HomeMy WebLinkAbout2007 [07] Jul 11 {Book 41}
CITY Of ST. JOSEPH
www.cityofstjoseph.com
Administrdtor
ludy Weyrens
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Meeting Notice
Wednesday July 11, 2007
3:00 p.m. City Hall .
Mdyor
Richdrd Cdrlbom
1. Call to Order.
Councilors
Steve Frdnk
AI Rdssier
Renee Symdnietz
Ddle Wick
2. Approval of Agenda.
3. Business.
a. Preliminary TIF Application - Schellinger.
b. Market Research Study - McComb Group.
4. Adjournment.
2.) College Avenue North, PO Box 668 . Sdint. Joseph, Minnesotd )6)74
Phone ,2.0.,6,.]2.01 FdX )2.0.,6,.0)42.
Administrdtor
Judy Weyrens
MdYor
Richdrd Cdflbom
Councilors
Steve Frdnk
AI Rdssier
Renee Symdnietz
Ddle Wick
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CITY Of ST. JOSEPH
www.cityofstjoseph.com
DATE:
July 3, 2007
MEMO TO:
Economic Development Authority
Honorable Mayer Rassier
Members of the City Council
Administrator Weyrens
FROM:
Cynthia Smith-Strack, Municipal Development Group
RE:
Request for Tax Increment Financing Assistance - Schellinger
Request:
Mr. Chris Schellinger has submitted a pre-application for $230,000 (net present value) Tax
Increment Financing assistance for the construction of a 9,000 square foot facility at 24
College Avenue North. A copy of the TIF Pre-Application is attached for your review. A
representative of the company will be present to answer questions regarding the preliminary
application.
Background:
T1F
Tax increment financing is a tool which allows the City/EDA to reimburse a company or land
owner a portion of the new property taxes generated as a result of an development project.
The amount of financial assistance available (TIF) is dependent upon a number of factors
including but not limited to the assessed market value of the building and the financial need of
the company. There are several types of tax increment financing districts, each of which has a
maximum increment period established by state law. Mr. Schellinger is requesting assistance
in the form of redevelopment TI F.
Redevelopment T1F
A "redevelopment district" means a type of TI F district consisting of a project, or portions of a
project, within which the authority finds by resolution that one or more of the following
conditions, reasonably distributed throughout the district, exists:
1. Parcels consisting of 70 percent of the area of the district are occupied
by buildings, streets, utilities, paved or gravel parking lots, or other
similar structures and more than 50 percent of the buildings, not
including outbuildings, are structurally substandard to a degree
requiring substantial renovation or clearance;
2. The property consists of vacant, unused, underused, inappropriately
used, or infrequently used rail yards, rail storage facilities, or excessive
or vacated railroad rights-of-way;
3. Tank facilities, or property whose immediately previous use was for tank
facilities, as defined in section 115C.02, subdivision 15, if the tank
facilities:
a. Have or had a capacity of more than 1,000,000 gallons;
b. Are located adjacent to rail facilities; and
c. Have been removed or are unused, underused,
inappropriately used, or infrequently used; or
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2.') College Avenue North' PO Box 66s . Sdint. Joseph, Minnesotd .,6174
Phone )2.0.,6,.]2.01 Fdx ,2.0.,6,.0)42.
4. A qualifying disaster area.
The Remodeling Professionals project is expected to qualify for redevelopment TIF under (1)
above.
Term of TIF Aareement
The maximum term of a redevelopment TIF district is 25 years, however, the term of any TIF
agreement should only reflect the amount needed to close a demonstrated 'gap' in financing;
therefore, very often the approved agreement terms are much shorter than the maximum
allowed by state law.
Pavas yOU ao TlF
State law allows the City/EDA to proceed with two types of TIF financing mechanisms. The
first is the issuance of a TIF bond by the City/EDA. In this arrangement the proceeds of new
tax increments are immediately available to the developer in the form of cash. With this type of
mechanism the City/EDA bear significant risk in that if the project isn't completed and/or taxes
are not paid, the City is responsible for making the bond payment.
Due to the amount of risk involved, the City of S1. Joseph's TIF policy highly discourages the
issuance of TIF bonds. Instead an arrangement known as 'pay as you go' is the standard
mechanism embraced by the City/EDA. With 'pay as you go' TIF, the City does not issue
debt, instead the City enters into an agreement with the Developer pledging to 'rebate' a
portion of the tax increment provided property taxes are paid. In this kind of arrangement, the
Developer may use the TIF agreement to leverage a note from a conventional lender but the
City is not incurring risk if taxes aren't paid or the project not completed.
The Proiect
A site plan (draft) for the proposed development is attached. The redevelopment project
consists of the construction of an 9,000 s.f. commercial structure within the Downtown.
Estimated market value after taxes is anticipated to be $1.2 to $1.4 million; construction cost is
estimated at: 784,590.
Pay-as-vou-qo redevelopment TIF assistance is reQuested in order to help the project move
forward. Schellinger has provided the EDAlCity with preliminary source/use statements
illustrating a gap (net present value) in funding.
Requirements: Preliminary TIF Application:
The following are required to be submitted with the preliminary application for TIF assistance:
1. A map showing the. exact boundaries of the proposed development. A preliminary site
plan is attached.
2. A General description of the project including the following:
· Size and location of building(s); The proposed single story structure will be
utilized for commercial lease space. The building design is reminiscent of
traditional downtown buildings. Parking will be provided to the rear of the
facility.
· Business type and use; The redevelopment project will raze an existing
residential dwelling and add 9,000 sf of commercial lease/own units in
downtown. Commercial uses are expected to be a mix of retail and
professional offices. A portion of the new structure will house the
Applicant's business, Remodeling Professionals.
· Traffic information, including parking; Parking facilities are proposed to the rear
of the building, as required in the Central Business District. The Planning
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. Timing of project; The applicant wishes to proceed with the expansion on a
timely basis. The project cannot commence until, if approved, a TIF
agreement is signed. Commencement of any construction activity prior to
the signing of a TIF agreement will void any/all increment available to the
project and, therefore, the use of tax increment financing. The applicant
wishes to proceed with site plan approval later this summer and with
construction to begin at the earliest in the Fall of this year or at the latest
the Spring 2008.
. Estimated market value following project completion. MDG has consulted with
the County Assessor regarding a projected EMV. The review is pending at
this time, however, a report is expected intime for the July 11th meeting. The
applicant has provided project estimates within project pro-formas which
place the project cost at $1.2 to $1.4 million.
3. The existing Comprehensive Plan land use designation and zoning of the property. The
comprehensive plan guides the subject parcel to continued downtown (Central
Business District) use. Current zoning class is B-1. Professional offices and retail
facilities are permitted within said zoning class.
4. A statement identifying how the increment will be used and why it is needed to complete
the project. The increment will be used to assist with the following eligible expenses
associated with the development: land acquisition, site preparation, demolition and
utility placement/service/connection.
Thorough sources/uses will be included with the final application for TIF, the
company will be required to disclose financial information in conjunction with the
final application. Preliminary sources/uses are included in attachments to this
memo.
5. A statement identifying the public benefits for the proposal including estimated increase in
property valuation, new jobs to be created and other community assets. The preliminary
application includes the following statement "The redevelopment of this site will
increase the property tax value from a single family home with an estimated EMVof
$106,000 to a commercial development with an estimated market value between
$1,200,000 and $1,400,000. Furthermore, the redevelopment of this site will directly
benefit the revitalization efforts of the City in promoting new businesses in the core
Downtown. "
6. A written perspective of the developers company (Le. corporation, principals, history, past
projects, etc.). A written narrative is attached to this memo.
TIF Policy:
A copy of the City's TIF policy is attached. The policies for the use of TIF include the
following:
1. General Policy - The City of St. Joseph and EDA shall consider Tax Increment
Financing for projects that serve to accomplish the City's goals for housing and
economic development as they may. change over time. The goals include facilitating
projects that would result in the creation of quality jobs(Le. stable employment and/or
attractive wages and benefits) and the attraction. retention. and expansion of business
and housing options in the City. The request appears to meet this policy criteria.
2. Objectives: As a matter of adopted policy, the City of St. Joseph and EDA will
consider using tax Increment Financing (TIF) to assist private development projects to
achieve one or more of the following purposes: The project appears to meet
objectives as outlined in (a), (c), (d), (e) and (f) below.
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achieve one or more of the following purposes: The project appears to meet
objectives as outlined in (a), (c), (d), (e) and (f) below.
a. Remove blight and/or encourage redevelopment in the commercial
and industrial areas of the City in order to encourage high quality
development or redevelopment and private reinvestment in those
areas.
b. To provide for a balanced and sustainable housing stock to meet
diverse needs both today and in the future.
c. To retain local jobs and/or increase the number and diversity of
quality jobs (Le. stable employment and/or attractive wages and
benefits.
d. To encourage additional unsubsidized private development in the
area, either directly, or through secondary "spin-off" development.
e. To offset increased costs of redevelopment (Le. contaminated site
clean-up, demolition of existing building), over and above those costs
that a developer would incur in normal urban and suburban
development.
f. To facilitate the development process and to achieve development on
sites which would not be developed without this assistance.
3. Costs that qualify for TIF assistance: The TIF would assist with the razing of a
substandard building and replacement of the building with a human-scale
commercial facility. Unless exempt from business subsidy law (Mn. Stat) the
development will be required to create a minimum of one new livable wage job
within two years. The applicant is proposing the creation of a minimum of two
new employment positions. Upon final application additional information
regarding the occupational classification of proposed jobs will be submitted.
4. Minimum Qualifications:
a. TI F would facilitate development that would not occur without the assistance. The
Preliminary TIF application is supplemented by source/use statements
including preliminary proforma analysis which identify a $230,00 (net
present value) gap in project funding. The applicant has certified the
development could not occur but for the use of TIF.
b. But-For Test. The pre-application requires the developer to submit a statement
identifying how the increment will be uses and why it is needed to complete the
project. The applicant has submitted sources/uses analysis illustrating the
project does not cashflow without T1F assistance.
c. The project is consistent with the Comprehensive Plan and zoning
ordinance. The subject parcel is zoned downtown commercial.
d. Prior to approval of the TIF Plan (at the time of final application), financial
guarantees and credentials will be required.
e. The Applicant has executed a' purchase agreement for the property.
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5. Desired Qualifications:
a. Taxes paid before and after the development will be greater than a 2:1 ratio.
Current property taxes payable on the subject parcel equal to $1,050. Taxes
post construction are estimated at 3% of the project cost or $36,000
annually. Preliminary TIF projections have been created by Ms. Traci Ryan
of David Drown Associates and are attached for your information.
b. TIF should not be used for speculative projects. Mr. Schellinger has been a
development professional for over a decade. Remodeling Professionals was
formed in 2004. The company has conducts business within a 15-mile
radius of the City of St. Joseph. Complete financial information from the
company and major shareholders will be required if/when a final application
is submitted.
c. TIF should not be used to pay for overpriced land. The TIF assistance is
proposed to be used for costs associated with redevel9pment of
substandard property within the original townsite (Central Business District)
and not for greenfield development. As you are aware, redevelopment costs
in downtown areas far exceed greenfield development due to the fact the
parcel features an existing structure which shall be razed resulting in more
intensive site preparation work. In addition, since the site is within a dense,
developed urban area, specialized construction techniques must be
employed. TIF is not being used to pay for overpriced raw land.
d. TIF should be pay-as-you go. The request is for pay-as-you go assistance.
e. Preference is given to projects that do not cause extraordinary demands on City
services. The applicant is proposing retail/office space. No extraordinary
demands on the utility systems are anticipated.
f. Preference is given to projects that are consistent with the compo plan, improve
surrounding land uses, provide new employment, are financially feasible and
provide the highest and best desired use for the property. The project appears
to meet all of the aforementioned criteria in addition to furthering the City's .
goal of revitalizing the Downtown with pedestrian friendly, human-scale
construction.
The Developer and the City's new TIF Consultant will be present to provide answers to
questions and additional comment as requested. The Developer's purchase agreement
expires at the close of August and the Developer can not close on the property unless TIF is
approved. The concept of 'preliminary' as it pertains to this request is similar to the concept of
'preliminary' in conjunction with a 'preliminary plat.' Although the conventional definition of
'preliminary' describes activities preceding the main discourse or business approval of the
'preliminary' TIF application is an action analogous to approving the conceptual use of TIF for
this project.
Action:
If the EDA is supportive of utilizing TIF for this project, a MOTION is in order to recommend
the City Council approve the pre-application and authorize submittal of the final application
and fee.
If the City Council is supportive of utilizing TIF for this project, a MOTION is in order to
approve the pre-application and authorize submittal of the final application and fee.
fIJII - ,20
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City of St. JoSeph
TIF Assistance Program
Preliminary Application
(Please print or type)
Generallnform~tion:
Legal name of owner/applicant:
c ~.~ ~WE. \..~~
Operating Entity (if different): tel>
Address: .3\55"u \<8\. t:+~ A\Jor.J \ MN 51.o$l.O
Telephone Number:-320. <gl\~'.l.\\\~Fax Number: 3;m .1)~,r' ~I.\q t.t
el. 44 Z, '44Lf :2
Name of contact person: C \~> C14tu...x..~~
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The following information should be presented in to the St. Joseph EDA Office as soon as
pOSSible after the initial meeting with the EDA Director. The information will be evaluated to
determine if the proposed project conforms with the community's goals and objectives.
=> A map showing the exact boundaries of the proposed development.
=> Give a genera/ description of the project including the following:
. Size and location of building{s)
· business type and use
· traffic information, including parking
· timing of project
· estimated market value following completion
=> The existing Comprehensive Plan land use designation and Zoning of the property.
Make a general statement as how the project will conform to the land use
designation.
=> A statement identifying how the increment will be used and why it is needed to
complete the project.
=> A statement identifying the public benefits of the proposal including estimated
increase in property evaluation, new jobs to be created and other community assets.
=> A written perspective of the developers company(i.e. corporation, principals, history,
past project, etc.)
Signature
Date:
EDA ~ J;<
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24 College Avenue North
~'Name: No Parcels Selected
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Desc:ription:
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24 College Ave Project
The request to consider TIF financing is being submitted for a project proposed to be
constructed at 24 College Ave.
General Description of Project
The site consists of24)28 sq.ft. and is currently included in the Downtown
Redevelopment TIF district. The proposed walk up office condominiums would be
consistent with the intent to revitalize the Core Downtown as outlined in the Final Draft
of the Design Standards Committee Urban Environs Work Group dated May 1,2007.
The site is currently occupied by a single family home and garage. Survey of the lot
shows it to be long and narrow with a single access from the adjacent alley.
Redevelopment of the site will necessitate removal of the house, garage, site preparation
and accessing utilities.
Utilities are accessible to the site and it is anticipated that minimal disruption to College
Ave will occur during construction.
Size and Location of the Buildiug
· The building is proposed to be set-back from College Avenue property line 5 - 15
feet and front along the entire length of the West property line abutting College
Avenue.
· Proposed size of the building is estimated at between 8,000 - 9,000 square feet
Business Type and Use
· Business type and use would be Professional Office Space and/or Retail.
Traffic information, parking, etc.
· Parking is proposed to be at the rear of the building along with associated on-
street parking.
· Ingress and egress to the rear lot parking will be through the East! West alley
along the South property line.
Timing of Project
· Timing of municipal approval of the project and initial interest in the property
will impact the start for the project, however,
· The goal is to begin construction as early as Fall 2007 or as late as Spring 2008.
Estimated Market Value of Completed Project
· The proposed project is estimated to have a completed market value of between
$1,200,000 and $1,400,000.
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Existing Comprehensive Plan Designation and Land Zoning
24 College Avenue is within District Five of the Comprehensive Plan land use districts
and has the following designations, zoning and/or uses:
Current Zoning
The Zoning of24 College Avenue is currently commercial/B-l Central Business District
Comprehensive Plan Land Use designation(s)
The Comprehensive Plan identifies/recommends the land use f9r this property as Central
Business and/or Medium to High Density residential.
Proposed Project's conformation to current zoning and land use designation
The proposed Office/Retail business qevelopment meets the goals and uses set forth in
the existing zoning and Comprehensive plan for this property in several ways:
}> Redevelopment of an existing residential unit within the Central Business District
near the city's core.
}> Creation of a commercial development that meets the goal of expanding a vital
downtown business district
}> Property is within the service area of existing municipal utilities and will;
}> Assist in prevention of "leap frog" type development into un-serviced areas and;
}> Provide for maximum cost effectiveness for community residents.
}> The property is largely undemti1ized relative to the potential for business activity.
Increment Uses and Necessity
The site is currently occupied by a single family home and garage. Survey of the lot
shows it to be long and narrow with a single access from the adjacent alley.
Redevelopment of the site will necessitate removal of the house, garage, site preparation
and accessing utilities. Because of the limited access and size of the lot, maximization of
the lot is difficult. Increment will be used to defray the costs of redevelopment and
limited functionality of the site
Due to the current market structure in St Joseph, it is unlikely rents will be high enough
to support the redevelopment costs associated with this site. Similar commercial
developments within the core downtown are limited to a new project proposed on the
next block to the south of the site. Existing office/commercial properties for rent or
purchase are significantly older and therefore depress the market prices.
Tax increment proceeds will be used to defray the redevelopment costs of the site and
support the depressed rents in the market to allow the project to be successful.
Public Benefit of Development
The redevelopment of this site will increase the property tax. value from a single family
home with an estimated market value of $1 06,000 to a commercial development with an
estimated market value between $1,200,000 and $1,400,000. Furthermore, the
redevelopment of this site will directly benefit the revitalization efforts of the city in
promoting new businesses in the Core Downtown.
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24 College Avenue Development Company Team
Developer:
Chris Schellinger
A Life-long local resident residing in Collegeville
Township and fourth-generation General Contractor in the
St. Cloud area.
Owner of Remodeling Professionals of St. Cloud, Inc., a
company focusing primarily in residential remodeling with
all business occurring within a 15 mile radius of Saint
Joseph, MN. Significant business and business
management experience within the S1. Cloud/St. Joseph
Metropolitan area within construction, manufacturing and
development. _
Development Consultant: Wendy Hulsebus
Wendy Hulsebus bas over ten years of commercial lending
and real estate development experience. She specializes in
commercial financing and land development.
Legal Counsel: D. Michael Noonan - Rinke Noonan
Mike Noonan is a founding shareholder and has been
practicing law with Rinke Noonan since 1969. He
concentrates in the areas of business, corporations,
partnerships, mergers and acquisitions, commercial
transactions, and commercial real estate law.
Scott Hamak - Rinke Noonan
Scott Hamak bas been practicing law with Rinke Noonan
since 2000 and concentrates in the areas of business law,
commercial transactions, mergers and acquisitions and real
estate development.
Marketing Agent:
Bill MolitorlMeyer Commercial
Bill has an extensive background in commercial and
industrial development, site selection and leasing. He is a
life-long resident of the area and very familiar with the St.
Cloud/St. Joseph area.
Architect:
To Be Determined
Financing:
To Be Determined
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Additional Site Plan Detail
24 College Avenue Project
1. Heating/Cooling-
a. Rooftop cooling units
b. In floor, hot water heat.
2. Steel Truss
a. See notes on site plan for additional information.
3. # of Restrooms
a. Up to # 2 sets of common area restrooms.
4. Percentage Retail/Office
a. Unknown at this time, depending entirely upon first tenants.
b. It is expected there will be approximately a 50/50 mix.
" I.
f.~ - }C'
Property Address:
Investment Properly Analysis wlo TIF
Purchase Cost
Down Payment
Financing:
Financing:
Amount
Amount
$1,008,000
$0
Land Value
Personal Property Value
Building Value
Land Improvement Value
Total Depreciation
Rent per Unit:
TIF
$108,000
$0
$108,000
Annual Operating Expenses:
Real Estate Tax
Repairs & Painting
MaintlCaretkr
Manag'ement
Reserves
$0
$0
$0
$0
$0
Total Operating Expenses:
Gross Operating Income
Minus: Total Operating Expenses
Equals: Net Operating Income
Minus: Annual Debt Service
Equals: Cash Flow Before Taxes
II. Annual Debt Service
Minus: Interest
Equals: Principal Reduction
III, Net Operating Income
Minus: Interest
Minus: Total Depreciation
Equals: Taxable Income
Multiply: Tax Bracket
Equals: Income Tax Saved or (Paid)
IV. Appreciation
Return on Investment with Appreciation
Rate
Rate
$1,260,000 DSCR
$252,000 1.01
Term 20 P&I $8,908 /mo. $106,894 tyro
Term 30 P&I $0 /mo. $0 tyro
X 0% Depreciation
X 20.00% $3,000
X 3.64% $44.177
X 6.67% $667
$47,844
9,000 sq ft $
Less Vacancy I 0.00%1
12 rent rate triple net
Gross Operating Income:
0.0%
0.0%
0.0%
0.0%
0.0%
Insurance
UlilitieslWater/Cable
Advertising
Cleaning & Supplies
Lawn/Snow
$108,000
$0
$108,000
$106,894
Cap Rate:
DSCR:
8.57%
1.01
$106,894
$88,200
$108,000
$88,200
$47,844
($28,044)
[[?dJtM%'~1;E0;']
Purchase Cost
Cash flow before taxes + Princioal reduction + Taxes Saved + Aooreciation
Cash Invested .
Return on Investment without Appreciation _......._............................................_....................._.........................
Cash flow before taxes + Princioal reduction + Taxes Saved
Cash Invested
Capitalization Rate
Net Ooeratinn Income
Purchase Cost
Cash on Cash
Cash flow before tax
Cash Invested
NOTE: INFORMATION DEEMED RELIABLE BUT NOT GUARANTEED .. SOME CALCULATIONS ARE SUBJECT TO MATHMATICAL ROUNDING
I~ .. 1
$0
$0
$0
$0
$0
Income Value
$1,260,000
$1,106
$18,694
$9,81S
$25,200
21.8%
11.8%
8.6%
0.4%
0.0%
0.00/0
0.0%
0.0%
0.0%
$108,000
$0
Per Unit
$1,260,000
2%
Investment Property Analysis wI TIF
Property Address:
Purchase Cost
Down Payment
Financing:
Financing:
Amount
Amount
$905,003
$0
$1,260,000 DSCR Units
$252,000 1.13
Rate 8.75% Term 20 P&I $7,998 /mo. $95,971 tyro
Rate 6.00% Term 30 P&I $0 /mo. $0 tyro
$20,000 X 0% Depreciation
$15,000 X 20.00% $3,000
$1,215,000 X 3.64% $44,177
$10,000 X 6.67% $667
land Value
Personal Property Value
Building Value
land Improvement Value
Total Depreciation
............-..........................................................................................................................................................................
$47,844
Rent per Unit: $108,000 9,000 sq ft $ 12 rent rate triple net
T1F $0
$108,000 less Vacancy I 0.00%1 Gross Operating Income: $108,000
Annual Operating Expenses:
Real Estate Tax $0 0.0% Insurance $0 0.0%
Repairs & Painting $0 0.0% UtilitieslWater/Cable $0 0.0%
MaintJCaretkr $0 0.0% Advertising $0 0.0%
Management $0 0.0% Cleaning & Supplies $0 0.0%
Reserves $0 0.0% Lawn/Snow $0 0.0%
Total Operating Expenses:
.......................................................................................................................................................................
$0
I. Gross Operating Income
Minus: Total Operating Expenses
Equals: Net Operating Income
Minus: Annual Debt Service
Equals: Cash Flow Before Taxes
$108,000
$0
$108,000
$95,971
Cap Rate:
DSCR:
8.57%
1.13
Income Value
$1,260,000
Per Unit
$1,260,000
$12,029
II. Annual Debt Service
Minus: Interest
Equals: Principal Reduction
$95,971
$79,188
$16,784
2%
III. Net Operating Income
Minus: Interest
Minus: Total Depreciation
Equals: Taxable Income
Multiply: Tax Bracket
Equals: Income Tax Saved or (Paid)
$108,000
$79,188
$47,844
$6,661
$25,200
IV. Appreciation
Purchase Cost
Return on Investment with Appreciation
24.1%
Cash flow before taxes + Princioal reduction + Taxes Saved + Aooreciation
Cash Invested
Return on Investment without Appreciation
14.1%
Cash flow before taxes + Princioal reduction + Taxes Saved
Cash Invested
Capitalization Rate
.......................................................................................................................................................................
8.6%
Net Ooeratino Income
Purchase Cost
Cash on Cash
,.......................................................-..-.......-................-......-.............-.........................-............................................................
4.8%
Cash flow before tax
Cash Invested
NOTE: INFORMATION DEEMED RELIABLE BUT NOT GUARANTEED. . . SOME CALCULATIONS ARE SUBJECT TO MATHMATICAL ROUNDING
i4 - 't
24 College Ave Project
Sources
$
$
$
Bank Financing
Tax Increment Financing
Deferred Developer Fees
Total Sources
905,003
230,000
100,000
$
1,235,003
Uses
Land Acquisition
Building Construction
Demolition
Professional Fees
Development Fee
Interest and Carrying Costs
Total Uses
A ' Gel
$
$
$
$
$
$
$
215,900
784,590
10,000
77,639
50,000
96,874
1,235,003
I
Development Budget
Project:
24 College Ave Project
July 3, 2007
DEVELOPMENT BUDGET
College Ave Project
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
liTEM COST
Building Acquisition 0
Land Acquisition 215,900
Rehab (see schedule) 0
New Construction (see Schedule) 716,265
Permits -incl. 0
Site Work whole site - incl. 0
Demolition - Remove Bldg. 10,000
Streets and Sidewalks - incl. 0
Water- incl. 0
Sewer- incl. 0
Stormwater & Drainiage 0
Contingency - 2% 14,325
Site Planning 0
Architect & Engineer - 7% 50,139
RE Attorney 2,500
Tenant Buildout Allowance 54,000
Survey 1,500
Const. Loan Interest and Carrying Costs 68,874
Const. Origination 11,000
TIF Fee 15,000
Property Taxes 0
Appraisal 4,000
Environmental 2,000
Organization Expense 2,500
Development Fee 50,000
Marketing- 1 % 12,000
Other 5,000
TOTAL DEV COST 1,235,003
Land Area Phase I
61,519 sqft
Cost per Sq Ft
o
Total Bldg sqft
assumes $6 per sq foot 9,000
estimated at 1% construction loan
Misc Carrying costs Cost/SqFt
$ 137
New Construction
Model Number
1
2
3
4
5
Size in Sq Ft Cost/Sa Ft Unit Cost # Units Total Sales Price Price/saft
9000 137 1,235,003 1 1,235,003 1,260,000 $ 140
0 137 0 1 0 - $ -
0 137 0 3 0 - $ -
0 137 0 1 0 - $ -
0 0 0 -
205,834 6 1,235,003 1,260,000
Total
Less Sales Commissions
Total Profit
New Construction
Months to construct
Sales time
31 months
4 months
Sales Expense
6.0%1
Page 1
Proforma lumber1 012306.xls
I~ -10
Commercial Project Recap
Project Name College Avenue Professional Building
Project Location 24 College Avenue; Saint Joseph, MN 56374
xi dgs 9 x :lgs 9
Phase Phase Description 0 0 0 0 Total
172.00 Sians 4000 0
610.00 Performance Bond
650.00 Insurance 4500
850.00 Architectural costs - Printina 0
1000.00 Building Permits 12,600
1040.00 SupelVision/Site Sup/General 40,000
1050.20 Staking 3500
1100.00 SAC Fee 5,400
1120.00 WAC Fee
1130.00 Park Fee
1400.00 QualitvControl Test 3,000
1500.00 General Reauirements
1503.00 Winter Conditions 3000
1505.00 Temp Utilities 3500
1600.00 Material and EQuipment 1,200
1700.00 Final Clean Up/Close
1850.00 Dumpster/Scrap 5,880
1900.00 Miscellaneous Requirements 1,000
1910.00 Milea"e- Carpenters 1,100
2110.00 Off-5ite Improvements Road
2200.00 Earthwork 15,000 I
2280.00 Fill Hauling 7,500
2500.00 Pavina & Surfacina & Curb 14,500
2510.00 Parkina lot Strioina 0
2700.00 Site Utilities/Sewer, Water & Storm 9,600
2810.00 Underaround Sprinklina
2900.00 Landscaoina 10,000
3100.00 Concrete 2-New Aooroaches
3270.00 Concrete Curb
3270.00 Concrete Curb Face Walk
3400.00 City Sidewalk with Ped Ramps
3500.00 Concrete Floor
4285.00 Stucco -
4400.00 Stonework
4990.00 Comb MasonlV/Concr Bid 90,000
6100.00 Rough Up Carp Materials 137,800
6150.00 Trusses 28,300
6200.00 Finish Carp Materials
6210.00 Carn labor - Rough Up 59 300
6210.00 Carp Labor - Finish
6220.00 Millwork
6400.00 Cabinets
7100.00 Waterproofina
7200.00 Insulation 20,685
7201.00 Blowino & Insulation labor
7300.00 Shineles & Rootina 22,500
7301.00 Shin~J1ina labor Onlv
7460.00 Specialtv Sidina Materials 19,900
7460.00 Specialtv Sidina Labor
7630.00 Gutters & Downspouts
8100.00 Hollow Metal Door/Fr
8120,00 Alum Entrance Door/Fr
8520.00 WindowslEntrv Doors 25,000
8700.00 Finish Hardware 2.500
9250.00 Sheetrock Material
9255.00 Sheetrock Hanging labor 15.000
9255.00 Sheetrock Taoe & Sorav 15000
Bldg 1 Bldg 2 Bldg 3 Bldg 4
bl 1 bId 3 bid 1 bid
r-Jl
x 1 blC!9_s 1 bldg x 3 bldgs 1 bldg
Phase Phase Description 0 0 0 0 Total
9500.00 Acoustical Treatment 15000
9680.00 Caroet & Inlaid
9900.00 Painting
9950.00 Wall Coveril1Qs
10400.00 Identifvina Devices
10520.00 Fire Proto ~ecialtv
10550.00 Postal Specialties
10800.00 Toilet & Bath Accessories
10830.00 Mirrors
10850.00 Marble Tops
12500.00 Window Treatments
13900.00 Firing Warning System
15300.00 Fire Sprinkling Svstem 35,000
15400.00 Plumbing 20,000
15450.00 Water Softener/Conditioner
15500.00 HVAC (HeaWentlAC) 25,000
16050.00 Electrical 35 000
16500.00 Liaht Fixtures
16720.00 Fire Alarm ~stem
16730.00 Security Access SyStem MOO
16760.00 Intercom Systems
99999.00 MN Sales Tax
Contractor Overhead
Contractor Profit
Totals 716,265 0 0 0 0
Square Foot
Building construction costs Sq Ft
~OOO 0 0 0
79.59 #DIV/O! #DIV/O! #DIV/O!
$ 716,265.00
A-(~
City of St. Joseph
Policy and Procedures for Tax Increment Financing
Project
For the purpose of this policy, the "EDA" shall also mean the St. Joseph Economic Development
Authority, which serves in conducting various economic development, housing and redevelopment
programs and activities within the City of St. Joseph.
I. GENERAL POLICY
The purpose of this policy is to establish th~ position of the City of St. Joseph and the Economic
Development Authority with respect to the use of Tax Increment Financing for private
development within the City. This policy shall be used as a guide in the application for, review and
consideration of any requests for Tax Increment assistance. The fundamental purpose of tax
increment financing in St. Joseph is to encourage desirable development and/or redevelopment
that would not otherwise occur "but for" the assistance provided through TIF.
The City of St. Joseph and EDA shall consider Tax Increment Financing for projects that serve to
accomplish the City's goals for housing and economic development as they may change over
time. The goals include facilitating projects that would result in the creation of quality jobs(Le.
stable employment and/or attractive wages and benefits) and the attraction, retention, and
expansion of business and housing options in the City.
II. CITY's and EDA's OBJECTIVE FOR THE USE OF TIF
As a matter of adopted policy, the City of St. Joseph and EDA will consider using tax Increment
Financing (TIF) to assist private development projects to achieve one or more of the following
purposes:
. Remove blight and/or encourage redevelopment in the commercial and industrial areas of the
City in order to encourage high quality development or redevelopment and private
reinvestment in those areas.
· To provide for a balanced and sustainable housing stock to meet diverse needs both today
and in the future.
· To retain local jobs and/or increase the number and diversity of quality jobs (Le. stable
employment and/or attractive wages and benefits.
· To encourage additional unsubsidized private development in the area, either directly, or
through secondary "spin-off" development.
· To offset increased costs of redevelopment (Le. contaminated site clean-up), over and above
those costs that a developer would inCur in normal urban and suburban development.
· To facilitate the development process and to achieve development on sites which would not
be developed without this assistance.
· To meet other uses of public policy, as adopted by the Council from time to time, including
promotion of quality urban design, quality architectural design, energy conservation,
decreasing the capital and operating costs of local government, etc.
St. Joseph TIF Policy
1
El)A - 29
f f! - 15
III. COSTS WHICH QUALIFY FOR TIF ASSISTANCE
. Project design fees including: utilities, landscape, architectural and engineering design.
. Site related work including: permits for site work, earthwork/excavation, soil correction,
landscaping, utilities, streets and roads, street/parking lot paving, street/parking lot lighting,
curb and gutter, sidewalks
. Land acquisition
. Special assessments
. Legal fees (acquisition, finance, closing)
. Soil tests
. Environmental studies.
. Surveys
. Park and open space dedication fees
. Interest rate write downs
. Relocation assistance
. Replacement or clean-up of contaminated soils which would otherwise preclude
redevelopment
. Rehabilitation
. Any other costs allowable by Statute
IV. PROJECTS WHICH MAY QUALIFY FOR TIF ASSISTANCE
All new TIF projects considered by the City of St. Joseph and EDA must meet each of the
following minimum qualifications and will also be evaluated based on their ability to meet the
desired qualifications for assistance. However, it should not be presumed that a project meeting
any of the qualifications will automatically be approved. Meeting the qualifications creates no
contractual rights on the part of any potential developer to have its project approved.
MINIMUM QUALFICIA TIONS
1. The project should meet one or more of the Tax Increment Financing Objectives outlined in
Section II of this policy, but at a minimum shall:
. Remove blight and/or encourage redevelopment in the commercial and industrial
areas of the City in order to encourage high quality development and redevelopment
and private investment in those areas.
. To facilitate the development process and to achieve development on sites which
would not be developed without this assistance.
2. The developer must demonstrate that the project is not financially feasible "but for" the use of
TIF assistance.
3. The project must be consistent with the City's Comprehensive Plan, Zoning Ordinances and
the EOA's Strategic Plan or require changes to the plan and ordinances must be under active
consideration by the City at the time of final TIF application submittal.
4. Prior to approval of a TIF financing plan, the developer shall provide any requested market
and financial feasibility studies, appraisals, soil borings, private lender commitment, and/or
St. Joseph TIF Policy
2
i? IJIf - 21
f{-If:;
other information the City, EDA or its financial consultants may require in order to proceed
with an independent underwriting of the proposal.
5. The developer must provide adequate financial guarantees to ensure the completion of the
project. These may include, but not limited to: assessment agreements, letter of credit,
personal deficiency guarantees, maximum cost contract, etc.
6. Any developer requesting TIF assistance should be able to demonstrate past successful
general development capability as well as specific capability in the type and size of
development proposed. TIF will not be used when the developer's credentials, in the sole
judgement of the City, are inadequate due to past track record relating to: completion of the
projects, general reputation and/or bankruptcy, or other problems or issues considered
relevant by the City and EDA. '
7; The developer shall retain ownership of the project at least long enough to complete it, to
stabilize its occupancy, and to establish the project management and initiate repayment via
the TIF assistance.
DESIRED QUALIFICATIONS
1. TIF proposals creating a higher ratio of property taxes paid before and after redevelopment
will receive priority consideration. Given the different assessment circumstances in the City,
this ratio will vary widely. A 1:2 ratio of taxes paid before and after redevelopment is desired.
2. TIF proposals should normally not be used to support speculative industrial, commercial,
office or housing projects. In general, the developer should be able to provide market data,
tenant letter of commitment or finance statements which support the market potential/demand
for the proposed project.
3. TIF will normally not be used in a project that involves an excessive land and/or property
price. This will normally be where the acquisition price is more than 20% in excess of the
market value as determined by an independent appraisal of the property.
4. TIF will not be used in projects that would give a significant competitive financial advantage
over similar projects in the area due to the use of tax increment subsidies. Developers should
provide information to support that the TIF assistance will not create such a competitive
advantage. Priority consideration will be given to projects that fill an unmet market need.
5. TIF will be provided on a pay-as-you-go basis. Any request for up front assistance will be
evaluated on its own merit in accordance with this policy. Projects requesting pay-as-you-go
financing will receive priority consideration.
6. Preference will be given to projects that do not place extraordinary demands on City services.
If it is determined by the City's Public Works Director and City Engineer that an extraordinary
increase in public service would result because of the project, TIF financing will not be
considered.
7. TIF will not normally be used for projects that would generate significant environmental
problems in the opinion of the local, state, or federal governments. Priority will be given to
project that aim to clean-up existing contaminated sites and would facilitate the location of an
industry or business that has an environmentally sound track record, or meet a housing need
in the City.
8. Preference will be given to projects that meet good public policy criteria as determined by the
EDA and City Council, including:
St. Joseph TIP Policy
ElJA ~ ~
3
(t -/J
. Projects that are in accord with the Comprehensive Plan, Strategic Plan, Zoning Ordinances
and other redevelopment plans of the City and EDA,
. Projects that provide significant improvement to surrounding land uses, the neighborhood,
and/or the City,
. Projects that provide a significant increase in tax base,
. Projects that provide significant new, or retained employment,
. Projects that meet financial feasibility criteria established by the EDA, and
. Projects that provide the highest and best desired use for the property.
V. TAX INCREMENT PROJECT EVALUATION PROCESS
The following five methods of analysis for all TIF proposals will be used:
1. Consideration of project meeting minimum qualifications.
2. Consideration of project meeting desired qualifications.
3. Project meets "but for" analysis and statutory qualifications (Exhibit A).
4. Project Report Card (Exhibit B).
5. Project is deemed consistent with the EDA Strategic Plan and the City's Comprehensive Plan.
Please note that the evaluation methodology is intended to provide a balanced review. Each area
will be evaluated individually and collectively and in no case shall one area outweigh another in
terms of importance to determining the level of TlF assistance.
VI. APPLICATION FOR TIF ASSISTANCE FOR ALL TIF DISTRICTS AND
PROJECT AREAS
The City's tax increment financing program will be administered by the St. Joseph Economic
Development Authority (EDA). The St. Joseph EDA will require a non-refundable application fee
in the amount of $2,000 for its processing of the application. The application fee shall be paid to
the EDA at the time of final TIF application is submitted.
At the time a final TIF application is submitted, the applicant shall also deposit $8,000 with the
EDA if the project cost is estimated at $750,000 or less or $15,000 if the project cost is estimated
at $750,001 or more, with the EDA to cover its attorney's and consultant's costs incurred as part
of amending or establishing a TIF District, drafting and negotiating a development agreement, and
conducting and fiscal analysis that may be require to meet the requirements of utilizing TIF. If
additional costs are incurred beyond the $15,000, prior to the execution of a development
agreement, the EDA shall notify the applicant in writing and the applicant will be required to
deposit additional funds upon notice.
If the project is approved and the applicant proceeds with the project, the EDA shall reimburse the
applicant any unused portion of the deposit as of the date of execution of the development
agreement. If the applicant does not proceed with the project, the EDA shall reimburse the
applicant for the unused portion of the deposit as of the date that the EDA is notified in writing that
the applicant desires to withdraw its application.
VII. APPLICATION PROCESS
The application process is a two-step process and must be completed in accordance with the TIF
application procedures (Exhibit C). The purpose of this approach is to give an applicant the
opportunity to present a development proposal without expending a great deal of money and time
in pursuing a development that may conflict with the City's and EDA's goals and objectives.
St. Joseph TIF Policy
4
{;j)A- - 31
t {' - /fy
VIII. OTHER POLICY ISSUES
FISCAL DISPARITIES
Does not impact the City of St. Joseph according to State Statute.
Loss of Government Aid
The City and EDA shall follow applicable state laws in terms of potential public improvement
financing with TIF. It shall be the general policy of the City and EDA to identify public
improvements at the time of adoption or amendment of the TIF Plan.
PASSED AND DULY ADOPTED this _ day of
PASSED AND DULY ADOPTED this _ day of
.1998 by the City of St. Joseph.
, 1998 by the St. Joseph EDA.
Mayor
EDA Chair
ATTEST:
City Administrator
EDA Director
Attachment A "But For" Worksheet
Attachment B In-house Grading and Report Card
Attachment C Application Procedures
St. Joseph TIP Policy
5
EJ)tA:--3Z
tc -If
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.l{~
Attachment B
PROPOSED TAX INCREMENT FINANCING
Rating & Analysis
1. Ratio of Private to Public Investment in the Project:
Private Fllnd"Q'D<'
C~~~
3:1
2:1
Below 2: 1
$ " 0 D5, (70 '3
$ ':250:0{)f)
$ I H'7' f/o:3>
, /
q. 31;
Private Investment
TIFlPublic Investment
Ratio of Private /Public Financing
2. Jobs created and/or retained in the City:
~
# Jobs created/retained
26+
11-25
6-10
~
None
Total number of jobs created andlorretained as
a result of the project.
3. Pay Level of Jobs:
Job Classification
Wa2e
% of Median Class Waee*
(CJ;1~~C%lJY1 laborer
"It/VIS C U/{ (above I""
~ n, SO ( lINe-UtiI'! = \ 5,<-/3) I \ .310
~ n..<;o [t'V'f.d{a/ll~\5.,",,3) Ilst'Jo
Average Score:
EJ
***
~
3
2
1
Score:
5
4
3
~.
1
Score:**
5
.5
* Median Wage for Job Classifications is defined as the median wage for the applicable overall job classification in
the St. Cloud Metropolitan Statistical Area as identified by the Minnesota Workforce Center's most current report.
**Score Calculation (for each iob classification):
111 % of median wage for job classification or greater = 5
101- 110% of median wage for job classification = 4
100% of the median wage for job classification = 3
90 - 99% of the median wage for job classification = 2
Less than 89% of median wage for job classification = 0
*** The average score of all job classifications shall be used as the overall score for this category.
E/JA--3Y
f( -J2
4. Increase in Estimated Market Value:
1) ~ I
Before/ Aft~"Plonmpnt
Estimate market value of site after development ~
Estimated market value of site before development 1:3
1:2
Ratio of value before/after development 1: 1
1:<1
Stoore
" ~
4
3
2
1
o
>rt;
$ 'I 3a?,ooo
$ IO~.~ro
.
5. Will the proposed project redevelop a previously contaminated or environmentally challenged site;
redevelop a blighted or underutilized parcel; or, preserve/promote historical features of existing
buildings?
~5
?(5~ ~No(Zeropoints)
6. Is the proposed project consistent with the City's long term development and redevelopment guidelines as
contained in the City's Comprehensive Plan?
~5
~Yes(;;,"~ ~No(Zeropoints)
7. Does the Developer agree to pay-as-you-go financing?
-15
peS(5po~
_No (Zero points)
CALCULATION OF OVERALL SCORE:
Total Points Scored / 7 = average score.
Average, 4 = Below Average, 5 = Fail
'04,,)
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www.cityofstjoseph.com
CITY Of ST. JOSEPH
DATE:
July 3, 2007
Administrdtor
Judy Weyrens
MEMO TO:
S1. Joseph Economic Development Authority
Honorable Mayor Rassier
Members of the City Council
Administrator Weyrens
Mdyor
Richdrd Cdrlbom FROM:
Cynthia Smith-Strack, Municipal Development Group
Councilors
Steve Frdnk
Al Rdssier
Renee Symdnietz
Ddle Wick
RE:
McComb Group Market Study
Background:
In late February of this year the City executed a contract agreement with McComb Group to
conduct market research and analysis of S1. Joseph business communities, trade areas,
potential demand for retail/services and potential demand for rental units within the Central
Business District.
The market study was to be completed by June 30th. As of the date of this letter the City has not
taken receipt of the study, however, the Ci~/EDAlCOllege/Chamber and Mr. McComb will be
meeting to review the final study on July 11 h. If copies of the study are received prior to the
meeting they will be forwarded to members of the City Council and EDA, time permitting.
Action:
Review and comment following the presentation by Mr. McComb is kindly requested.
:?-5
2.)" College Avenue North. PO Box bbs . Sdint. Joseph, Minnesotd )"b)74
Phone Fo.jbj.72.01 FdX Fo.jbj.Oj42.