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HomeMy WebLinkAbout1985 09-12 EBFAPEMORANDUM 1 TO: Earle Brown Farm Committee FROM: Brad Hoffman, Administrative Assistant ' DATE: September 11, 1985 SUBJECT: Review of Earle Brown Farm Project BOND ISSUE Significant changes in bonding law are forth coming. The Treasury (U.S.). has taken a position that no more than 1% of the proceeds from a bond issue can directly or indirectly benefit the private sector and remain tax exempt. The impact on municipalities suggests that almost all municipal bond issues in the future would be taxable. Relative to this project, the diffeence could mean a $6,000,000 bond issue at 11 percent or more as opposed to an issue at approximately 8 percent. The City/HRA has three (3) options. First, wait and gamble on the actions of the federal government and methodically resolve all of the questions one might have about the development of the farm. This is a very conservative and safe approach relative to the overall planning. It does ignore almost certain changes in the bonding laws that would increase the cost of the project. Second, the HRA could do a partial issue. A partial issue would be dependent upon the development of either the Texas Air or Ryan property. It offers a middle road to the all or nothing scenario. It would still leave significant financing requirements for the restoration of the Farm subject to changes in federal law. It would provide the City/HRA more time for planning although perhaps underfunded. Third, the City/HRA with the development agreements (Ryan or Lombard residential) in hand (signed) would proceed with a total bond issue. With, one development agreement in hand it would be possible to do the total issue with a recall feature. With a recall, the City/HRA could call in any outstanding bonds and retire them if we did not obtain the development contracts required or did not need all of the money bonded. The advantage is to proceed and plan the development of the Farm with the financing secured and not be subject to changes in federal law including additional arbitrage limitations. The investment of the proceeds holds your position minimizing your costs. The disadvantages are that without one or both development agreements, the City/HRA would not want to proceed with the restoration of the building beyond the level that could be supported by the captured tax increment from Target and Lombard's retail development. TRAFFIC Short-Elliot-Hendrickson, Inc., a consulting engineering firm, completed a traffic analysis of the commercial/industrial area of Brooklyn Center which included the Earle Brown Farm area. The study suggests that the probable case development for all of the land inside of Earle Brown Drive north of Summit will be 843 peak hour trips during the peak hour of 5-6 p.m. Anything beyond that level will result in a significant deterioration in the ability of the surrounding streets to accomodate traffic flow. In short, 843 peak hour trips can be translated into quantificable levels of development. It also represents the maximum level of development prudent planning would allow. It is our (staff) position that 229 peak hour trips be reserved for the Earle Brown Farm development. This is an adequate number to accomodate any of the development l ' proposals discussed at this point in time. The residential development would require approximately 132 peak hour trips and the remaining 478 peak hour trips could be used for other development. A maximum of 170,000 square feet of office ' (for other development) could be accomodated. TEXAS AIR ' Texas Air property, according to information in the Assessing Department, is 213,618 square feet. They are asking $3.35 per foot or $715,620 for the property. If the City/HRA acquires the property, it will help assure the probable case traffic generation level, it will allow for a better spacial use of the entire site to include maintaining an openness about the farm; and it will allow the City/HRA to maximize the development of the Ryan property at 170,000 and retire the bond issue sooner. A partial acquisition of approximately 50,000 square feet allows the development of the residential at its projected level but leaves a portion of land subject only to the current zoning requirements of an I-1 district. Costs are unknown at this time. It leaves a possible undesirable development abutting a ' residential development. Ryan's development would be maximized at 130,000 square feet. The City/HRA could decide not to acquire any of the Texas Air property. The residential development would be reduced to approximately 200 to 230 units and Ryan ' would still be at 130,000. This scenario would reduce the costs overall but also deminish the tax increment base meaning a longer pay-off for the district and less tax generation when it does go back on the rolls. ' LOMBARD The most significant problem to be worked out is the relationship between their residential units and possible services offered to seniors in the stable and ' Hippodrome. It would be desirable to not duplicate the same services in such close proximity. Concluding an agreement won't occur until after the City/HRA has made its decisions about the use of the buildings. ' RYAN The City/HRA is negotiating the development of this property for an office development. The size of the office would be dependent upon whether or not the ' City/HRA acquires the Texas Air property. If the City/HRA acquires the property an office building of 170,000 square feet could be built; if not a 130,000 square foot building is possible. The square footage is a function of the traffic generation ' impact. The zoning ordinance could potentially allow for a larger office development. In order to induce Ryan to'start his third building early, the City/HRA would offer ' him $8.9 million in tax exempt revenue bonds. There are a number of advantages to having Ryan start his project now. If he starts now i.e. accepts the bonding, we could limit the size of his development relative to the limitations of the traffic ' study. We would have a greater impact on site layout to help preserve the openness of the Farm. The office development would return money to the tax increment district faster and the amount would be greater than that projected in the plan. The disadvantage is that Ryan will build some day - without any subsidy. The use of ' IR bonds does take monies from the Federal Treasury and to some extent competes with other municipal bonds. CURRENT TAX INCREMENT (JULY 1985) ESTIMATED PROJECT COSTS Acquisition Redevelopment Maintenance Fund Administration Consultant/Legal Contingencies subtotal Area-wide Streetscape Area-wide Improvements Area-wide Utilities subtotal Financing Costs: Issuance Discount C $19 per $1,000 Capitalized Interest Total Costs Less: Land Sales CDBG Assessments/MSA Investment EArnings TOTAL BOND COSTS $ 2,250,000 2,000,000 500,000 239,000 30,000 501,900 $ 5,520,900 $ 500,000 1,300,000 200,000 $ 7,520,900 $ 45,000 127,300 1,956,409* $ 9,649,609 $ 650,000 680,000 1,300,000 319,609 $ 6,700,000 *Subject to adjustment due to timing of bond sale and pre-waiting interest rates at the time of issuance. ADJUSTED TAX INCREMENT BUDGET r' fit" (SEPTEMBER 11, 1985) _ r Land Acquisition Redevelopment Maintenance Administration Consultant/Legal Contingencies subtotal Street scape Area-wide improvements Area-wide utilities subtotal Financing Costs Issuance Discount Capitalized Interest Total Costs Less: Land Sales CDBG Assessments/NSA Investment Earnings TOTAL BOND COSTS $ 2,847,000 2,000,000 500,000 239,000 30,000 501,900 $ 6,117,900 n $ 500,000 1, 300, 000, $ 7,917,900 $ 45,000 127,300 1,956,409 $10,046,609 $ 822, 500 s 680, 000--~ ~`~o t ) n 1,300,000 319,609 d o . $ 6, 00,000 P 005 00 0 INjA 1 COSTS Texas Air - 213,618 feet at $3.35 per foot $ Ryan - Revenue Bond $8,900,000 Direct Cost to City/HRA $ REVENUE 715,620 , b 1% 0 ,S' Lombard - Land Sale $ 672,500 Offi ce Building 150,000 $ 822,500 TAX INCREN;ENT RETURN Ryan - Office 130,000 sq. ft. at $2.15 per ft. $ 279,500 - gross tax Office 170,000 sq. ft. at $2.15 per ft. $ 365,500 - gross tax t ~ ~O Y LESS $ 25, 000 - - V 0 c W- Increment = $254, 500 to $340, 000 annually - 4 tv"ck --o akq,4f ~0If n, The tax increment plan calls for a second phase to the residential development to start paying an increment by 1994. The second phase would not be built but replaced by the Ryan Office. If Ryan starts in 1986, his building will be paying a full tax by 1989. That means the tax increment district will receive 5 years of revenues it did not plan for. The total of those revenues with no provisions made for inflation will range from $1,270,000 for a 130,000 square foot building to $1,700,000 for a 170,000 square foot building. The Phase II residential would have generated $131,000 in tax. Ryan's development at 130,000 square feet will generate $148,500 more in taxes annually. At 170,000 square feet, it will generate $234,500 in additional taxes annually. LOMBARD Lombard's development of 269 residential units will generate $263,279 in taxes and will substantially reduce the potential number of vehicle trips at peak hours.