2018-11-07 Council Work Session PacketCITY OF MENDOTA HEIGHTS CITY
COUNCIL WORK SESSION
AGENDA
November 7, 2018
6:00 pm
Mendota Heights City Hall
1. Open Session--Call to Order
2. Review of Tax Increment Fundamentals, and Request for TIF Assistance for
Michael Development Senior Housing
3. Adjourn
DATE: November 7, 2018
TO: Mayor, City Council and City Administrator
FROM: Tim Benetti, Community Development Director
Mark McNeill, City Administrator
SUBJECT: City Council Workshop – Pre-information & Presentation of TIF Request from
Michael Development (Phase II) - Tax Increment Financing District No. 2
Introduction
The City Council will hold a workshop meeting at 6:00 PM on Wednesday, November 7, to hear
information about Tax Increment Financing (TIF) in general, and then information about a TIF
proposal which will be considered by the City Council at its November 20th meeting.
Background
Mike Swenson of Michael Development has submitted an application for tax increment financing
(TIF) assistance for Phase II of his Mendota Heights Apartments development, located at 2160-
2180 Highway 13. These properties were formerly known as the Mendota Motel and Larson
Garden Center sites.
This project was originally planned as two, 70-unit market-rate apartment buildings, to be built in
two separate phases. Phase I is currently taking place on the former motel site, while Phase II is
proposed to be constructed on the former garden center site. These plans had been revised to
provide for one 70-unit market rate apartment in the Phase I component, while Phase II is to consist
of “up to 68-units” apartment.
Mr. Swenson is proposing a further modification of his plans by offering to provide up to 62-units
of senior (aged 55+) housing under this Phase II.
On June 20, 2017, the City approved the creation of Redevelopment Tax Increment Financial
District No. 2 on the former motel and garden center properties. A related Interfund Loan
Agreement was also approved, which will provide the developer with up to $634,000 of TIF
financial assistance over a 9-year period on just the Phase I site.
At the November 7th City Council Workshop session, Ms. Stacie Kvilvang of Ehlers and
Associates, the City’s financial advisor, will provide a brief re-cap on the basics of TIF, and then
present a preliminary analysis and findings for Mr. Swenson’s request for TIF assistance on the
Phase II component.
Please note the final consideration of this Phase II TIF financing will be presented at the November
20, 2018 regular council meeting.
Any questions prior the workshop should be directed to Community Development Director Tim
Benetti, or City Administrator Mark McNeill.
TIF 101 & Michael Development TIF RequestCity of Mendota HeightsStacie Kvilvang – Ehlers1November 7, 2018
Agenda• Tax Increment Financing (TIF) Basics• Overview of existing TIF District• Project analysis & recommendation• Next Steps
What is TIFThe ability to captureand usemost of the increased local property tax revenuesfrom new developmentwithin a defined geographic area.
Why Use TIF• Encourage certain types of development or redevelopment that would not normally occur without assistance (“but for” test)Redevelop blighted areasRemediate polluted sitesConstruct affordable housingCreate or retain jobs
Building Blocks of TIFOriginal Tax CapacityThere is Value in the District when created (also called “base value”)Tax revenues continue go to all local governments
Base Valuation and Taxes of the District6Currently City receives this much in taxes from the propertyTAX BREAKDOWNPropertyTax Local Fiscal DisparitiesCityCounty School Mk Value State-wideValueCapacity Taxes TaxesPortionPortion Dist Taxes Taxes0.92244 1.50049 0.37487 0.28004 0.04458 0.22295 0.0018252 0.45802$3,550 $3,465$1,443$1,078 $172 $858 $630 $2,8200.92244 1.50049 0.37487 0.28004 0.04458 0.22295 0.0018252 0.45802$4,770 $4,655$1,938$1,448 $231 $1,153 $900 $3,789CITY TOTAL$3,381 $24,580Greenhouse$493,300 8,273$14,114Misc TOTAL TAXESMotel$345,400 6,158$10,466Development
Building Blocks of TIFDevelopment occursTIF District “captures” value from new developmentAbatement can “capture” part or the entire value from the parcelOriginal Tax Capacity
TIF Example (26 Year Redevelopment District)8Base TaxesCaptured Tax CapacityDistrict EndsFull Taxes to all Entities
Taxes Not Captured in TIF•State Property TaxesTax paid by commercial users (cabin owners pay as well)Not included in local tax capacity rate, therefore it is not applied to captured value for TIF districts or abatement•Market Value TaxesSchool operating referendums and other school taxesBased upon market value of property rather than tax capacity of propertyNot included in local tax capacity rate, therefore it is not applied to captured value for TIF districts or abatement
TIF District: Where Increment is Collected10• Defines parcels whose increased value will be captured• Parcels do not have to be contiguous, but usually are• Must meet criteria in State law for type of District being established
Project Financing• Eligible usesLand acquisition and relocationDemolition and clearanceEnvironmental remediationSite improvements and parkingPublic utilitiesConstruction of affordable housingCity administrative costs
Redevelopment TIF District 2• Created on June 20, 2017• Included 9 parcels• 26-year term• Anticipated development of 138 apartment units in 2 phases
Phase 1 Development• Redevelopment of former motel site – 1 parcel• Michael Development of Minnesota, LLC• 69 Unit Apartment Building – non age restricted• Provided $634,000 of TIF with a maximum 9-year Term
The Project – Swenson Development, LLC• 62-Unit Sr. Apartments• Total project costs of approximately $12.630 million– Tax value of $10.720 million141 Bdrm 211 Bdrm + Den 162 Bdrm 25TOTAL 62Unit Summary
Base Value and Future Value15Estimated Total TaxableMarket Value MarketArea/Phase New Use Per Sq. Ft./UnitValue2 Apartments 160,000 10,720,000TOTAL 10,720,000PROJECT INFORMATION (Project Tax Capacity)2,221%increase in property valuation
Future City Portion of Taxes16Future City taxes from Phase 2Local City County School Mk ValueTaxes Portion Portion Dist Taxes0.89508 0.37826 0.26580 0.03878 0.21224 0.00172$110,990$46,904$32,959 $4,809 $26,318 $17,086$128,076Sr. AptTAX BREAKDOWN - $160,000 Per Sr. Apt UnitDevelopment MiscTOTAL TAXES
SOURCESAmount Pct. Per UnitFirst Mortgage 8,190,000 65% 132,097 TIF Note 700,000 6% 11,290 Equity 3,740,994 30% 60,339 TOTAL SOURCES 12,630,994 100% 203,726 USESAmount Pct. Per UnitAcquisition Costs 800,000 6% 12,903 Construction Costs 10,476,337 83% 168,973 Environmental Abatement/Soil Correction 465,000 4% 7,500 Professional Services 453,000 4% 7,306 Financing Costs 436,657 3% 7,043 TOTAL USES 12,630,994 100% 203,726 Sources and Uses17TIFDeveloper CashTotal Development Costs
Residential IncomeRental Unit IncomeMonthly Unit Annual Size Rent/Unit Type Rent Type Rent Count Revenue Sq. Ft. Sq. Ft.1BRMarket Rate$1,270 21 $320,040 771 $1.651BR+DenMarket Rate$1,580 16 $303,360 955 $1.652BRMarket Rate$2,000 25 $600,000 1,210 $1.65Gross Potential Rent 101,950 62 $1,223,400 61,721 $1.65# of Stalls Annual $ Per StallOther Residential Income(if available)Revenue Per MonthParking 68 $29,376 $36$1,140$10,602Total Other Income $41,118Total Residential Income$1,264,518AnnualResidential VacancyPercent Loss5.0%$0Gross Potential Rent 5.0%($61,170)Total Vacancy($61,170)$1,203,348ExpensesApartment Operating CostsAmount Per Unit$29,450 $475$105,000 $1,694$43,400 $700$32,000 $516$65,036 $1,049Total Operating Costs $274,886 $4,434Apartment Management, Taxes, & ReservesAmount Per UnitManagement Fees4.00% of EGI$48,134 $776Property Taxes $128,092 $2,066Replacement Reserves $15,500 $250Total Management and Other Costs $191,726 $3,092$466,612$7,526Net Operating Income (NOI) $736,736Tax Increment Financing$94,897Net Operating Income (with Assistance) $831,633InsuranceMaintenanceTotal ExpensesAdministrativePayrollUtilitiesEffective Gross Income (EGI)By Line ItemStorage LockersMisc. Income18RentsAnnual Rent RevenueAnnual IncomeManagement CostsNet Operating Income& TIF Assistance
Stabilized2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032IncomeYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13Effective Gross Income (EGI) 1,203,348 1,233,432 1,264,267 1,295,874 1,328,271 1,361,478 1,395,515 1,430,403 1,466,163 1,502,817 1,540,3871,578,897 1,618,369Total Expenses 466,612 474,688 482,965 491,449 500,146 509,059 518,196 527,561 537,161 547,000 557,085 567,422 578,018NET OPERATING INCOME 736,736 758,744 781,303 804,425 828,125 852,418 877,319 902,841 929,002 955,817 983,302 1,011,475 1,040,351Tax Increment Financing RevenueInflator:0%0 45,131 94,89794,897 94,897 94,897 94,897 94,897 94,897 94,897 94,897 94,897 0ADJUSTED NET OPERATING INCOME 736,736 803,875 876,199 899,322 923,022 947,315 972,215 997,738 1,023,899 1,050,714 1,078,199 1,106,371 1,040,351Debt ServiceDebt TermsYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13Debt A: First Mortgage30 yr amortization @ 5.25%589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091Total Debt Service 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091 589,091Calc MethodDebt CoverageDebt A125% 136% 149% 153% 157% 161% 165% 169% 174% 178% 183% 188% 177%Debt Coverage w/o Tax Increment FinancingDebt A125% 129% 133% 137% 141% 145% 149% 153% 158% 162% 167% 172% 177%NET CASH FLOW AVAILABLE FOR DISTRIBUTION 147,645 214,784 287,108 310,231 333,931 358,224 383,124 408,647 434,808 461,623 489,108 517,280 451,260Returns AnalysisCash on Cash Annual Return3.9% 5.7% 7.7% 8.3% 8.9% 9.6% 10.2% 10.9% 11.6% 12.3% 13.1% 13.8% 12.1%Cash on Cash Average Annual ReturnStart From:Year 13.9% 4.8% 5.8% 6.4% 6.9% 7.4% 7.8% 8.2% 8.5% 8.9% 9.3% 9.7% 9.9%Cash on Cash Annual Return (w/o TIF assistance)3.9% 4.5% 5.1% 5.8% 6.4% 7.0% 7.7% 8.4% 9.1% 9.8% 10.5% 11.3% 12.1%Cash on Cash Average Annual Return (w/o TIF assistance) 3.9% 4.2% 4.5% 4.8% 5.2% 5.5% 5.8% 6.1% 6.4% 6.8% 7.1% 7.5% 7.8%Cash on Cost Annual Return5.8% 6.4% 6.9% 7.1% 7.3% 7.5% 7.7% 7.9% 8.1% 8.3% 8.5% 8.8% 8.2%Cash on Cost Annual Return (w/o TIF assistance) 5.8% 6.0% 6.2% 6.4% 6.6% 6.7% 6.9% 7.1% 7.4% 7.6% 7.8% 8.0% 8.2%19Annual TIFReturn on Cost (NOI/TDC)Debt Service CoverageProject ReturnsReturn on $3.74 million equity
Review Summary20Return on Cost (With TIF) 6.94%Return on Cost (Without TIF) 6.19%Year 3 Return on Equity (With TIF) 7.67%Year 3 Return on Equity (Without TIF) 5.79%Year 12 Return on Equity (With TIF) 13.83%Year 12 Return on Equity (Without TIF) 11.29%Year 12 AVG Return on Equity (With TIF) 9.68%Year 12 AVG Return on Equity (Without TIF) 7.47%
TIF Recommendation• Recommend: $700,000 PAYGO TIF Note– 11 Year Term21
Stacie Kvilvang651-697-8506skvilvang@ehlers-inc.comEhlers
Ryan Ruzek
From:
Kevin Kielb <Kevin.Kielb@bolton-menk.com>
Sent:
Tuesday, November 6, 2018 2:29 PM
To:
Ryan Ruzek
Cc:
Eric Leagjeld
Subject:
Town Center Retaining Wall Plan
Attachments:
117253501-Layout1.pdf
Rya n,
Sorry this took so long. Eric mentioned that it got a little more involved than originally anticipated.
After discussions with contractors, we ended up with two options for the short-term solution. Either a pre -cast barrier (J
Barrier) or a reinforced fence would work. Based on what we are hearing, the precast barrier will most likely be the least
costly and most functional option.
For estimating costs and comparing options, we used the MnDOT average bid prices.
1. For an anchored barrier, the unit price is $23.72/LF. Based on a length of 100 LF, an estimated cost of around
$2,500 can be expected. Due to the small quantity and site constraints, the costs will most likely range between
$3,000 and $5,000.
2. For a 4' high fence, the unit price is $18.00/LF. Based on our design, there are a number of factors that will
increase the unit price including:
• Soil anchors (2) at approximately $2,000 each = $4,000.
• Raw cable costs should be approximately $7/LF, two strands, approximately $1,400 for materials. Labor to
install & misc. hardware will be another $1,100, for a cost of $2,500.
• Removals, including posts = $1,500.
• Total costs will likely be between $8,000 and $12,000.
A warning sign should be installed on each end, similar to that shown on the plan sheet. This is a standard sign and
should be readily available. Assume $500 for the two signs to be furnished and installed.
Please call if there are any questions related to the plan. Based on these estimated prices, will the City be contacting
contractors for the installation? Let us know if there is any assistance required, or if the City will perform that portion of
the project.
Thanks,
Kevin P Kielb P.E.
Principal Engineer
Bolton & Menk, Inc.
7533 Sunwood Drive NW
Suite 206
Ramsey, MN 55303-5119
Mobile: 651-968-7760
Kevin.Kielb@Bolton-Menk.com
"Please note my email address has changed"
LINE SECTION
NOTES:
1. SEE MO/DOT STANDARD PLATE 8337 FOR
REINFORCING REQUIREMENTS
2. PLACEMENT OF BARRIERS SHALL CONFORM TO
THE LATEST VERSION OF THE MN MUTCD,
INCLUDING "FIELD MANUAL FOR TEMPORARY
TRAFFIC CONTROL ZONE LAYOUTS"
3. SECURE ADJACENT BARRIER SEGMENTS WITH
STANDARD CONNECTION PIN, TYP. .4
8,. a
a °
c� da
v a 4
® d v °
d.
® v a•4
1'-101/2" " °�
o
TYPICAL SECTION
TEMPORARY PRECAST
CONCRETE BARRIER
NOTTOSCALE
TEMPORARY BOULDER PROTECTION
B ALTERNATE #W
W8-14
(24 X 24)
FALLEN
ROCKS
TEMPORARY BOULDER PROTECTION
SIGNAGE
(PULL, ENO OR CORNER POST)
BRACEBAR
FOR
POST
CONCRETE
lBLE, CENTERED
YP•
DEPTH
TRUSS ROD
STRETCHER
BELOW
INSION CABLE_
D, LACE THRU���`�
GRADE
FRAMING MEMBERS
TYPE 1(SCHED 40) ROUND PIPE
TENSION CABLE
AS SPECIFIED
:CURE POSITION
'`��"
POSTS (LINE, END, CORNER AND PULLPOSTS)
FABRIC HEIGHT4 FEET
OUTSIDE DIAMETER
o
�I
-o
2.875
i
N
I
48
12
54
10'-0" CENTER TO CENTER (MAX)
PULL, END OR CORNER POST
TEMPORARY BOULDER PROTECTION
ALTERNATE#1
-TENSION BANDS ASSPECIRED
SPACED 15" APART MAXIMUM TURNBUCKLE AND CLEVIS
AS SPEUFIED
— towGROUND ANCHOR
AS SPECIFIED
II
CONCRETE FOOTING
I SEESCHEDULE
CHAIN LINK FENCE FRAMEWORK SPECIFICATIONS
POST
CONCRETE
DEPTH
FOOTING
BELOW
GRADE
FRAMING MEMBERS
TYPE 1(SCHED 40) ROUND PIPE
(IN)
DIA (IN)
DEPTH (IN)
POSTS (LINE, END, CORNER AND PULLPOSTS)
FABRIC HEIGHT4 FEET
OUTSIDE DIAMETER
(IN)
2.875
48
12
54
WALLTHICKNESS(IN)
0.203
WEIGHT(LB/FT)
5.79
MATERIALS
1, CHAIN LINK FENCE: 2" X 2" 9 GAUGE GALVANIZED
2. CABLE: z"¢ MINIMUM WITH 7,500 LB MINIMUM WORKING LOAD LIMIT
3. WIRE ROPE CLIPS: QUANTITY AND SPACING PER MANUFACTURER TO MEET7,50D LB WORKING LOAD
LIMIT
4. TURNBUCKLE: 7,500 LB MINIMUM WORKING LOAD LIMIT
S. CLEVIS: 7,SDD LB MINIMUM WORKING LOAD LIMIT
6, SOILANCHOR: 11,000 LB MINIMUM WORKING LOAD LIMIT. ANCHOR SELECTION BY CONTRACTOR AND
MAY INCLUDE ANCHOR TYPES AS HELICAL MANTA RAY AND APPROVED EQUALS
LOCATION MAP
J
PROJECT MAP
I HEREBY CEAF 111TIG PIAN, SPECIFlCATION, OR REPORT WAS PREPARED°�1tl" SHEET
BY ME OR UNDER MY DIRECTSUPER-1.N AN—I AM A DULY LICENSED BOLTON EEL MENDOTA HEIGHTS, MINNESOTA
SIO
0 5 10 PROFESNAL ENGINEER UNDER — IA— OF— ETATE OF MINN. �u.WN EEL TOWN CENTER RETAINING WALL TEMPORARY PROTECTION
VERT. S.1
SCALE FEET Eric Leagjeld EEL
& MENK " A. BOULDER WALL TEMPORARY PROTECTION PLAN
cNo 40430 MM/DD/YYYY ENr PRa. No.
�XXXXXXXXXX