Consider Support of Financial Assistance for Presbyterian Homes Project; Haviland Fields

The purpose of this case is to evaluate a proposed housing project by Presbyterian Homes and to provide a recommendation/comments to the City Council.  Presbyterian Homes has approached the City and requested assistance for its 460 unit housing project on the Lord of Life Church site on Nowthen Blvd NW.  The project consists of senior, affordable and market-rate products.  The Developer will provide a detailed presentation to the EDA outlining the project and the assistance request and will be available for questions.  The Developer has provided $11,000 to the city to process the TIF Application and to draft necessary documents if approved.  Staff is bringing this proposal to the EDA for consideration.

Project Description:
The Developer will provide a presentation to the EDA .  The City has worked with Ehlers to draft a term sheet defining possible parameters of a potential assistance package for the 2 phase project on the Lord of Life site.  The existing church will remain as part of this project.  Details for the two-phase project are below:

Phase 1 will include the construction and equipping of a multi-story, approximately 280-unit general occupancy apartment with at least 20% of the units occupied or held for occupancy by persons and families whose incomes do not exceed 50% of area median income, and underground and surface parking stalls. (2024-2025)

Phase 2 will include the construction and equipping of a multi-story, approximately 160-unit senior (62+) apartment and 20 (62+) rental park homes and with at least 20% of the units occupied or held for occupancy by persons and families whose incomes do not exceed 50% of area median income, and underground and surface parking stalls. (2025-2026)

• Tax Assessed Project Valuation - $104,371,600 
• Annual Taxes (Estimate) - $1,292,366
• 5.3M Base Taxable Value established (Not TIF)
• 16 new jobs with average wages of $26.00/hr.
• Provision of affordable, senior and market rate housing
• Approx. $150M in private investment
• $14 of private investment for every $1 in TIF
• $8.3M in fees and taxes; $5.7M of which is “front loaded” in the project schedule.
• Significant future tax revenue (Onboarding the developable portion of tax-exempt church property onto future tax rolls, $1.3M/yr. upon expiration of district).
• New resident population to support local businesses as both customers and employees.
• High quality housing, which includes a component of price restricted units, supporting employees of existing local businesses, a high area of need.
• Public access to on-site amenities (Pickleball courts). (Can be private or city owned)

Assistance Request / Financial Analysis:
The Developer requested 11.3M over 25 years in Pay Go Financing as evidenced in the attached Business Assistance Application.   The business application scores 27.5 which is a moderate score.  Based on the information provided and attached analysis conducted by Ehlers, Staff believes that 9.2M and a 20 year duration of assistance is appropriate for a project of this type and size. The reduction of the duration of the district also allows the City to receive tax revenue from the project sooner.  The TIF assistance request would be the largest provided for a single project in Ramsey. Based on the proposed level of assistance, both Staff and Ehlers are recommending a look-back provision that would allow the City to reduce the TIF provided if the rate of return exceeds the projected rate of return if assistance is provided.

Based on review of the Developer’s pro forma and under current market conditions, the proposed development may not reasonably be expected to occur solely through private investment within the near future.  Due to the costs associated with developing the property and constructing housing with affordable rents, this project is only feasible, in part, through public assistance. As such, this project does meet the "But-For" test needed for the provision of TIF and is not unduly enriching the developer.
 
TIF assistance should be provided on a “pay-as-you-go” (PAYGO) basis.  With PAYGO TIF assistance, the City does not provide any funding up-front. Instead, the City enters into an agreement to provide tax increment payments that are generated solely from the project’s actual increased property taxes. The Developer uses those tax increment payments to obtain additional debt and/or support returns on investment. If the tax increment is insufficient to pay the $2.7 million in total TIF notes, the City does not make up the shortfall.

Alternatives:
1) Recommendation to the City Council supporting the project and the attached term sheet and assistance levels
2) Recommendation to the City Council supporting the project with revisions to the term sheet and assistance levels
3) Recommendation to the City Council supporting the project but not supporting city assistance for the project
4) Request for more information
5) Something else
 

Pay-Go Tax Increment Financing

Based on discussion

Many alternatives have been presented to the EDA.  Based on discussion an alternative from below could be selected:

1) Recommendation to the City Council supporting the project and the attached term sheet and assistance levels
2) Recommendation to the City Council supporting the project with revisions to the term sheet and assistance levels
3) Recommendation to the City Council supporting the project but not supporting city assistance for the project
4) Request for more information
5) Something else