Steiner Tax Increment Project
EVENSEN DODGE, INC.
FINANCIAL CONSULTANTS
-
August 31, 1984
Mr. William Craig
City Manager
City Hall
1010 First Avenue South
Hopkins, Minnesota 55343
Dear Mr. Craig:
I am pleased to forward this Preliminary Feasibility Analysis of
the proposed Steiner Tax Increment Project.
~
Background
The City has been approached by Mr. Paul Steiner to participate
in a series of redevelopment projects. Our understanding of the
current status of these proposals is as follows:
1. The City would purchase a portion of the Hurley proper-
ty for $65,000, undertake soil and other improvements
for $522,000, and then resell the property in July 1985
to Steiner for $300,000. Steiner will then construct a
75,000 SF office/warehouse building, with an Estimated
Market Value (EMV) of $2,250,000, completing con-
struction in July 1986.
2. The City would purchase several parcels from Feltl for
$250,000, undertake various improvements (including the
demolition of an old house) for $75,000, and resell the
properties to Steiner in 1986 for $125,000. Steiner
will then construct a 40,000 SF office/warehouse
building, with an EMV of $1,200,000, completing con-
struction in July, 1987.
-it
3.
Steiner will also purchase the adjacent landfill from
the City for $288,100 (on a 6-year CD) in 1985, and
build a total of eight warehouse/office buildings, two
a year, from 1985 through 1988, for a total size of
57,600 SF and a total EMV of $1,382,400.
3608 IDS Tower, Minneapolis Minnesota 55402
612/338-3535 800/328-8200 800/328-8100 Minnesota
cks3.38/1
4. In addition, the City would invest another $300,000 for
street improvements (including engineering costs) and
the acquisition of right-of-way.
Analysis and Assumptions
Figure l, attached, details a quarterly cash flow feasibility
study of the proposed project. Figure 2 is a debt schedule,
showing the issuance of $1,260,000 in G.O. Tax Increment Bonds
this October or November. The bond issue has been sized as
follows:
$ 65,000
522,000
250,000
75,000
245,000
25,000
30,000
1,212,000
48,000
$1,260,000
Purchase Hurley site
Improvements to Hurley site
Purchase Feltl site
Improvements to Feltl site
Street improvements
Engineering costs
Purchase right-of-way
Total estimated costs
Bond discount and issuance costs
Bond Issue Size
The debt has been structured w~ thout any capitalized interest,
relying on revenues from land sales to meet debt service require-
ments in the earlier years of the project. The debt has also
been structured as "end-loaded", deferring most principal repay-
ment until the latter years of the project, to minimize the debt
service strain on the project until tax increments build up.
In addition to the general project description in the "Back-
ground" section of this letter, the other assumptions employed
here include:
1. A Redevelopment Project and an Tax Increment District
are both established this year, in time for the Origi-
nal Assessed Value (OAV) to be certified as of the
1983/84 assessments; it is also assumed that the entire
Tax Increment District would qualify under Minnesota
Statutes 273 as a "Redevelopment" type of tax increment
district. A further analysis can be conducted to
determine the feasibility of the project if structured
as an "Economic Development" type of District.
2. The City sells $1,260,000 of G.O. Tax Increment Bonds
in October or November of 1984, structured approximate-
ly as depicted in Figure 2.
cks3.38/2
3. The City will choose to retain 100% of the tax incre-
ments generated, and will also choose not to require a
fiscal disparities contribution to be made by the
commercial/industrial properties in the District.
These two elections, taken together, will ensure that
the City can use the full amount of increment for debt
service. At some later point in the project, as the
fund balance grows to a comfortable level (i.e.,
equalling one year's debt service), the City may then
elect to retain something less than 100% of the incre-
ments.
4. The tax increment receipts shown in Column C of Figure
are based on current assessments ratios, the EMV's in
Renne's memo, an annual mill rate of approximately 100,
a 90% collection rate, and the construction schedule
described earlier. It is also assumed here that the
properties do not inflate in value after initial
assessment, and that the mill rate is constant, over
the life of the project.
5.
It is assumed that the City will resell the respective
parcels, including the landfill, at the schedule
described above. The landfill will be sold on a 6-year
CD, with $38,100 down, at 9%, with a 25-year amortiza-
tion schedule, and with a balloon in the sixth year.
.
6. Interest earnings on the proj ect' s fund balance is
assumed to be 8% annual, compounded quarterly. This is
a very conservative estimate under current market
conditions, but protects the City against sudden drops
in interest rates.
7. The construction schedule shown in Column G is an
arbitrary one, assuming drawdown of funds between the
last quarter of 1984 and the last quarter of 1985. I
don't think this is a particularly crucial assumption,
but it is one that should be more narrowly defined.
8. The debt service in Column H is taken from the proposed
debt structure in Figure 2.
e
cks3.38/3
Conclusion
Our conclusion, based on this preliminary analysis and on the
assumptions detailed above, is that the project is feasible, in
the sense that the projected tax increments will be sufficient,
combined with revenues from land sales, to pay the debt service
on G.O. Tax Increment Bonds.
I want to emphasize again that this analysis is only preliminary,
and based on a considerable number of conjectural assumptions. I
will be delighted to refine this analysis, as planning proceeds
and more information becomes available.
I hope this preliminary analysis provides sufficient information
to proceed with additional planning and to arrive at some de-
cisions. Please feel free to raise questions or make suggestions
concerning this analysis.
Best regards,
Ii\ENS~ODGE' INC.
~ Key:1;-
Senior Financial Analyst
cc: Wayne S. Burggraaff
cks3.38/4
CIJv OF .HOP~INS. MINNESOTA
. ,
Prellllnar'! Lash Flow Feaslhlllty Analvsls - SteIner Proposal
tAl (Bl (C) lDl lEI (F) (61 (HI (!) (J) tKl
---------------------------Intlow-------------------------- --------------Outflow----------------
Net Tax Land Interest Const. QUARTERLY
Year 1 Bond Increeent Sale Earnings Costs Debt CUI1ULAllVE Yearl
Iluarter Proceeds ReceIpts Revenues 81. TOTAL (est.) ServIce TOTAL BALANCE Quarter
-------- --------- ------- -------- ----- ----- ++++++++++
1984/4 S1.212, uOO $1,212.000 $270,000 5270.000 $942.000 1984/4
198511 518.840 S18,840 50 59bO,840 1985/1
12 $19.217 $19.217 $300,000 5300.000 5680.057 /2
13 5300,000 $13.601 $313,601 $300.00(1 589.34U $38lf,340 5b04,318 13
14 $38,000 $12,086 550.086 5342,000 $342,000 5312.404 14
198b/l $6.248 $6.248 $59,560 $59,560 5259.092 198b/l
12 55.182 $5.182 $0 5264,274 12
/3 5125.000 55.285 $130,285 559.560 559.5bO $335.000 13
14 525,451 56.700 532.151 $0 $3b7.151 14
1987/1 57,343 $7,343 $64.560 5b4,5bO $309.9'34 198711
12 $32.98B $6.199 $39,187 50 5349.120 12
13 S6.982 $b.982 $59.379 $59,379 5296,724 13
14 532.988 525,451 $5.934 564.373 SO $361,U97 14
1988/1 57.222 $7,222 $b4,379 $b4.379 5303.940 198811
12 $72. 772 $6,079 $78,851 $0 $382.791 /2
13 57,b56 S7,65b 559.191 559.191 5331.256 13
14 $72.772 525.451 $6.b25 5104.848 50 5436.104 14
1989/1 $8,722 $8,722 $69.191 ib9,191 $375.635 1989/1
12 $90,b93 57,513 598.206 $0 $473,841 12
n $9.477 S9,477 $58,804 $58,804 $424.514 /3
/4 $90.693 525.451 58,490 5124.634 $0 5549,148 14
1990/1 $10,983 $lO,983 $68,804 56B,8M 5491,327 1990/1
12 $97,409 $9,827 $107,236 $0 5598,562 /2
13 $11.971 $11.971 $58,404 558,404 5552.130 13
14 597,409 525,451 511,043 $133,903 50 Sb86.032 14
1991/1 $13,721 $13,721 $83,404 $83.404 5b16.349 1991/1
12 $97,409 $12,327 $109,736 $0 5726,085 12
/3 $14,522 $14,522 557,373 $57,373 $683,233 13
14 597,409 5253,245 S13,bb5 5364,319 SO $1,047,552 /4
1992/1 $20.951 520,951 $82,373 582,373 $986.130 199211
12 597,4u9 519,723 $117,132 50 $1,103,262 12
13 522,Ob5 $22,Ob5 $56.310 55b.310 $1 ,069, 017 /3
14 597,409 $21,380 5118.789 50 $1,187.80b 14
1993/1 $23,75b $23,75b stOb.310 st06.310 $1.105,252 1993/1
12 597,409 $22,105 5119,514 50 $1,224,767 12
13 524,495 524,495 554,123 $54,123 51,195,139 /3
/4 $97,4\.19 $23.903 $121,312 $0 $I, 31b. 451 14
1994/1 $26,329 $2b.329 $129.123 st29.123 S1,213,b57 1994/1
12 597.409 $24.273 $121,682 $0 $1,335.339 12
13 $26.707 52b,707 $50,748 550.748 $1.311.298 /3
/4 597.409 $2b.226 $123.635 so 51. 434.933 /4
199511 $28.699 $28,699 $150.478 $150.478 SI,313.153 1995/1
12 $97.409 S26,263 5123.b72 SO $1 ,43b. 815 12
13 528,737 $28.737 $411.148 S46.148 $1,419,414 13
14 S97,409 528.388 $125.797 50 51.545,211 14
Prepared by Evensen Dodge. Inc. 28-Aug-84
CITY OF HpPKINS. MINNESOTA
. '. -
1996/1 $30,904 530,904 $196.148 $196.148 $1.379,967 1996/1
12 $97:409 $27,59'1 $125.008 $0 51.504.976 12
13 $30.100 530,100 539.098 $39,098 $1,495.977 13
/4 $97.409 $29,920 $127,329 50 $1, b23. 30b /4
1997/1 $32,466 $32,466 $189,098 $189.098 $1. 466. 674 1997/1
12 $97,409 529,333 U2b,742 $0 $1,593.416 /2
/3 $31.868 $31.868 $31,973 $31,973 $1,593,312 13
14 $97,409 531.866 $129,275 50 $1,722,587 14
1998/1 $34.452 $34.452 $181,973 $181.973 $1.575.0116 1998/1
12 $97,409 $31. 501 5128.910 $0 51,703.97D /2
/3 $34.080 534,080 $24,773 524.773 $1,713.282 13
/4 597,409 534.266 $131.b75 $0 51,844.957 14
1999/1 $36,899 $36,899 $174.773 $174.773 $I,707.0B3 1999/1
12 597.409 $34,142 $131,551 $0 $1.838,634 12
13 $36,773 53b.773 $17.497 517,497 $1,857,909 13
14 597.409 $37,158 $134.5b7 $0 $1,992,477 14
2000/1 $39.850 $39,850 51b7.498 $167,498 $1.864,828 2000/1
12 597,409 $37,297 $134,70b 50 $1,999,534 12
13 $39.991 $39.991 $10.147 $10,147 52.029.377 13
14 597.409 $40,538 $137,997 $0 $2,lb7.374 /4
2uOl/1 543,347 $43.347 $215,147 $215,147 $1,995,574 200111
Total: st. 212. 000 $2.535,904 $843,500 $1,391.857 $5,983,2bl $I ,212. 000 $2,775.687 $3,987,687
Prepared by Evensen Dodge. Inc. 28-Aug-B4
.. "
CITY OF HOP~INS, MINNESOTA
$1,260.000 6.0. TAl INCREMENT BONDS, SERIES 1984
15-YEAR PRELIMINARY DEBT SCHEDULE - 8/28/84
---------------------
---------------------
DEBT SERVICE SCHEDULE
---------------------
---------------------
e BONDS BONDS
DATE PRINCIPAL COUPON INTEREST PERIOD TOTAL FISCAL TOTAL OUTSTANDIN6 PAID TO DATE
81 1185 89.340.00 89.340.00 1,200,000.00
21 1/86 59,560.00 59.560.00 148,900.00 1,2bO.000.OO
8/ 1/86 59.560.00 59,560.00 1.260,000.00
21 1187 5.000.00 7.250000 59.5bO.00 b4.560.00 124,120.00 1,255,000.00 5,000.00
8/ 1/87 59.378.75 59.378.75 1.255,000.00 5,000.00
2/ 1/88 5.000.00 7.500000 59,378.75 b4,378.75 123,757.50 1,250,000.00 10.000.00
81 1/88 59.191.25 59,191.25 1.250,000.00 10,000.00
21 1189 10,000.00 7.750000 59,191.25 b9,191.25 128,382.50 1.240.000.00 20,000.00
8/ 1/89 58,803.75 58,803.75 1.240,000.00 20,000.00
21 1/90 10.000.00 8.000000 58,803.75 68.803.75 127,607.50 1.230,000.00 30,000.00
81 1/90 58.403.75 58,403.75 1,230,000.00 30.000.uO
21 1191 25,000.00 8.250000 58.403.75 83,403.75 141,807.50 1.205.000.00 55,000.00
81 1/91 57.372.50 57.372.50 1.205,000.00 55,000.00
21 1/92 25,000.00 8.500000 57.372.50 82,372.50 139,745.00 1,180,000.00 80.00U.oO
8/ 1/92 5b.310.00 56.310.00 1,18U.uOO.oO 80.000.00
e 21 1/93 50.000.00 8.750000 56,310.00 106,310.00 Ib2.620.00 1. 130.00u.00 130,000.00
81 1/93 54.122.50 54,122.50 1,130,000.00 130.000.00
21 1194 75,000.00 9.00uOOO 54,122.50 129.122.50 183.245.0U 1,055,000.00 205.000.00
8/ .1/94 50,747.50 50,747.50 1.055.uOO.00 205.00u.00
21 1/95 100.000.00 9.200000 50,74i.50 150,747.50 201,495.00 955,000.00 305,000.00
81 1/95 46,147.50 4b,147.50 955.uOO.00 305,000.00
21 1196 150,000.00 9.400000 46,147.50 19b.147.50 242,295.00 805.000.00 455,000.00
8/ 1196 39,097.50 39.097.50 805,000.00 455,000.00
21 1/97 150.000.00 9.500000 39,097.50 189,097.50 228,195.00 b55,000.00 605,000.00
81 1/97 31,972.50 31.972.50 655,000.00 605,000.00
21 1/98 150.000.00 9.600000 31,972.50 181,972.50 213.945.00 505,000.00 755,000.00
81 1/98 24,772.50 24,772.50 505,000.00 755,000.00
21 1/99 150.000.00 9.700000 24,772.50 174,772.50 199,545.00 355,000.00 905,000.00
81 1/99 17,497.50 17,497.50 355.000.00 905,000.00
21 11 0 150.000.00 9.800000 17.497.50 Ib7,4If7.50 184,995.00 205,000.00 1,055.000.00
81 11 0 10.147.50 10,147.50 205,000.00 1,055,000.00
21 1/ 1 205,000.00 9.900uOO 10,147.50 215.147.50 225,295.00 1.260,000.00
-------------- -------------- --------------
l,2bO.000.OO 1. 515. 950.00 2,775,950.00
ACCRUED
1.260,000.00 1,515.950.00 2.775.950.00
-------------- -------------- --------------
-------------- -------------- --------------
DATED 111 1/84 WITH DELIVERY OF 111 1184
BOND YEARS 15.860.000
AVERAGE COUPON 9.558
AVERAGE LIFE 12.587
N I C Z 9.7172131 Z WITH A BID OF 98.00u