06/23/2020 - City Council Finance Committee
FINANCE COMMITTEE MEETING
TUESDAY, JUNE 23, 2020
2:30 P.M.
CITY HALL
EAGAN ROOM
AGENDA
I. AGENDA ADOPTION
II. REGIONAL PONDING
III. RESOLUTION OF SUPPORT FOR TAX INCREMENT FINANCING
IV. OTHER BUSINESS
V. ADJOURNMENT
Agenda Information Memo
Finance Committee Meeting
June 23, 2020
II. REGIONAL PONDING
DIRECTION TO BE CONSIDERED:
None. For discussion purposes only.
FACTS:
The City has a long-term stormwater plan which identifies needs in the City’s
regional stormwater system.
Opportunities sometimes arise for cost-effective implementation of the long-
term stormwater plan.
At the meeting, staff will provide an update to the Finance Committee on cost
mitigation strategies for the implementation of the long-term stormwater plan.
Agenda Information Memo
Finance Committee Meeting
June 23, 2020
III. RESOLUTION OF SUPPORT FOR TAX INCREMENT FINANCING
DIRECTION TO BE CONSIDERED:
To provide direction on a tax increment financing proposal for Nicols Apartments.
FACTS:
In 2019, Real Estate Equities submitted a pre-application for business assistance
financing for a 202-unit affordable housing development (204 units currently
proposed) south of the intersection of Nicols and Diffley Roads.
At the May 28, 2019 meeting, the Finance Committee was in agreement that the
developer should work with the Dakota County Community Development
Agency (CDA) on tax increment financing and other public financing assistance.
At the March 3, 2020 meeting, the Finance Committee requested additional
information on the tax increment financing proposal for Nicols Apartments.
The CDA’s TIF policy:
o Provides tax increment through an Interest Rate Reduction program in
which the CDA provides up to 70% of available increment over 15 years.
o Stipulates that the CDA retain 30% of increment for the first 15 years and
100% of increment for the remaining 11 years of the district for other
affordable housing developments in the City.
o Requires the developer to participate in the Housing Choice Voucher
program for the 26-year term of the agreement.
o Provides only the amount of increment necessary to ensure the
development can meet the affordable housing requirements stipulated in
state statute.
The CDA’s TIF policy supports creation of a 26-year district. The developer may
receive 70% of available increment for up to 15 years. The CDA retains the
remaining TIF over the term of the district for support of existing and new
affordable housing within the host community. Tony Schertler, CDA Executive
Director, projects that existing senior and youth-supportive housing in Eagan will
require $21 million of capital needs over the next 20 years.
The CDA’s TIF consultant has reviewed the developer’s proposal and reported
that:
o The development project, as proposed, is feasible only with public
financial assistance. The developer proposes to use 4% low-income
housing tax credits, TIF, and tax-exempt bonding (first mortgage).
o The developer needs $1,468,000 (present value) of TIF assistance to
support construction of the $56.7 million affordable housing project.
o Based on current estimates, the assistance can be provided within 13
years, subject to final construction costs and terms of the first mortgage.
o Based on current estimates, the CDA would retain 30% of TIF generated
in years 1-13, as well as 100% of TIF generated in years 14-26.
o The developer is proposing a mix of unit affordability as follows:
Level of Affordability
Met Council Allocation
of Affordable Need for
Eagan (2030)
Proposed Units –
Real Estate Equities
At or below 30% AMI 232 0
31% to 50% AMI 100 45
51% to 80% AMI 140 159
Notes:
- 45 units (22% of total units) are at 50% AMI
- 139 units (68% of total units) are at 60% AMI
- 20 units (10% of total units) are at 70% AMI
o Total TIF from all jurisdictions and the portion of TIF derived from
captured City taxes are as follows:
TIF – All Jurisdictions
Present Value
TIF – City Portion Only
Present Value
To
Developer To CDA Total To
Developer To CDA Total
Years 1-13 $1,468,000 $663,430 $2,131,430 $598,583 $270,583 $869,166
Years 14-26 $0 $1,371,696 $1,371,696 $0 $559,248 $559,248
All Years $1,468,000 $2,035,126 $3,503,126 $598,583 $829,831 $1,428,414
Notes:
1. Present value calculated at 3.45% rate and semi-annual payments.
2. Total TIF collected, not present value, is $5,538,838, including $1,896,243 to the
developer and $3,642,126 to the CDA. Total City portion of TIF collected, not present
value, is $2,258,484, including $773,201 to the developer and $1,485,283 to the CDA.
The Dakota County CDA has requested that the City adopt a resolution approving
the location of a housing project (Nicols Apartments). If the City Council
approves the resolution, Dakota County will hold a public hearing, and the CDA
will work with the developer to draft a TIF note and related documents.
Action on the tax increment resolution is scheduled for the July 7, 2020 City
Council meeting. The staff report will include the outcome from the Finance
Committee meeting.
Attachments: (3)
FCIII-1 Resolution
FCIII-2 Memo, Northland Public Finance, May 15, 2020
FCIII-3 Letter, Tony Schertler, May 18, 2020
RESOLUTION NO. --------
CITY OF EAGAN
APPROVAL OF THE LOCATION OF A HOUSING PROJECT UNDERTAKEN BY THE
DAKOTA COUNTY COMMUNITY DEVELOPMENT AGENCY IN THE CITY OF EAGAN
WHEREAS, pursuant to Minnesota Statues, §383D.41, the Dakota County
Community Development Agency (the “Agency”) is authorized to exercise the powers and
duties of a housing and redevelopment authority under the provisions of the Municipal
Housing and Redevelopment Act, including the establishment of a tax increment financing
plan and a tax increment financing district to provide monies to finance a housing program;
and
WHEREAS, a proposal has been made to the Agency by Real Estate Equities (the
“Developer”) that the Agency: (a) undertake a tax increment financing program for Nicols
Apartments, a housing project as defined under Minnesota Statute §469.002 (the “Nicols
Development”) located in the City of Eagan on the real property legally described on Exhibit A
attached hereto (the “Property”), and (b) create a tax increment financing district and plan
including the Property pursuant to Minnesota Statutes §§ 469.174 to 469.179; and
WHEREAS, Minnesota Statute §469.002, Subd.12, a Project is defined to include a
“housing project” and that the term is also applied to all real and personal property, assets, cash,
or other funds, held or used in connection with the development or operation of a project; and
WHEREAS, Minnesota Statute §469.002, Subd, 13, a Housing Project is defined §to
mean any work to provide decent, safe and sanitary dwellings for persons of low income; such
work to include acquisition of land, equipment, facilities, and other property for necessary and
convenient appurtenances, utilities, site preparation or other purposes; and includes the planning
of buildings, acquisition of property, construction of improvements and all other work in
connection therewith; and
WHEREAS, pursuant to Minnesota Statutes §§469.174 to 469.179, for purposes of Tax
Increment Financing, a Project is defined to mean a project as defined in §469.002, Subd. 12;
and
WHEREAS, the Property is situated within the boundaries of the City of Eagan; and
WHEREAS, pursuant to Minnesota Statute §383D.41, as a condition to exercising the
Agency’s powers within the boundaries of the City of Eagan, the location of the housing project
must be approved by the Eagan City Council; and
WHEREAS, the Agency and Developer have provided the City with the terms and
conditions of the tax increment financing for the Nicols Development and the Council has
reviewed the proposed land use, development, and improvements to be constructed on the
Property.
NOW THEREFORE, the City Council upon review of the Agency’s housing project
proposal, does hereby approve the Nicols Development location.
CITY OF EAGAN
CITY COUNCIL
BY: _________________________
Its Mayor
Attest: _______________________
Its Clerk
Motion by:
Seconded by:
Those in Favor:
Those Against:
Date June ____, 2020
CERTIFICATION
I, Christina M. Scipioni, Clerk of the City of Eagan, Dakota County, Minnesota, do hereby
certify that the foregoing resolution was duly passed and adopted by the City Council of the City
of Eagan, Dakota County, Minnesota, in a regular meeting thereof assembled this ____ day of
_______, 2020.
____________________________
City Clerk
Northland Securities, Inc.
150 South Fifth Street, Suite 3300, Minneapolis, MN 55402
Toll Free 1-200-851-2920, Main 612-851-5900,www.northlandsecurities.com
Member FINRA and SIPC | Registered with SEC and MSRB
MEMORANDUM
To:Dakota County Community DevelopmentAgency
From:Tammy Omdal, Managing Director
Jessica Green, Managing Director
Date:May 15, 2020
Re:Tax Increment Financing (TIF)Assistance forHousingProjectin Eagan
The Dakota County Community Development Agency (the “CDA”) requested that Northland
review the revised Application from Real Estate Equities, LLC (the “Developer”) for TIF, dated
May 7, 2020. In preparing this review, Northland relied on information included in the
Application.
The Developer is requesting $1,468,000 in TIF payable over 20 years, with interest, among other
forms of assistance, to assist with the financing of a 204-unit apartment building (the “Project”).
The Project is located next to 4205 Nicols Road in the City of Eagan (the “Property”).
All apartment units will be affordable with income and rent restrictions at or below 70% of the
area median income (AMI). The 2020 AMI for Dakota County as calculated by the U.S.
Department of Housing and Urban Development is $103,400. The parcel is approximately 8 acres
located with access to Highway 77 and Interstate 35E. The property is currently guided for
commercial and a rezoning is required.
The request is for the CDA to establish a housing TIF district to capture the increase in property
taxes from the Project to assist with the financing of the affordable housing units. TIF assistance
for a residential rental property requires that a minimum of either 20% of the units be leased to
person at or below 50% of AMI, or 40% of the units be leased to persons at or below 60% of AMI.
The Project will meet the requirement.
Northland has reviewed the information submitted by the Developer based on general industry
standards for land acquisition, construction costs, developer fees, operating expenses, and rental
rates, among other items. We find the information provided to be within general industry
standards. Exhibit A provides a preliminary source and use of funds for the approximate $56.7
million Project.
Housing Project Review
May 15, 2020
Page 2
Observations
It is Northland’s observation that the Project, as proposed, is feasible only through assistance, in
part from TIF. This observation may change if information about the Project changes. Financing
affordable housing projects takes multiple sources to achieve rents at affordable levels.
Based on the Application, the Developer proposesto maximize public finance tools, including 4%
Low-income Housing Tax Credits (LIHTC) and TIF to assist with financing the Project. The
Developer plans to seek tax-exemptbonding(firstmortgage) to finance approximately 63% of the
costs of the Project. The Developer has submitted application to the CDA for bonds and LIHTC.
TheDeveloperwilldeferaportion ofthedeveloperfeeandrelyon aletterofcreditforthebalance
of funds. The deferred developer fee is not guaranteed. It will be paid from future net cash flow
fromtheProject.Subjecttotheestimatedtermsofassistance,wefindthattheProject,asproposed,
would not be reasonably expected to occur solely through private investment within the
reasonably near future.
Based on the pro forma developed by Northland, using information from the Developer and
information independently prepared, we estimate the TIF assistance to the Developer could be
limited to a duration of no greater than 15 years, subject to final terms of the first mortgage. Our
opinion on duration may change based on new information from the Developer and changes to
the assumptions. Our analysis assumes 1.0% annual inflation in taxable market value for the
Project and 2020 tax rates.
We estimate the Project is feasible with TIF assistance to the Developer in an amount no greater
than $1,468,000, with a maximum term of 15 years and 3.45% rate. Based on current estimates,
the Developer would be reimbursed within 13 years. This is based on the CDA providing 70% of
the TIF collected to payment on a note issued to the Developer, with assistance provided on a
“pay-go” basis payable solely from TIF. The CDA would retain tax increments not payable to the
Developer to pay administrative costs of the district (up to 10% of TIF) and to assist other
affordable housing projects within Eagan. The CDA would collect increment for the maximum
duration of 26 years.
Exhibit Bprovides estimated TIF cash flowincluding the amount ofincreased City property taxes
from theProject that would be captured to assist the Project and other affordablehousing projects
within Eagan. The total estimated increases in City tax revenue captured to assist the Project is
approximately $2.3 million or present value of $1.4 million. This includes approximately $0.7
million ($0.6 million present value) to reimburse the Developer and approximately $1.5 million
($0.8 million) for the CDA to assist other affordable housing projects in Eagan and the
administrative costs of the CDA for the housing TIF District.
Housing Project Review
May 15, 2020
Page 3
Without assistance the Project will not achieve a cash-on-cost basis, net operating income divided
by total development cost, greater than 5.0% (see Exhibit C). TIF is estimated to be necessary to
achieve debt service coverage (average at least 1.2X). Developer compensation on these types of
projects is typically the developer fee. It is common for a developer to defer a large portion of the
developer fee to make the project work, as is proposed for the Project. The developer fee is paid
out of cash flow, so the dollars are “at-risk” for the developer. We might typically expect the
developer fee to be repaid over a 15-year term. We estimate repayment in less than 12 years with
interest.
Use of Tax Increment Financing (TIF)
A decision to deny the use of TIF does not necessarily mean that there will be no future
improvements on the site. A decision to approvemay be made based on afindingthattheProject,
asproposed,wouldnotbereasonablyexpectedtooccursolelythrough privateinvestmentwithin
the reasonably near future. It does not mean that “no” development, housing or commercial, will
occur on the site ever.
While not a statutory required finding for a housing TIF district, the preliminary analysis shows
that an induced development will yield a net increase in taxable market value of approximately
$45.8 million (future value) for the site compared to the likely taxable market value of $1.5 million
(future value) without TIF.
While the proposed income and rent levels and unit mix will meet the TIF, LIHTC, and the fair
market rent requirements, the CDA and the City may want to consider whether the proposed
income qualification levels the Developer is proposing are acceptable in helping the City meet its
overall affordable housing goals. The Developer is proposing the following mix of units:
Figure 1.
Level of Affordability
Met Council Allocation of
Affordable Housing Need for
Eagan (2030)
Proposed Units – Real Estate
Equities (REE)
At or below 30% AMI 232 0
31% to 50% AMI 100 45
51% to 80% AMI 140 159
Note to Figure 1:
45 units (22% of total units) at 50% AMI
139 units (68% of total units) at 60% AMI
20 units (10% of total units) at 70% AMI
Housing Project Review
May 15, 2020
Page 4
Summary
This memorandum wasprepared to assist with evaluation of the request for assistance submitted
by the Developer. The assumptions and estimated amounts provided in this memorandum and
exhibits are subject to change. The key items to note from the memorandum are as follows:
All204apartmentunitstobeaffordablewith incomerestrictionsrangingfrom50%to70%
of AMI. Income qualifications and rent requirements for the proposed public financing
will be met.
The public finance tools proposed include tax exempt bonding, 4% LIHTC, and TIF. The
Developerhassubmittedapplication totheCDA forthebondsandLIHTCandrequesting
for establishment of a housing TIF district.
The Developer will defer a portion of the developer fee (approximately $3.2 million). The
developer fee will be repaid from future cash flow from the project with interest. The
repayment is estimated to be within 11 years. The repayment will be based on net cash
flowafterdebtservicepayments.Thetermofrepaymentmaybelessorgreaterdepending
on the actual net cash flow. Reduction in rental income from either market conditions or
an increase in the requirements for level of affordability will extend the term of
repayment, among other factors.
The Developer is proposing 78% of the affordable units in the highest AMI bracket based
on the City’s allocation of the Metropolitan Council’s Allocation of Affordable Housing
Need. They are proposing more units at this bracket than for which the City has
demonstrated need.
Preliminary review suggests the Project, as proposed, is feasible only through assistance,
in part from TIF. The TIF assistance is estimated to not exceed $1,468,000, with the term
of assistance to the Developer to not exceed 15 years at 3.45% rate.
Exhibit D provides a summary of current property taxes payable from the property and
for property taxes that would be payable based on different development scenarios for
the Property.
Housing Project Review
May 15, 2020
Page 5
Exhibit A
Total % of Total PerUnit
Sources of Funds(Permanent)
First mortgage 1 $35,560,000 62.7%$174,314
TIF Mortgage 1 $1,468,000 2.6%$7,196
LIHTCEquity - 1st Installment (Closing) $4,768,800 8.4% $23,376
LIHTCEquity - 2nd Installment (Completion) $9,814,000 17.3% $48,108
LIHTCEquity - 1st Installment (Stabilization) $1,821,668 3.2% $8,930
Deferred developerfee $3,186,350 5.6% $15,619
Investment earnings $139,196 0.2% $682
Total Sources of Funds $56,758,014 100.0% $278,226
Usesof Funds
Acquisition $2,025,000 3.57% $9,926
Construction 3 $37,053,256 65.28%$181,634
Construction of parking 2 0.00%$0
Construction contingency $1,868,914 3.29% $9,161
Bridge financingcosts $4,152,207 7.32% $20,354
Bond costs $409,392 0.72% $2,007
Soft costs (not includingdeveloperfee) $3,970,125 6.99% $19,461
Title and tax credit fees $851,644 1.50% $4,175
Otherinterest and reserves $1,499,650 2.64% $7,351
Developerfee payable at closing $1,741,476 3.07% $8,537
Deferred developerfee $3,186,350 5.61% $15,619
Total Uses of Funds $56,758,014 100.00% $278,226
Numberof Units 204
Notes:
3/ Request forTIFassistance calls out extraordinary costs of reginal pond/infrastructure as reason to request 20
years of TIF assistance. These costs are notprovided in the application. They may be included in the construction
costs, furtherdetails are needed in orderto confirm.
1/ Developer's application provides for40yeartermat 3.45% amortized over40years. Developerpro forma
anticipates amortgage on aTIF Note. Northland has assumed atermof 10years and rate of 3.45% forthe TIF
Mortgage. This is differentthan the assumptions by the Developerforthe TIF Note. The Developerassumed 20
years at 3.45%.
DakotaCounty Community Development Agency
Eagan, MN
2/ Construction of parkingcost not provided separately fromtotal construction costs in developer's pro forma
submitted with application.
Nicols Apartment Eagan
DeveloperSources and Uses of Funds forConstruction
204Unit Residential Apartment Building
Housing Project Review
May 15, 2020
Page 6
Exhibit B
100.0%3.45%30.0%3.45%70.0%3.45%3.45%3.45%1245,44286.79%212,255199,36163,67759,808148,579139,55260,58325,96486,54886,54856,90324,3872245,50886.79%212,312392,06963,694117,621148,618274,44860,60025,97186,571173,119111,90747,9603245,57586.79%212,370578,34763,711173,504148,659404,84360,61625,97886,595259,714165,07670,7474245,64386.79%212,428758,41163,729227,523148,700530,88860,63325,98686,619346,332216,47292,7745245,71186.79%212,487932,46963,746279,741148,741652,72860,65025,99386,643432,975266,153114,0656245,78086.79%212,5471,100,72063,764330,216148,783770,50460,66726,00086,667519,642314,176134,6477245,85086.79%212,6081,263,36163,782379,008148,825884,35260,68426,00786,692606,334360,598154,5428245,92086.79%212,6691,420,57663,801426,173148,868994,40460,70126,01586,716693,050405,472173,7749245,99186.79%212,7291,572,54963,819471,765148,9111,100,78460,71926,02286,741779,791448,849192,36410246,06386.79%212,7921,719,45563,838515,836148,9551,203,61860,73726,03086,767866,558490,780210,33411246,13686.79%212,8551,861,46263,856558,439148,9981,303,02360,75526,03886,792953,351531,313227,70612246,20986.79%212,9181,998,73463,875599,620149,0421,399,11460,77326,04586,8181,040,169570,495244,49813246,28386.79%212,9812,131,430102,417663,431110,5641,468,00045,08341,76186,8441,127,013598,583270,51714246,35886.79%213,0462,259,703213,046791,70386,87186,8711,213,884322,82015246,43386.79%213,1122,383,701213,112915,70186,89786,8971,300,781373,38116246,50986.79%213,1782,503,566213,1781,035,56686,92486,9241,387,705422,25617246,58686.79%213,2452,619,436213,2451,151,43686,95186,9511,474,656469,50318246,66486.79%213,3112,731,445213,3111,263,44586,97986,9791,561,635515,17519246,74286.79%213,3792,839,722213,3791,371,72287,00687,0061,648,641559,32520246,82286.79%213,4482,944,392213,4481,476,39287,03487,0341,735,675602,00521246,90286.79%213,5183,045,574213,5181,577,57487,06387,0631,822,738643,26322246,98386.79%213,5873,143,387213,5871,675,38787,09187,0911,909,829683,14623247,06486.79%213,6583,237,941213,6581,769,94187,12087,1201,996,949721,70124247,14786.79%213,7293,329,346213,7291,861,34687,14987,1492,084,098758,97225247,23086.79%213,8023,417,707213,8021,949,70787,17887,1782,171,276795,00126247,31586.79%213,8743,503,126213,8742,035,12687,20887,2082,258,484829,831TOTAL=5,538,8383,503,1263,642,5952,035,1261,896,243773,2011,485,2832,258,484598,583829,8311Taxablemarketvalue(TMV)annualgrowthassumption=1.00%2OriginalTaxCapacityRateestimatedbasedonTaxesPayableYear2020.3Electionforcapturedtaxcapacityis100.00%4CapturedTaxCapacityisnetofBaseTaxCapacitycalculatedbasedonaTMV=$1,206,400.Affordablerentalhousingpropertyclassificationrate.5Presentvalue(PV)iscalculatedbasedonsemi-annualpayments,3.45%rate,anddateof1/1/2022.6TMVcalculatedbasedon204housingunitsatanestimatedaveragevalueof$175,000/unit.Affordablerentalhousingpropertyclassificationrate.7TIFretainedbytheCDAwillpayadministrativecostsandassistotheraffordablehousingprojectswithinEagan.8AvailableTIF(TaxIncrementFinancing)isnetofStateAuditorFeeof0.36%.ToDeveloperPVofCityCapturedTaxestoDeveloper5CumulativeCapturedCityTaxesCapturedCityTaxesToCDATotalPVofCityCapturedTaxestoCDA6TIFRetainedbyCDA7PVofTIFRetainedbyCDA5,7PresentValueofTotalAvailableTIF5OriginalTaxRate2TIFDistrictYearDakotaCountyCommunityDevelopmentAgencyEagan,MNNicolsApartmentsEaganTaxIncrementFinancingDistrictNo.TIFDistrictNo.16(Housing)ProjectedTaxIncrementCashFlowCapturedTaxCapacity3,4KeyAsssumptionsforCashFlow:TIFtoDeveloperTotalAvaialbleTIF8PVofTIFtoDeveloper5
Housing Project Review
May 15, 2020
Page 7
Exhibit C
YearofTIFDistrict123456789101112131415GrossIncome(beforeTIF)3,130,0673,192,6683,256,5223,321,6523,388,0853,455,8473,524,9643,595,4633,667,3723,740,7203,815,5343,891,8453,969,6824,049,0754,130,057LessExpensesbeforerealestatetaxes(833,712)(856,099)(879,136)(902,841)(927,235)(952,338)(978,170)(1,004,753)(1,032,109)(1,060,260)(1,089,230)(1,119,043)(1,149,724)(1,181,298)(1,213,792)Lessrealestatetaxes(303,923)(304,811)(305,708)(306,614)(307,529)(308,453)(309,387)(310,329)(311,281)(312,243)(313,214)(314,195)(315,186)(316,186)(317,197)NetOperatingIncome(NOI)1,992,4322,031,7582,071,6782,112,1972,153,3212,195,0552,237,4072,280,3812,323,9822,368,2172,413,0902,458,6062,504,7722,551,5912,599,068PlusTIFRevenue148,579148,618148,659148,700148,741148,783148,825148,868148,911148,955148,998149,042110,564--NOIwithTIF2,141,0112,180,3762,220,3362,260,8962,302,0622,343,8382,386,2332,429,2492,472,8932,517,1712,562,0882,607,6492,615,3362,551,5912,599,068DebtService1,911,8071,910,6051,909,3611,908,0731,906,7401,905,3601,903,9321,902,4531,900,9231,899,3401,718,1301,716,4341,714,6781,712,8601,710,979NetCashFlowbeforePaymentonDeferredDeveloperFee229,204269,772310,976352,824395,322438,479482,301526,796571,970617,832843,958891,215900,658838,731888,089PaymentonDeferredDeveloperFee3229,204269,772310,976352,824395,322438,479482,301526,796571,970617,832137,191----NetCashFlowafterPaymentonDeferredDeveloperFee----------706,767891,215900,658838,731888,089CashoncostwithTIF(NOI/TDC)13.8%3.8%3.9%4.0%4.1%4.1%4.2%4.3%4.4%4.4%4.5%4.6%4.6%4.5%4.6%CashoncostwithoutTIF1,23.5%3.6%3.7%3.7%3.8%3.9%3.9%4.0%4.1%4.2%4.3%4.3%4.4%4.5%4.6%DebtcoveragewithTIF21.121.141.161.181.211.231.251.281.301.331.491.521.531.491.52DebtcoveragewithoutTIF21.041.061.091.111.131.151.181.201.221.251.401.431.461.491.52Notes:1/TotalDevelopmentCost(TDC):$56,758,0144/Expensesincluderealestatetaxesbasedon$35,700,000taxablemarketvalue,pay2020taxratesheldconstant,and2.0%annualincreaseintaxablemarketvalue.DakotaCountyCommunityDevelopmentAgencyEagan,MNNicolsApartmentEagan204UnitResidentialApartmentBuildingPreliminaryEstimatedProForma3/ParamountofTIFnoteisestimatedat$1,468,000,15yearterm,3.45%rate.ThesourceoffundsfortheprojectassumesamortgageoftheTIFnote.Thispaymentisincludedunderdebtserviceintheproforma.3/TotalDeveloperFeeof$4,927,826.Developerproformaassumesinitialpaymentof$1,741,476atclosingwiththebalanceof$3,186,350deferredandtobepaidasrevenueisavailable.Theproformaaboveassumesthedeferredfeeispayablewith5.0%interest.
Housing Project Review
May 15, 2020
Page 8
Exhibit D
Taxable
Market Value
of Property
County Tax City Tax
School Tax
(Includes
Referendum)
Special
Taxing
Jurisdictions
Taxes
Total Local
Taxes Payable
Fiscal
Disparities
and State
Commercial
Tax
TIF Total Taxes
Payable
A
Current -
Certified for
Pay 2020,
Commercial
(3a)
$1,206,400 $3,652 $5,476 $6,403 $549 $16,080 $20,245 $0 $36,325
B
Estimated -
Housing (4d)
within TIF
District No.
16
$35,700,000 $2,184 $3,191 $85,199 $329 $90,902 $0 $213,022 $303,923
C
Comparative-
Housing (4a)
not within TIF
District
$35,700,000 $107,694 $157,357 $189,100 $16,204 $470,354 $0 $0 $470,354
D
Comparative-
Commercial
(3a)
Development
not within TIF
$35,700,000 $111,417 $162,797 $192,767 $16,764 $483,744 $635,444 $0 $1,119,188
Notes:
2. Property tax rates used to calculatetheestimated property taxes arebased on Pay 2020 tax rates.
3. Scenario B is based on theproposed Project by theDeveloper and establishment of TIF DistrictNo. 16.
4. Scenarios C and D areprovided for illustrativecomparison purposes only and do not represent proposed projects for theProperty.
1. Theestimated real estates taxes shown in thetableareillustrative. Annual taxes by year will vary based on multiplefactors, including
valuation of property, changein tax rates, among other factors.
Dakota County Community Development Agency
Eagan, MN
Nicols Apartments Eagan
Tax IncrementFinancing DistrictNo. TIF District No. 16 (Housing)
Annual Property Taxes Payable- Current, Estimated, and Comparative
Scenarios
May 18, 2020
Mayor Mike Maguire
City of Eagan
3830 Pilot Knob Road
Eagan, MN 55122
Dear Mayor and Councilmembers,
As you consider the actions for the Real Estate Equites affordable housing development, I would like to take
this opportunity to describe for you how the Dakota County Community Development Agency (CDA)
deploys our financial resources to assist in developing new and preserving existing affordable housing
throughout Eagan. As you are aware, the developer (Real Estate Equities) of this project is requesting Tax
Increment Financing to assist them in providing 204 affordable housing units, of which 45 units will be
affordable to households earning below 50% of Area Median Income (AMI), 139 units for 60% AMI and 20
at 70% AMI. Although the City of Eagan could have created this proposed TIF district on its own, the City
requested that the Dakota County CDA create the affordable housing district in the case.
As a condition of the Dakota County CDA’s creation of an affordable housing TIF district, the CDA requires
a portion of the future tax increments be pooled for the preservation of existing affordable housing units in
Eagan and for the development of new affordable housing units. I thought it would be helpful for the City
Council to see what the current portfolio of CDA managed affordable housing units in Eagan and some
examples of estimated capital needs for those units. It is important to recognize that we also have used, and
will continue to use, these pooled tax increments on new developments as well.
Exhibit A contains a list of all CDA properties in Eagan. Our capital needs projections show that in just the
four senior housing developments (Oakwoods, O’Leary Manor, Lakeside Pointe and Oakwoods East) the
capital expenditure needs over the next 20 years is approximately $20 million. The youth supportive housing
provided at Lincoln Place projects over $1 million of capital needs.
Exhibit B is a table provided by Northland that illustrates the projected tax increment generated by the Real
Estate Equities development. The third column illustrates how much TIF is captured by the CDA. The
present value of those tax increments is estimated to be a little over $2 million. These dollars are critical to
maintaining the existing affordable housing stock in Eagan.
Sincerely,
Tony Schertler
Executive Director
Cc: Dave Osberg, City Administrator
Exhibit A: Housing Data EAGAN
CDA Housing (497 units)
Eagan has the most CDA housing units of any city in Dakota County. Lakeville follows with 459 units.
245 senior (four developments)
Oakwoods (65 units) ‐ opened in 1992
O’Leary Manor (65 units) ‐ opened in 1998
Lakeside Pointe (60 units) ‐ opened in 2004
Oakwoods East (55 units) ‐ opened in 2008
200 workforce (five developments)
Oak Ridge (42 units) ‐ opened in 1996
Erin Place (34 units) ‐ opened in 2004
Northwood (47 units) ‐ opened in 2013
Riverview Ridge (27 units) ‐ opened in 2014
Lakeshore (50 units) ‐ opened in 2015
28 public housing (single family homes,
duplexes, fourplexes)
24 youth (Lincoln Place ‐ opened in 2010)
CDA Housing in Eagan
Senior
O’Leary Manor
Lincoln Place
Youth
Lakeside Pointe
Oakwoods Oakwoods East
Rents
Senior Housing
O’Leary Manor & Lakeside Pointe
One‐bedroom: $665
Two‐bedroom: $816
Oakwoods & Oakwoods East
One‐bedroom: $438‐$785
Two‐bedroom: $649‐$994
Lincoln Place
Based on 30% of income. Minimum rent for resident is $50
and with subsidies maximum rent is $835.
CDA Housing in Eagan
Workforce
Northshore
Oak Ridge
Erin Place
Riverview Ridge
Lakeshore
Rents
Workforce Housing
One‐bedroom: $680
Two‐bedroom: $775
Three‐bedroom: $860
Housing Project Review
May 15, 2020
Page 6
Exhibit B
100.0% 3.45% 30.0% 3.45% 70.0% 3.45%3.45% 3.45%1 245,442 86.79% 212,255 199,361 63,677 59,808 148,579 139,552 60,583 25,964 86,548 86,548 56,903 24,3872 245,508 86.79% 212,312 392,069 63,694 117,621 148,618 274,448 60,600 25,971 86,571 173,119 111,907 47,9603 245,575 86.79% 212,370 578,347 63,711 173,504 148,659 404,843 60,616 25,978 86,595 259,714 165,076 70,7474 245,643 86.79% 212,428 758,411 63,729 227,523 148,700 530,888 60,633 25,986 86,619 346,332 216,472 92,7745 245,711 86.79% 212,487 932,469 63,746 279,741 148,741 652,728 60,650 25,993 86,643 432,975 266,153 114,0656 245,780 86.79% 212,547 1,100,720 63,764 330,216 148,783 770,504 60,667 26,000 86,667 519,642 314,176 134,6477 245,850 86.79% 212,608 1,263,361 63,782 379,008 148,825 884,352 60,684 26,007 86,692 606,334 360,598 154,5428 245,920 86.79% 212,669 1,420,576 63,801 426,173 148,868 994,404 60,701 26,015 86,716 693,050 405,472 173,7749 245,991 86.79% 212,729 1,572,549 63,819 471,765 148,911 1,100,784 60,719 26,022 86,741 779,791 448,849 192,36410 246,063 86.79% 212,792 1,719,455 63,838 515,836 148,955 1,203,618 60,737 26,030 86,767 866,558 490,780 210,33411 246,136 86.79% 212,855 1,861,462 63,856 558,439 148,998 1,303,023 60,755 26,038 86,792 953,351 531,313 227,70612 246,209 86.79% 212,918 1,998,734 63,875 599,620 149,042 1,399,114 60,773 26,045 86,818 1,040,169 570,495 244,49813 246,283 86.79% 212,981 2,131,430 102,417 663,431 110,564 1,468,000 45,083 41,761 86,844 1,127,013 598,583 270,51714 246,358 86.79% 213,046 2,259,703 213,046 791,70386,871 86,871 1,213,884322,82015 246,433 86.79% 213,112 2,383,701 213,112 915,70186,897 86,897 1,300,781373,38116 246,509 86.79% 213,178 2,503,566 213,178 1,035,56686,924 86,924 1,387,705422,25617 246,586 86.79% 213,245 2,619,436 213,245 1,151,43686,951 86,951 1,474,656469,50318 246,664 86.79% 213,311 2,731,445 213,311 1,263,44586,979 86,979 1,561,635515,17519 246,742 86.79% 213,379 2,839,722 213,379 1,371,72287,006 87,006 1,648,641559,32520 246,822 86.79% 213,448 2,944,392 213,448 1,476,39287,034 87,034 1,735,675602,00521 246,902 86.79% 213,518 3,045,574 213,518 1,577,57487,063 87,063 1,822,738643,26322 246,983 86.79% 213,587 3,143,387 213,587 1,675,38787,091 87,091 1,909,829683,14623 247,064 86.79% 213,658 3,237,941 213,658 1,769,94187,120 87,120 1,996,949721,70124 247,147 86.79% 213,729 3,329,346 213,729 1,861,34687,149 87,149 2,084,098758,97225 247,230 86.79% 213,802 3,417,707 213,802 1,949,70787,178 87,178 2,171,276795,00126 247,315 86.79% 213,874 3,503,126 213,874 2,035,12687,208 87,208 2,258,484829,831TOTAL=5,538,838 3,503,126 3,642,595 2,035,126 1,896,243773,201 1,485,283 2,258,484598,583 829,8311 Taxable market value (TMV) annual growth assumption =1.00%2 Original Tax Capacity Rate estimated based on Taxes Payable Year2020.3 Election forcaptured tax capacity is 100.00%4 Captured Tax Capacity is netof Base Tax Capacity calculated based on aTMV =$1,206,400. Affordable rental housingproperty classification rate.5 Presentvalue (PV) is calculated based on semi-annual payments, 3.45% rate, and date of 1/1/2022.6 TMV calculated based on 204housingunits at an estimated average value of $175,000/unit. Affordable rental housingproperty classification rate.7 TIF retained by the CDA will pay administrative costs and assistotheraffordable housingprojects within Eagan.8Available TIF (Tax IncrementFinancing) is netof State AuditorFee of 0.36%.ToDeveloperPV of CityCapturedTaxes toDeveloper5CumulativeCapturedCity TaxesCaptured CityTaxesTo CDA TotalPV of CityCapturedTaxes toCDA6TIFRetained byCDA7PV of TIFRetained byCDA5, 7PresentValue ofTotalAvailableTIF5OriginalTax Rate2TIFDistrictYearDakotaCounty Community DevelopmentAgencyEagan, MNNicols Apartments EaganTax IncrementFinancingDistrictNo. TIF DistrictNo. 16(Housing)Projected Tax IncrementCash FlowCapturedTaxCapacity3,4Key Asssumptions forCash Flow:TIF toDeveloperTotalAvaialbleTIF8PV of TIF toDeveloper5Exhibit B: TIF Data