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HomeMy WebLinkAbout2008 03-24 630 CMW AGENDA CITYCOUNCIL/MANAGERWORKSHOP Monday,March24,2008 CouncilChambers,CityHall 6:30p.m. A.CalltoOrder B.RollCall C.Approvalofagenda D.NewBusiness 1.GethsemaneTIFandParkDiscussion E.Adjournment AgendaItemWorkSession AGENDAREPORT TO :CityCouncil FROM: ChuckAhl,ActingCityManager SUBJECT: GethsemaneTIFandParkPurchaseDiscussion DATE: March19,2008 INTRODUCTION/SUMMARY TheGethsemaneLutheranChurchisproposingtosellaportionofthepropertytoPres.Homes, anon-profitdeveloperofSeniorHousingProjects.Thedevelopmentplanisfor111unitsof assistedseniorhousing.Theproposalwilluse60%oftheirexcesslandthathasbeenacity parkthattheCityhasenjoyedtheusageoffor25+yearsfor$1peryear.Obviously,theyhave therighttodeveloptheirprivateproperty.TheyareinterestedinanagreementwiththeCity thatallowsustousetheremainderofthepropertyforparkpurposesbutalsohaveindicated thattheprojectisnotviableiftheyarenotabletoprovidefor20%oftheunitsatmarketrate, whichrequiresTIFassistance. Attachedisasummaryofsomeoptionsthatstaffhasbeenexploringindiscussions/ negotiationswiththeGethsemanerepresentatives.Thisissuehasalsobeenpreliminarily reviewedwiththeParksCommission. RECOMMENDATION ThisisanupdatefordiscussionwiththeCouncil.NoactionontheTIForparklandpurchaseis recommended,althoughtheCouncilmaywishtoexpresssomedirectionoropinionstoprovide staffwithdirectiononproceeding. Attachments: 1. GethsemaneFinancialOptions GETHSEMANEFINANCIALANALYSIS March18,2008 R.CharlesAhl,ActingCityManager TIFAnalysis TheDevelopersTIFproposalrequestsconsiderationof90%oftheTIFgeneratedfor thesitetobededicatedtothemonaPay-As-You-Gopaymentinexchangeformaking 20%ofthe111unitstobemarketrate/affordable.ThisrequiresthattheTIFDistrictbea HousingDistrictwithamaximumtermof25years.Allproceedsmustbepledgedfor housingpurposesandcannotbeappliedtoapurchaseofthepark.The10%remainder canbeappliedforadministrativepurposesontheTIFDistrict.Reducingthe90% paymentto80%paymentdoesnotresultinanypropertytaxescomingtothetaxing jurisdictions;itonlyresultsinfundingintheTIFDistrictthatcanbeusedforother housingexpenses.AnoptionexiststoapproveTIFforlessthan25years;whichwould allowalltaxingdistrictstorealizefundsearlier. ThepreliminaryanalysisfromFebruaryindicatedthatthedeveloperwillrealizean estimated21.0%internalrateofreturnwiththeTIFAssistance.WithouttheTIF Assistance,thedeveloperwillrealizeaninternalrateofreturnof16.17%,which comparestoarateofreturnanalysisonTheShoresprojectof14.515.5%.The Shoresprojectdidnotproceed,soitmaysupportsomeassistance.EvenwithoutTIF Assistance,theinvestorsappeartoberepaidoftheiroriginalprojectequitywithin8-10 yearsontheproject.ThismaysupportaproposaltoreducetheTIFtermtolessthan therequested25years,butstillwillneedtoexistformorethan10years. ThebenefitstotheCityofapprovingthisTIFrequestareminimalbasedonthecurrent proposal.Ifwelookatthescenario:wehaveanareaoftheCitythathasbeenusedas parklandforthepast25+years.Thatlandhasnotpaidtaxes.Ifthedevelopment proceedswithTIFassistanceasrequested,theCitywillstillnotberealizinganyfunds frompropertytaxes,asitwillbepledgedtotheTIFDistrictinexchangeforthe22units beingaffordable.TheCitywillhaveveryspecificincreasedservicerequirements.This typeoffacilityprovidesafairlyhighdemandonourEMSprogram.Ifyouusejusta straightlinecalculationaboutourFireDepartmentbeing20%ofouroveralltaxlevyand thissitewillgenerateapproximately$40,000totheCityinpropertytaxes,ifthereareno otherservicesrequired,theCitywilllose$8,000peryearbyapprovingthisTIF Application.Inaddition,theCitylosesamajorityofapark,thatisnotedaspropertythat isprivately-ownedandtheCityenjoyedusageforyears.Whilewehaveademonstrated needforseniorhousing,Maplewoodisquitehighintheamountofaffordablehousing availablewithintheCity.Howmuchaffordableseniorassistedhousingisaquestion thatwewillneedtoaddress.ThecurrentTIFApplicationwillbedifficulttojustifyunder thisscenario.Insummary,theCityisbeingaskedtogiveupallpropertytaxesfor25 yearsandalsoprovidedemonstratedneededservices.TheCouncilshouldquestion theirsupportforthistypeofaproposal. OptionsforGethsemanetoConsider: 1.IfTIFisrequiredtomaketheprojectproceed,weneedaproposalthataddresses theCitysfinancialandParkCommissionsconcerns: a.OptionA: i.Gethsemanewouldagreetodelaythepurchaseoftheparklandand thesubsequentimprovementsuntilaftertheresultsofaNovember 2008Referendum.Thereferendumwouldrequest$500,000to $650,000forthepurchaseanddevelopmentofthispark. GETHSEMANEPROPOSAL MARCH18,2008PAGETWO ii.ThetermsforGethsemanecouldinclude: 1.agreetoa$366,000PACchargeontheseniorhousing 2.agreetoa$125,000assessmentfortheparkinglotandpark landdevelopment;termswouldbe8yearsat6%;theCity couldbondforanadditional$125,000tomatchthisamount. Theimprovementstotheparkinglotandparkwouldnot proceedunlessthereferendumpasses. 3.agreetoan$806,000parklandpurchaseprice 4.agreetoanannual$12,500Paymentinlieuoftaxes[PILOT] tooffsettheimpactonCityservices;thiswouldincludean annualincreaseof3%to4%;thisprovisionexistswhilethe TIFDistrictisin-place iii.Ifthereferendumfails,then: 1.Citymayelectnottopurchasetheproperty 2.ifpurchaseispursued,itcouldbewiththefollowing conditions: a.$185,000PACCharge b.$735,000purchaseprice c.$0improvementstoparkinglotorpark d.NoexclusiveusageagreementforGethsemane school b.OptionB: i.Toavoidareferendumquestion,theCity,Gethsemaneand developercouldenterintoaDevelopmentContractandTIF Agreementwiththefollowinggeneralterms: 1.parkpurchaseof$806,000 2.PACchargetodevelopmentof$366,000 3.assessmenttoGethsemaneChurchof$225,000[8-yearterm at6%interestrate];theCitycouldmatchthe$225,000 throughbondingforimprovementstothepublicparkinglot alongwithgrading 4.Agreetoa$30,000PILOT;whichwouldincludeanannual adjustmentof3%-4%andwouldbeineffectduringtheterm oftheTIFDistrict.TheCitycouldagreetousethePILOTas: a.$12,500towardPublicSafetyneeds b.$17,500pledgetowardabondtobeusedfor improvementstoGethsemanepark;a15-yearbond forthisamountwouldyield$225,000 c.Citycouldagreetouse$215,000ofexistingPAC$$. 2.IfTIFisnotabsolutelynecessary,thentheCitycouldestablishaTaxAbatement District.ThatAbatementfundingwouldneedtohaveanexustothedevelopment, butitislikelythatitwouldgenerateabout$40,000peryearthatcouldbeusedfor expenses.Followingarepossibleterms: a.CityestablishesaTaxAbatementDistricttocapture$27,500peryear,with thereminder($12,500peryear)beingprovidedastaxestotheCityto theoreticallyprovidepaymentfortheincreasedEMSservices.TheTax AbatementDistrictcanbe15-20yearsinlength.Thus,theCitywouldhave approximately$450,000thatwecouldplanfor.TheCitymaynotbeableto bondforthisduetotermsofusageandprocedure. GETHSEMANEPROPOSAL MARCH18,2008 PAGETHREE b.TheCitycouldproposethefollowingusesforthefunds: i.$100,000fortheentrydriveway/parkinglotforthecombinedSenior Development-parkimprovements. ii.$75,000fortheimprovements/gradingoftheSeniorDevelopment parkimprovements. iii.$50,000forthetrailimprovementsintheareathatarerelatedtothe SeniorDevelopment. iv.$231,000towardthepurchaseoftheexcesslandfromtheSenior Developmenttobememorializedasgreenspaceparklandforthe SeniorDevelopmentandarearesidents. v.Theoriginal$456,000wouldcomefromeitherataxabatementbond [preferredapproach]oraloanfromthePACFund.Repayment wouldbeintheformofthe$27,500peryearfor16+years. vi.TheCitycouldcontributeanadditional$289,000fromexistingPAC moniesforatotalof$745,000fromPACmoniesifbondingisnot possible;however,$456,000couldberepaidthroughtheTax AbatementDistrict. c.GethsemaneChurchandtheDeveloperwouldneedtoagreetothefollowing termsthroughaDevelopmentContract: i.purchaseoftheParkLandat$806,000. ii.$336,000fromthePACChargetothedeveloper.Thisiscalculated as:111unitsX$3,300/unit=$336,000 iii.agreetoa$175,000chargefortheparkinglotandparkland.This wouldbedeductedfromthepaymentfortheparkland.Thus,the CitycouldpayGethsemane$295,000forthedeedtotheparkland, whichiscalculatedas: 1.Purchaseprice:$806,000 2.lessPACCharge:($336,000) 3.lessparkinglotcharge:($175,000) 4.NetPayment:$295,000 iv.TherewouldbenoPILOTpaymentunderthisscenario.