HomeMy WebLinkAbout8B - Financing Options of EDA activities
DVANCE
TO:
Don Rye, Ralph Teschner & Frank Boyles
FROM:
Roger Guenette
DATE:
July 9, 1997
RE:
Summary of Methodology for TIF Reporting Forms
To aid everyone's understanding of how the TIF reporting forms have been completed and how
TIF revenues should be managed, I have prepared a summary of the methodology used for computation
of the data. Certain base data is provided each year by the following parties:
County Auditor: original tax capacity, current tax capacity, net tax capacity.
Department of Revenue: factors required to calculate fiscal disparities impact based upon option
"A" election.
City Finance Director: actual revenues received in the form of land acquisition receipts, TIF
revenues, developer guaranteed payments, City rebate payments, City bond debt service obligations, City
loan repayments and capital expenditures.
In regard to the TIF district within Waterfront Passage Business Park (2-1, 2-2,2-3,2-5,2-6,2-7
& 2-8). I have incorporated the following base data into the reports:
Proiect Costs - Uses of Funds
Land Purchases
Land Interest
Improvements
TOTAL
$ 184,794
66,996 ·
1.111.612
$1,363,402
· Interest paid until time of contract buyout
Sources of Funds
Improvement Bond
EnterprisefTrunk Fund
Prepaid Assessment
TOTAL
$ 791,100
355,000
217.302
$1,363,402
The EnterprisefTrunk Fund and Prepaid Assessment funding sources have been utilized in
conjunction with the Improvement Bond proceeds to fund the project costs. Each parcel has been
assigned a pro rata portion of the debt obligations. Repayment of these funds and the Improvement
Bond is to occur solely through tax increment revenues generated from parcels within WaterFront
Business Finance and
Economic Development
Specialists
',~:::HC~S
PJ Box 32600
NielS ~,If\. 5S432-06C:
Phone (6' 2\ 755-5303
Fox: (612) ~55-7~41
POBox 3027
NlonKato, MN 56002-3027
Phone (507) 387-7117
Fax (507) 387-6115
Passage Business Park. Land sale proceeds are not to be utilized for the ultimate repayment of these
obligations since the land in WaterFront Passage is an asset of the EDA; however, since the City has
been faced with cash obligations vis-a-vis the Improvement Bond debt service, the land sale proceeds
due to the EDA have been utilized to make debt service payments thus far. In fact, a substantial sum of
the land sale proceeds have been deposited in the TIF Debt Service account and are therefore
unavailable for transfer to the EDA until such time as the Improvement Bond is defeased or retired.
The City began to receive TIF revenues from the WaterFront Passage parcels in 1995 and 1996.
There will be a substantial increase in these revenues beginning in 1997. It will be necessary to maintain
records of the amount of land proceeds due the EDA for each parcel where the revenues were used by
the City to interim fund the debt service on the Improvement Bond. Tracking of these amounts will
allow the City to eventually repay the EDA for the use of the land sale proceeds.
Thus far, the land sale proceeds due to the EDA are quantified as follows:
TIF District
Land Sale Proceeds
2-1
2-2
2-3
2-5
2-6
2-7
2-8
TOTAL
$3,500
25,610
14,500
97,465
75,000
135,471
77.536
$429,082
The other sources of funds (Enterprise!frunk Fund and Prepaid Assessments) are to be repaid
to the City from TIF revenues generated within WaterFront Passage. The total amount of obligation to
be repaid to the City as a result of cash contributions from the Enterprise!frunk Fund and Prepaid
Assessments are calculated as follows:
Enterpriserrrunk Fund
Prepaid Assessments
Subtotal
Less Accumulated Land Interest
Subtotal
x 2 years Accrued Interest
Subtotal
Plus Accumulated Land Interest
TOTAL Repayment Due
$355,000
217.302
572,302
(66.996)
505,306
1.0']2
578,525
66.996
$645,520
Based upon the previous calculation, the City should receive $645,520, plus interest calculated at
7%, in repayments from TIF revenues over the term of the WaterFront Passage TIF districts.
Accordingly, each parcel in the Business Park is or will be assigned a pro rata portion of the debt based
upon the acreage of the parcel as compared to the amount of total developable acres in the Business
Park (20.02). The amortization for the repayment of the City debt is to occur over 15 years with the
initial repayment to commence in 1995.
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The calculation of principal and interest payments due to the City will also help to meet the
"local contribution" requirements that the City has elected for TIF districts 2-2, 2-3, 2-5, 2-6, 2-7 and 2-8
in order to avoid a loss of local government aid (District 2-1 is subject to an LGA HACA loss). Based
upon a pledge of local contributions that was filed with the Department of Revenue on 2/24/97, the 1996
TIF audit forms reported a contribution of all the interest due (and a minor amount of principal) the
City for repayment of the Enterprise(Trunk Fund and Prepaid Assessments from TIF Districts 2-2, 2-3,
2-5,2-6 and 2-7. Next year a similar local contribution will be recorded for TIF District 2-8 and any
other new districts created within WaterFront Passage.
The impacts of these finance strategies should be as follows:
1) Enable repayment of the $791,100 Improvements Bond from TIF revenues.
2) Enable repayment of approximately $550,000 (principal only) of City contributions from the
Enterprise(Trunk Fund and Prepaid Assessment.
3) Avoid LGNHACA losses with the exception of a minor penalty incurred in District 2-1.
4) Enable capitalization of $550,000+ to the EDA as the City reimburses an interim loan made
available from the proceeds of land sales within WaterFront Passage.
Please review the information in this memo along with the TIF audit reports prior to our
meeting in order to gain understanding and formulate additional questions. Thank you!
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