EDC 11-16-2010 - Laserfiche WebLink

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EDC Meeting November 16, 2010 Page 2 Cash Assistance (cont.) for eligible economic development projects that are started by June 30, 2011. All surplus TIF funds used for this purpose must be spent by December 31, 2011. For this project, the City will escrow $1.2 million with a title company. The City funds can only be spent development -related costs (i.e. architects, engineers, construction, but not developer fees). The developer will need to submit proof of the expenses and the City will sign off on all disbursements. Funds will be released in two installment: $500,000 on or before June 30, 2011 (assuming there is a closing) and $700,000 on or before December 31, 2011. Developer Equui The developer has indicated that they will be investing $4.0 million of their own funds in the project as equity. Although the project budget is still being developed, this equates to roughly 20 to 25 percent of the project. The developer has indicated that the lender will require them to spend their money first, before the company can access the construction financing. Project Valuation There has been a significant amount of discussion about the valuation of the project. The County Assessor will be responsible for this function and at meeting this summer they indicated that similar apartment projects (i.e. new construction) are being valued at roughly $115,000 per unit. While Stuart Companies has been less focused on value, they have been using some assumptions about the amount of taxes to be paid. Their cash flow projections and budget assume taxes of $1,500 per unit, which translates into a valuation of $97,600. The City feels strongly that the value will be much closer the County Assessor's initial estimate and is willing to forgo a minimum assessment agreement. This type of agreement could be problematic for a lender and there are concerns it could have ramifications on the tax-exempt status of debt already issued in the Northwest Quadrant. Park Dedication Fees The developer will pay the City for park dedication fees which are equal to $1,630 per unit. However, the developer has asked to pay the fees over a 10 year period. It is not unusual on large redevelopment projects for developers to negotiate either a reduction in fees or alternative repayment terms. In this case, the developer will make annual payments to the City of roughly $20,000. Repayment of these fees will be secured with the developer's personal guarantee. The developer has agreed to provide basic maintenance service for the adjacent park (i.e. lawn mowing) once the area is finished.