Consider Business Assistance Application for Ramsey Properties, LLC.
 

The EDA may choose to go into closed session pursuant to Minnesota Statutes section 13D.05, subdivision 3(c)(3) to consider offers or counteroffers for the purchase or sale of real or personal property.  If the EDA chooses to enter into to closed session the statute and reason above needs to be referenced along with legal description (Outlot A, Gigi Addition) and the Anoka County Tax ID number 28-32-25-23-0020.

The purpose of this case is to consider a Business Assistance request that involves the sale of Outlot A, Gigi Addition to The Schiebout Family Limited Partnership, LLLP (the "Developer").  The EDA and City Council have previously approved a Purchase Agreement to build an 82 unit Hilton Home 2 hotel and a proposed deal structure involving a TIF land cost write-down of $311,454.  Staff has been working with the Developer and Ehlers to complete the Business Assistance application and review.  Project costs are coming in higher than the Developer has originally anticipated. The Developer has also adjusted the hotel floor plan/design to add an entrance to Sunwood Drive NW as requested by City planning staff to encourage activity and a connection along Sunwood Drive which have also added to the cost.  These additional costs have triggered the request by the Developer for $306,000 in additional TIF assistance which is shown in the attached Business Assistance Application. The Developer has also created a new business entity called Ramsey Properties, LLC and has filled it with the Minnesota Secretary of State, so this will be the entity name moving forward.  As with any Business Assistance project, both Staff and Ehler's have completed analysis determined if the amount of assistance provided is appropriate. A summary of this analysis is below and attached in a Memo put together by Jason Aarsvold from Ehlers.  

In summary, the lower than average projected return on investment means the project does demonstrate a need for assistance. Providing the requested land write-down and PAYGO note will help facilitate development of the hotel without unduly enriching the developer.
 
We estimate the project will generate approximately $105,000 annually (at full build-out) in tax increment within the COR TIF district. Some of that increment can be directed to repay the City’s land write-down through an inter-fund loan, and some can be used to repay the PAYGO TIF note. We propose using 40% of the increment generated to repay the City’s inter-fund loan with the remaining 60% directed to the PAYGO note payments.
 
Based on this structure, we estimate the PAYGO note could be repaid with 6.5 years of payments, assuming an interest rate on the note of 5%. This, coupled with the land write-down, would push the project’s average cash on cash return to 8.8% by year 8 (at which point the TIF payments would stop). Repayment of the City’s land though an interfund loan would take an estimated 10.5 years assuming the City charges the maximum interfund land interest rate of 5%.

Staff is looking for EDA to provide a recommendation to the City Council in support of the proposed business assistance amount and structure.

Notification is not required.

General Project Description 

• 82 unit, Four Story Hilton Home 2 Hotel with hot breakfast and indoor pool; a Certificate of Occupancy 12 months after Closing (could be extended to 16 months based on supply chain issues or force majeure).  If this is not done, the City may exercise the Right of Re-Entry. 
• Tax Assessed Value 5.9M
• Estimated Taxes - $180,000 annually
• 21 new jobs to be created paying at least $18.22 / hr
• Catalyst project (provides more trips to COR and encourages investment in restaurants/retail)

General Terms of Purchase Agreement (and Business Assistance Package)

• Parcel: Outlot A, Gigi Addition - +/- 1.43 acres
• Purchase Price and Valuation: The purchase price for the Property is $1.00 on +/- 1.43 acres (62,290 square feet) as outlined in Exhibit A (the “Purchase Price”). The property valuation is $311,454. ($5.00/SF)
• $306,000 in Pay-Go TIF Note for Site Development / Improvements (NEW REQUEST)
• Inspection Period: 180 days
• Right of Re-Entry Required
• Reimbursement of Platting costs up to $3,500 if project proceeds.

Business Assistance Application Review

Review and analysis of the Business Assistance Package has been completed by City Staff and Ehler's. The project scores a 29.5 which is a moderate to high score for our project rating system.  Analysis by Ehlers supports the need for assistance for this project, its supports the TIF "But-For" test and does not unduly enrich the developer.

Next Steps (Future Meetings)
In the event that the Developer is comfortable with the assistance package recommended, staff will begin to work with Ehlers and Taft Law to put together a TIF Agreement outlining the terms and conditions of the financial assistance and business subsidy.  A public hearing will be held at a later date for the City Council to consider approval of the business subsidy.   The Developer will submit a site plan /plat application for review and approval by the Planning Commission and City Council.  The site plan and TIF Assistance process will run concurrently.

Alternatives:

1)   EDA Recommendation to the City Council to approve Business Assistance and a TIF Agreement in the form of $311,454 in TIF Land Cost Write Down and $306,000 if Pay-Go TIF for Site Development/Improvements (as presented); subject to City Attorney Review (Staff recommendation).
2)  EDA Recommendation to the City Council to approve Business Assistance and a TIF Agreement in the form of $311,454 in TIF Land Cost Write Down and $306,000 if Pay-Go TIF for Site Development/Improvements (with changes); subject to City Attorney Review 
3) Something else.
 

This case is being handled as part of normal Staff duties. If financial assistance is provided, TIF District 14 will be the funding source.

Staff recommends an EDA Recommendation to the City Council to approve Business Assistance and a TIF Agreement in the form of $311,454 in TIF Land Cost Write Down and $306,000 if Pay-Go TIF for Site Development/Improvements (as presented); subject to City Attorney Review.

Motion to recommend to the City Council to approve Business Assistance and a TIF Agreement in the form of $311,454 in TIF Land Cost Write Down and $306,000 if Pay-Go TIF for Site Development/Improvements (as presented); subject to City Attorney Review.