approves TIF District No. 18, the City will negotiate a development agreement with Aeon on the terms for use of the funds generated in the district. As the developer will not have a full understanding of its true financial gap until this project is awarded tax credits through Minnesota Housing, staff does not anticipate bringing a development agreement forward until the project receives these credits. The City's TIF Policy will set general parameters by which to commence these negotiations. This policy advocates using the pay-as-you-go method of Page 2 of 4