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HomeMy WebLinkAboutResolution - HRA 88-02 - Approve Minor Revisions - Elim Shores Project - 01/03/1989 HRA RESOLUTION NO. 88- 02 RESOLUTION GIVING APPROVAL TO MINOR REVISIONS TO A TAX INCREMENT FINANCING PLAN IN CONNECTION WITH THE ELIM SHORES, INC. PROJECT UNDER CHAPTER 469 , MINNESOTA STATUTES. WHEREAS, the City of Eden Prairie, Minnesota (the "City") has established the Housing and Redevelopment Authority in and for the City of Eden Prairie (the "Authority") for the purpose, among others, to undertake tax increment projects under Minnesota Statutes, Chapter 469 (the "Act") ; WHEREAS, Elim Homes, Inc. , a Minnesota nonprofit corporation acting on behalf of itself and for Elim Shores, Inc. , an affiliated Minnesota nonprofit corporation (collectively, the "Developer") has filed a proposal dated August 12, 1988 with the City (the "Proposal") requesting that the City and the Authority approve a project which will consist of the acquisition of the real property described on Exhibit A attached hereto and the construction thereon of a 64-unit housing facility and related common recreation and support facilities for rental to elderly persons of low and moderate income (the "Project") ; and • WHEREAS, the Developer has requested the approval of an interest reduction program for the Project as permitted by the Act (Minnesota Statutes §469. 176, Subd. 4 (b) ) to be funded with revenues derived from a tax increment financing plan; and i WHEREAS, based in part upon the representations of the Developer in the Proposal (in particular, pages 5 and 6 thereof) the Project is not reasonably expected to occur solely through private investment within the reasonable forseeable future and, accordingly, tax increment financing is deemed necessary to encourage the development of the Project and to serve the purposes of the Act as more fully set forth herein; and WHEREAS, to encourage the development of the Project and to serve the purpose of the Act as more fully set forth herein, the Authority preliminarily determined on October 18, 1988 that it is necessary and appropriate to proceed with the Project and approved a Tax Increment Financing Plan on such date; WHEREAS, minor revisions to such plan are necessary: NOW, THEREFORE, THE BOARD OF COMMISSIONERS OF THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF EDEN PRAIRIE HEREBY RESOLVES AS FOLLOWS: 1. The Authority hereby adopts and approves a revised � w Tax Increment Financing Plan for Elim Shores Project (revised January 3 , 1989) (the "Revised Tax Increment Financing Plan") as attached hereto as Schedule I. 2. The Revised Tax Increment Financing Plan is hereby incorporated by reference herein as if set forth in full herein including the establishment of the tax increment financing district as a housing district and the findings, expectations, estimates and determinations set forth therein. 3. The Revised Tax Increment Financing Plan is hereby determined to be in full compliance with the provisions of the Act including, without limitation, Minnesota Statutes §469. 175, Subd. 1. 4. The Authority hereby determines and authorizes to establish an interest reduction program pursuant to Minnesota Statutes §469. 176, subdivision 4 (b) and §469.012, subdivisions 7 through 10. The interest reduction program (the "Interest Reduction Program") will have a duration of 12 years after the date of first payment thereunder. The Interest Reduction Program shall provide for the subsidization of $75,000 of interest payments on first mortgage financing for multifamily housing units for low to moderate income elderly persons living within the housing district established hereby and the Authority hereby determines it necessary and appropriate to enter into the Development Agreements described in the Revised Tax Increment Financing Plan for the implementation of the Interest Reduction Program authorized hereby. 5. This Authority hereby determines that the Tax Increment Financing Plan originally submitted to the members of the County Board of Commissioners and the school districts contained the necessary information required to be presented to the members of the County Board of Commissioners and school district pursuant to Minnesota Statutes §469.175, Subd. 2 , including the Authority's estimate of the fiscal and economic implications of the proposed Tax Increment Financing District and there is no material change in such information in the Revised Tax Increment Financing Plan. 6. The Authority hereby determines that the Revised Tax Increment Financing Plan does not contain any modifications described in Minnesota Statutes §469.175, Subd. 4 , and, accordingly, no new notice or public hearing is required under Minnesota Statutes §469. 175, Subd. 2 and 4, for the Revised Tax Increment Financing Plan. 7. The City Council is hereby requested to conduct a public hearing on the Tax Increment Financing Plan and to thereafter approve the Revised Tax Increment Financing Plan in accordance with Minnesota Statutes §469.175, Subd. 2. w' Approved and adopted by the Housing and Redevelopment . Authority of the City of- Eden Prairie, Minnesota this 3rd day of January , 1989. Mayor ATTEST: I Revised December 13 , 1988 2nd Revision for December , 1988 3rd Revision for January , 1989 SCHEDULE I CITY OF EDEN PRAIRIE REVISED TAX INCREMENT FINANCING PLAN ELIM SHORES, INC. PROJECT TAX INCREMENT FINANCING PLAN FOR �ELIM SHORES PROJECT I. BACKGROUND ELIM Homes, Inc. , a Minnesota non-profit corporation (the "Developer") , has proposed the construction and operation of a rental housing facility (the "Project") in the City of Eden Prairie, Minnesota (the "City") , consisting of approximately 64 apartments and common recreation and support facilities. The Project will be located adjacent to Lake Mitchell, near the intersection of Highway 5 and Country Road 4, on the real estate described on Exhibit A hereto (the "Project Site") . The Project will be designed for rental to elderly persons of low to moderate income, and will offer a full range of living and care services including congregate dining, recreation and transportation programs. For purposes of this Tax Increment Financing Plan, elderly persons means persons aged 62 and over, provided that two adults living together shall be deemed both to be elderly so long as one of them is age 62 or older. The Developer intends to finance construction of the Project through the issuance by the City of multifamily housing revenue bonds (the "Bonds") pursuant to Minnesota Statutes, Chapter 462C, which will be secured by a first mortgage on this Project and the Project Site and by full -recourse loan agreement with the Developer. In order to make the Project and its 46 financing feasible, the Developer has requested the Housing and 1 Redevelopment Authority of the City of Eden Prairie (the "Authority") to finance an interest reduction program for the Project with revenues derived from a tax increment financing plan established for the Project, pursuant to Minnesota Statutes, Section 469.176, subdivision 4 (b) . II. STATUTORY AUTHORITY The Authority has power and authority to establish tax increment financing districts pursuant to Minnesota Statutes, Sections 469.174 to 469.179 (the "Act") , and to use tax increments to reduce interest payments on the Bonds pursuant to Minnesota Statutes, Section 469.012, subdivision 7 through 10 and an Interest Reduction Program adopted by the Authority on January _, 1989. III. BOUNDARIES AND CLASSIFICATION OF DISTRICT The Authority hereby creates a tax increment financing district (the "District") consisting of a "housing district" as defined in Section 469. 174, subdivision 11, of the Act, and encompassing the parcels of property identified on Exhibit B attached hereto. The Authority hereby finds that the Project, which is to be located within the boundaries of the District, is intended for occupancy, in part, by elderly persons of low and moderate income within the meaning of Section 469.174, subdivision 11, of the Act. The Authority also hereby finds that at least 75% of the rental units in the Project will be available to low and moderate income elderly persons, as set forth in Part VI hereof, and therefore 2 not more than one-third of the total fair market value of the Project consists of improvements to be constructed for commercial uses or for Iuses other than low and moderate income housing. IV. STATEMENT OF OBJECTIVES The Authority has determined that there is a need for development of rental housing facilities in the City, and in particular a need for development of rental housing facilities which provide a high quality of life for low to moderate income elderly persons in the City, in a manner consistent with the City's comprehensive plan and housing policies. The objectives sought to be accomplished by the Authority in carrying out this Tax Increment Financing Plan are to meet such needs by: 1. promoting and securing the prompt development of the property in the District in a manner consistent with the City's comprehensive plan and housing policies; 2. promoting and securing additional housing opportunities in the City, thereby improving City living standards; 3 . improving the financial base of the City and surrounding area, and increasing the tax base; and 4. encouraging the development of safe, decent and attractive rental housing in the City, and particularly rental housing designed for occupancy by elderly persons of low or moderate income. 3 V. DEVELOPMENT ACTIVITIES The development program for the Project consists of . the acquisition and construction by the Developer of an approximately 64-unit multifamily rental housing facility designed for occupancy by elderly persons of low to moderate income. In order to permit the Developer to keep rentals for the units at an affordable level and to permit the Developer to provide low rent units as provided in Part VI below, the Authority will use tax increments derived from the District to pay a portion of the interest on the Bonds, or other first mortgage financing used to finance the Project. Except as described in Part VII below, the Authority does not intend to acquire any property within the District in connection with the development of the Project. The Authority has not entered into any contracts at the present time relating to the development activities to take place within the District. However, the Authority reasonably expects to enter into a Development Agreement and an Interest Rate Reduction Assessment Agreement (the "Development - Agreements") with the Developer, under which the Developer agrees to construct the Project "and 'the Authority agrees to provide tax increment financing assistance through an interest reduction program as described herein. The Development Agreements will also (a) provide income limitations for thirteen of the rental units as set forth in Part VI hereof and as required by Minnesota Statutes, Section 469.012 , 4 subdivision 8, (b) provide that, upon any sale or transfer of the Project by the Developer, the Authority shall be entitled to a . payment by the Developer in an amount determined pursuant to Part VII hereof, as required by Minnesota Statutes, Section 469.012, subdivision 9, and (c) use its q od faith efforts to provide rent . .limitations for 13 of the units as set forth in Part VI hereof. It is currently expected that construction of the Project will commence on or about February, 1989, and that the Project will be available for initial occupancy on or about October, 1989. VI. LOW AND MODERATE INCOME AND RENT LIMITS The Development Agreements with the Developer will provide, and the Developer shall agree, that as long as tax increment financing assistance through the interest reduction program (as described herein) is being provided for the Project, the Developer shall ensure (a) that 20% of the rental units in the Project are made available to and occupied by elderly persons whose anticipated annual income (at initial occupancy) is not more than 50% of the median income (adjusted for family size) for the Twin Cities Metropolitan Area, as established from time to time by the United States Department 'of Housing and Urban Development ("HUD") , and (b) that an additional 55% of the rental units are made available to and occupied by persons whose anticipated annual income (at initial occupancy) is not more than 66 times 120 percent of the monthly fair market rent for the unit as established from time to time by HUD. No single family 5 i housing units, as defined in Minnesota Statutes 462C.02, Subdivision 4, are being financed in conjunction herewith. The . Development Agreements will also provide for income certification at the time of initial occupancy and other measures designed to verify the extent to which the low and moderate income occupancy goals are met. The Development Agreements with the Developer will also provide, and the Developer shall agree, that as long as tax increment financing assistance through the interest reduction program is being provided for the Project, the Developer shall use its good faith efforts to limit the monthly rents for thirteen (13) , or twenty percent (20%) , of the units as follows: Number of Unit Type Units Subsidized Rentals 1 Bedroom (590 sq. ft. ) 2 $295 1 Bedroom (620 sq. ft. ) 7 $340 1 Bedroom/Den (715 sq. ft. ) 2 $495 1 Bedroom/Den (820 sq. ft. ) 2 $510 Provided, however, notwithstanding the subsidized rentals listed above, the maximum rental amounts for any of the 13 low-rent units may be increased from time to time by the Developer using the following formula. The maximum subsidized rentals shall be calculated as follows: multiply (A) the median income for the Twin City Metropolitan Area, adjusted for a family size of one and one-half elderly persons, times (B) the percentage of such income which is typically used to pay for shelter and like services times (C) 50% divided by (D) 12, to produce a monthly 6 rental. The initial maximum monthly rent based on this formula is $510, based on a median income adjusted for family size, of . $30,600 (A) and a percentage of income used for shelter and like services of 40% (B) . ($30, 600 X 40% X 50% 12 = $510 per month) . The subsidized portion of the rental for the 13 units described in the preceding paragraph is the difference between the estimated lowest present market value rent for such units ($620) and the maximum subsidized rental ($510) or $110 per unit per month. The Development Agreements shall permit the City to have access to the books and records of the tenants, including leases for individual units, for the purpose of determining whether the intended subsidies are being maintained for such 13 units and the Developer shall agree in the Development Agreements to pay-- e-the- i ^r' �3��� au t equal to any in-tended subsidy which is not actually furnished to the residents of such 13 units. VII. AUTHORITY EQUITY The Development Agreements will provide that during the term of the Development Agreements the Authority will have an equity interest in the Project, which shall consist of the Authority's right, upon any sale or transfer by the Developer of its fee title interest in the Project to any person other than an affiliate of the Developer (i.e. , a nonprofit corporation under common control or management to the Developer and herein referred to as an "Affiliate") to receive a payment from the 7 Developer in an amount equal to (a) the sale price for the Project (or, in the case of any sale or transfer other than an arms-length sale, the appraised value of the Project) , less the sum of the following: (i) an amount equal to the Developer's cash equity contributed to the Project, (currently proposed to be $1, 000, 000) plus the amount of any additional cash equity contributed by the Developer or an affiliate in connection with the construction, acquisition or improvement of the Project; and (ii) an amount equal to the unpaid principal amount of all outstanding Bonds and any other debt the proceeds of which were used to improve, construct or equip the Project; multiplied by (b) a fraction, the numerator of which is the sum of the interest reduction payments made by the Authority here- under through the date of sale together with an amount representing a return on the Authority's contribution calculated from the respective dates of each payment thereof to the date of sale at a rate equal to eight percent (8%) per annum, without compounding, and the denominator of which is the amount determined in (a) (i) above plus any other moneys invested in the construction, improvement, equipping or operation of the Project by the Developer or any Affiliate, including without limitation, payments made by Elim Homes, Inc. , under its Guaranty Agreement relating to the Bonds and any rent subsidy payments made by any Elim affiliate (including the proposed rent subsidies to be 8 contributed by the Elim Foundation) , together with an amount representing a return on all of the foregoing calculated from the respective dates of any such payment or contribution to the date of sale at a rate equal to eight percent (8%) per annum, without compounding. The Authority's right to receive such payment shall be secured by the Development Agreements and/or a mortgage on the Project and the Project Site in favor of the Authority; provided any such mortgage shall be subordinate to any mortgage securing the Bonds or any other mortgage financing improvements to the Project. VIII. FINANCIAL DATA 1. Costs of the Project. The estimated costs of acquiring the Project Site, preparation of the Project Site, construction of the Project and operating the Project during the initial rent-up period, are set forth below: Construction of the Facility $2,747 , 000 Land Acquisition Costs 325, 000 Site Preparation and Improvement Costs 349, 600 Furnishings and Equipment Costs 100, 000 Architect, Engineering and Other Project Costs 195, 000 Capitalized Construction Period Interest 196, 100 Debt Service Reserve Fund 410, 000 Legal, Accounting and -Financing Costs 280, 800 Marketing Costs 225, 000 Working Capital 271, 500 TOTAL $5, 100, 000 The Developer intends to invest in 1988 and 1989 approxi- mately $1, 000, 000 cash toward development of the Project, and to raise the additional $4, 100, 000 through issuance of the Bonds by 9 the City. (Depending on actual construction bids, the principal amount of the Bonds may be increased to $4,400,000.) 2. Amount and Source of Authority Assistance. The Authority anticipates that it will provide total assistance to the Developer in an amount equal to $900, 000, consisting of the use of an average of $75, 000 of the tax increment derived from the District in each of the years 1991 through 2002 to pay a portion of the interest on the Bonds or other first mortgage financing for the Project in each of those years. The Authority also estimates that it will incur administrative expenses relating to the District of not more than $9, 000, which will be reimbursed from tax increments. The interest reduction payments shall average $75, 000 per year, but at no time shall the Authority pay interest reduction payments in excess of the amounts on deposit by reason of the collection of tax increments authorized hereby. In the event the average annual interest reduction payments hereunder is less than $75, 000 and there are sufficient funds to pay more than $75, 000 in interest reduction payments in any one year, the Authority shall increase the interest reduction payment for such year to the lesser of (i) the amount necessary to increase the average annual payments to $75, 000 per year or (ii) the amount of tax increments currently available therefor. 3 . Bonded Indebtedness. The Authority does not anticipate incurring any bonded indebtedness in connection with the District or the Project. 10 i4. Original Assessed Value. The assessed value of the taxable property in the District, as most recently certified by . the Commissioner of Revenue, is $51,840, which is expected to be the "original assessed value" of such property within the meaning of Section 469.174, subdivision 7, of the Act. 5. Captured Assessed Value. It is estimated that, upon completion of the Project, the captured assessed value of the taxable property in the District will be $702, 000. The Authority anticipates that all of the tax increment derived from all of the captured assessed value will be needed for purposes of this Plan. 6. Tax Increment. The Authority estimates that, upon completion of the Project, the tax increment to be derived from taxes levied on the taxable property in the District will, • initially, be approximately $84,200 per year, and that such tax increment will increase at the rate of four percent (4. 0%) per year. Any excess tax increment which is not needed for purposes of this Plan will be returned to the county auditor pursuant to Section 469. 176, subdivision 2 , of the Act. 7 . Duration of District. The duration of the District will be the lesser of 25 years from the date of receipt of the first tax increment, or 12 years after the date of the first interest reduction payment. IX. ECONOMIC IMPACT The Authority has analyzed the impact of the tax increment financing on all of the taxing jurisdictions in which all or any part of the District is located. Attached hereto as 11 Exhibit C and Exhibit D, respectively, are the Authority's analysis of such impact (a) assuming that the captured assessed value expected to be generated by the Project would be available to the taxing jurisdictions without creation of the District, and (b) assuming that none of the captured assessed value expected to be generated by the Project would be available to the taxing jurisdictions without creation of the District. X. NEED FOR TAX INCREMENT FINANCING The Authority has determined, in its opinion, that the Project would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future, and therefore the use of tax increment financing as contemplated herein is necessary. The Authority has based this determination on various representations made by the Developer, and in particular on the Developer's Proposal to the City of Eden Prairie dated August 12, 1988 (the "Proposal") , and the financial analyses set forth therein. The Proposal and the financial analyses set forth therein establish that (a) the Project (given the proposed rents and income guidelines) cannot be expected to generate cash flows necessary to meet debt service requirements for the Bonds or other first mortgage financing for the Project, based on the current market conditions, without some form of public assistance, and (b) other potential forms of public assistance or governmental programs are either unavailable to the Project or unaffordable. 12 . XI. FINDINGS The Authority hereby makes the following findings in connection with the creation of the District: 1. The District constitutes a "housing district" within the meaning of the Act, in that the Project is intended, in part, for occupancy by elderly persons of low or moderate income. 2. The. Project would not reasonably be expected to occur solely through private investment in the reasonably foreseeable future, as set forth in Part VIII above. 3. This Plan conforms to the general plan for the development or redevelopment of the City as a whole. 4 . This Plan will afford maximum opportunity, consistent • with the sound needs of the City as a whole, for the development of the Project by private enterprise. 5. This Plan, and the provision of interest reduction assistance for the project as contemplated herein, is consistent with the Authority's Interest Reduction Program and any rules contained therein, and financing for the acquisition and construction of the Project is not otherwise available from private lenders upon terms and conditions affordable to the Developer. XII. SUBMISSION TO CITY This Plan shall be submitted to the City Council of the City for its approval, after notice and public hearing, as required by Section 469.175, subdivision 3, of the Act. The 13 Authority recommends the approval of this Plan by the City Council, based on the Authority's findings and determinations set forth herein. XIII. CONSULTATIONS As required by Section 469.175, subdivision 2, of the Act, prior to the actual formation of the District, and at least 30 days before the public hearing referred to in Part X above, a copy of this Plan was submitted to the members of the Hennepin County Board of Commissioners, the members of the board of Independent School District No. 272, and to any other parties referred to in said Section 469. 175, subdivision 2. Such members and other parties have been given an opportunity to meet with representatives of the Authority and/or to present their comments • at the public hearing. 14 i V This plan was adopted and approved by the Board of Commissioners of the Housing and Redevelopment Authority of the City of Eden Prairie on this 3rd day of January, 1989. Chairman Secretary 15 EXHIBIT A All that part of Outlot A, NORTH BAY OF TIMBER LAKES 2ND ADDITION, according to the plat on file and of record in the Office of the Registrar of Titles, Hennepin County, Minnesota lying northerly and northeasterly of the following described line: Commencing at the northeast corner of Lot 2, Block 1, NORTH BAY OF TIMBER LAKES, according to the plat on file and of'- record in the Office of the Registrar of Titles, Hennepin County, Minnesota; thence South 88 degrees 02 minutes 18 seconds West, assumed bearing, along the north line of said Lot 2 a distance of 261.74 feet to the northwest corner of said Lot 2 and the point of beginning of the line to be described; thence South 70 degrees 26 minutes. 32 seconds West a distance of 266.88 feet to the most northerly corner of Lot 2, Block 1, said plat of NORTH BAY OF TIMBER LAKES 2ND ADDITION; thence North 29 degrees 00 minutes 00 seconds West, along the northwesterly extension of the northeasterly line of said Lot 2 a distance of 121.46 feet to a point on the survey line which is as shown on said plat of NORTH BAY OF TIMBER LAKES 2ND ADDITION distant 120. 61 feet northeasterly of the westerly line of said Outlot A as measured along said survey line; thence continuing North 29 degrees 00 minutes 00 seconds West to the shoreline of Mitchell Lake as shown on said plat of NORTH BAY OF TIMBER LAKES 2ND ADDITION and said line there terminating. • EXHIBIT B All that part of Outlot A, NORTH BAY OF TIMBER LAKES 2ND ADDITION, according to the plat on file and of record in the Office of the Registrar of Titles, Hennepin County, Minnesota lying northerly and northeasterly of the following described line: Commencing at the northeast corner of Lot 2, Block 1, NORTH BAY OF TIMBER LAKES, according to the plat on file and of record in the Office of the Registrar of Titles, Hennepin County, Minnesota; thence South 88 degrees 02 minutes 18 seconds West, assumed bearing, along the north line of said Lot 2 a distance of 261.74 feet to the northwest corner of said Lot 2 and the point of beginning of the line to be described; thence South 70 degrees 26 minutes 32 seconds West a distance of 266.88 feet to the most northerly corner of Lot 2, Block 1, said plat of NORTH BAY OF TIMBER LAKES 2ND ADDITION; thence North 29 degrees 00 minutes 00 seconds West, along the northwesterly extension of the northeasterly line of said Lot 2 a distance of 121.46 feet to a point on the survey line which is as shown on said plat of NORTH BAY OF TIMBER LAKES 2ND ADDITION distant 120. 61 feet northeasterly of the westerly line of said Outlot A as measured along said survey line; thence continuing North 29 degrees 00 minutes 00 seconds West to the shoreline of Mitchell Lake as shown on said plat of NORTH BAY OF TIMBER LAKES 2ND ADDITION and said line there terminating. e EXHIBIT C ELIM HOMES - EDEN PRAIRIE Tax Increment Financing BUILDING LAND CAPTURED VALUE COMPUTATION COMPONENT COMPONENT TOTAL Annual Rents - Stabilized at 94% Occupancy $ 546, 000 Less: 25% Allowance (Normal Operating Expenses) (136,500) Less: 10% Allowance (Special Services) (54,600) • Adjusted Value 354,900 J $ Capitalization Rate 0.12 Estimated Tax Market Value $2,957,500 $ 325,000 Assessment Rate 0.2 0.34 ----------- --------- Estimated Captured Assessed Value $ 591,500 $ 110,500 $702, 000 t EXHIBIT D iELIM HOMES - EDEN PRAIRIE Tax Increment Financing Advances of the Interest Rate Reduction could be scheduled as follows: Interest Tax Rate Increment Reduction Taxes Elim's Fiscal Year Ending Advances Paid Balance September 30, 1989 $6, 200 $6, 200 September 30, 1990 15, 000 21,200 September 30, 1991 $51,200 30, 000 -0- September 30, 1992 60,000 60, 000 -0- September 30, 1993 84,200 84, 200 -0- September 30, 1994 87, 600 87, 600 -0- September 30, 1995 91, 100 91, 100 -0- September 30, 1996 75,900 94,700 18 ,800 September 30, 1997 75, 000 98, 500 42, 300 • September 30, 1998 75, 000 102 ,400 69,700 September 30, 1999 75, 000 106, 500 101, 200 September 30, 2000 75, 000 110, 800 137 , 000 September 30, 2001 75, 000 115,200 177 ,200 September 30, 2002 75, 000 119,800 222 , 000 ------- ----------- $ 900,000 $1, 122, 000 Real Estate Taxes are assumed to increase at the rate of 4% per year after 1992 . Based on the above schedule, it is estimated that in the 10 years following the termination of the advances, Elim will pay approximately $1,500, 000 in real estate taxes in addition to the amount shown above.