City Council Minutes 2019 03 19 - Laserfiche WebLink

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City Council Meeting Minutes March 19 2019 Page 8 of 16 Director DeJong stated this is a Tax Increment Funding (TIF) rebate agreement with the Revitalization Commission (LRC) He noted this is the first application the LRC has received for direct financial assistance for redevelopment. The application provided financial information including a 10-year projection and sources and uses budget. Staff's analysis included previous used categories of removing blight factors, the effect on property values, and the advancement of the Urban Renewal Area Additional analysis included the need for financial assistance He noted Council will have policy considerations to discuss. The blight determination was made in 2006 with two factors on this property. unusual topography or inadequate public improvements and danger to life or property from fire or other causes. Two other blight factors this project addresses are faulty lot layout as well as deteriorating structures and the deterioration of the site A 10-year TIF analysis shows $119,500 in new revenue after construction and approximately $5,000,000 in new taxable property value in the urban renewal district. The purpose of the urban redevelopment plan is "Reduce, eliminate and prevent the spread of blight and to stimulate growth and reinvestment within the Area boundaries, on surrounding blocks and throughout downtown" The Terraces redevelopment would be a significant reinvestment for the downtown area and adds additional office and retail space in the area. Several other objectives of the renewal plan are met by this project. Staff reviewed the need for financial assistance by first asking if the project would not happen 'but for' the assistance He reviewed the main assumption of lease rates, debt, construction costs, and debt financing The applicant stating they need a 90% TIF rebate to further the project which is approximately $110,000 per year This brings the Rate of Return to 15% without assistance and 7.28% with assistance. Projects with similar risk profile have a typical range of 10-15% return Director DeJong reviewed the TIF Rebate Agreement: The developer will construct and receive a Certificate of Occupancy (CO) from the City for the project. Once the project is complete, the LRC will begin making annual TIF Rebate payments to the Developer equal to 90% of the increased taxes paid on the property less other defined LRC financial obligations. The total maximum rebate payment is $1,110,000 Annual payments will continue until the payment cap is met or the TIF revenue collection period for the Highway 42 Urban Renewal Area expires. The agreement terminates on February 18, 2023 if the project has not been completed This date represents the three year initial term of the PUD plus one year for construction Assignment of the TIF Rebate Agreement is permitted to similarly owned entities DeJong reviewed how TIF is generated Currently the site generates $45,000 in property taxes. If the new building is built it would generate $165,000 in property taxes which is