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Council Office of the City Manager |
Date |
March 10, 2008 |
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Agenda Item No.
66 Roll Call No. 08- Communication No. 08-135 Submitted by: Matt Anderson, Economic
Development Administrator |
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AGENDA HEADING:
Communication from the
City Manager regarding preliminary terms of agreement with the owners of Merle
Hay Mall for economic development assistance of up to $400,000 annually for a
total of up to $5.6 million from proposed
tax increment revenues for Merle Hay Mall located at 3830 and 3850 Merle Hay
Road.
SYNOPSIS:
Recommend proceeding with negotiations and final document
preparation with the owners of Merle Hay Mall (Elizabeth
Holland, general counsel for Abell Credit Corporation,
FISCAL IMPACT:
Amount: A development grant
of 100% of the project’s net tax increment generation, up to $400,000 annually for
up to a total of $5,600,000, is requested on a cash-available basis; the value
of the grant is based on a minimum assessment agreement of an additional
$10,000,000. The payments may extend over 15 tax years due to timing of the TIF
receipts.
Funding Source: Funding of the
assistance is contingent upon approval of the Merle Hay Commercial Area Urban
Renewal Plan, which is anticipated to be before the Council in late spring/early
summer 2008.
This developer assistance will
be funded entirely through the new property taxes generated directly from the
project after the required debt levies (about $5.50 of the annual tax rate levy
of $46/$1000) are paid and as the funding is available in the entire urban
renewal area.
As noted in the February 11,
2008 Council communication, if one or more of the larger properties in this proposed urban renewal/
TIF area experiences a significant assessment decrease, this area has the
potential to go “negative” in which the overall district drops below its
“frozen” assessment base which means having no increment available for any
public or private project.
If the urban renewal plan and
TIF are approved by City Council, the Finance Department will create a new URR
account code for this project.
ADDITIONAL INFORMATION:
As stated in the February 11th
Council communication, Merle Hay Mall is the largest mall in
The economic health of Merle Hay
Mall has a significant impact on
The developer has indicated
obtaining the financing necessary to undertake the needed improvements will be
in excess of what can be financed privately.
This level of TIF assistance is necessary for financial underwriting
approval to undertake the improvements.
The developer has identified
improvements to be made as being located on the mall concourse at
The preliminary terms of agreement, in addition to the
standard terms and conditions, shall also require:
1. The
developer shall enter into a binding agreement for a minimum $10 million
increase in property assessment for at least 15 years.
2. This
project design reviewed as early as possible by the Urban Design Review Board
before undertaking exterior renovations. The developer shall address the
3. The
developer shall provide written evidence of permanent financing.
4. Verification
of at least $14.1 million in expenditures for the capital and tenant
improvements and tenant allowances (from January 1, 2007 to December 31, 2009)
by the developer.
5. The City of
- approve a resolution by July 1,
2008 indicating its intent to create an urban renewal /TIF area that includes
the
Merle Hay Mall.
- incorporate the Urbandale Merle Hay
Mall properties into an urban renewal/TIF area on or by December 31, 2009.
Approval of the preliminary terms has been requested by the
developer in order to work with the permanent lender for loan approval that
will permit construction of exterior improvements to begin that can then be
completed in time for back-to-school (August 2008) shopping.
Merle Hay Neighborhood Association
An
informal meeting with representatives of the Merle Hay Neighborhood to review
the proposed mall improvements and use of the TIF was held on February 29, 2008
and Neighborhood Development staff reviewed the proposal at the group’s general
meeting on March 4, 2008. No action was taken at these meetings.
Sources and Uses
The developer has requested the
tax increment assistance based on the following sources and uses of funding for
the proposed mall renovations.
|
Sources |
|
|
Uses |
|
|
$1,800,000 |
Developer cash investment (includes work done in past year) |
|
$6,009,443 |
Capital
improvement (overall area) |
|
$10,000,000 |
Bank Mortgage |
|
$3,718,145 |
Tenant Improvements |
|
TIF (14 yrs. x $400,000 x 6.5% net present value) |
|
$3,846,563
|
Tenant
Allowance |
|
|
$14,132,959 |
Total
Sources |
|
$14,132,959 |
Total Sources |
*The $5,600,000 tax increment revenue is
valued at 6.5% present value over a 15 year term; the developer intends to
obtain a loan on the $5.6 M aggregate value of the TIF payments. As noted previously,
the payments may extend to a 15 year time period due to timing of the TIF
receipts.
At this time, the developer is
not ready to proceed with a project on the
PREVIOUS COUNCIL ACTION(S):
Date: 2/11/2008
Roll Call Number: 08- 245
Action: From William Lillis and
Date: 1/22/2007
Roll Call Number: 07- 144
Action: William J. Lillis, representing Merle Hay
Mall and Bankers Trust, regarding a Tax Increment Financing (TIF) District in
the Merle Hay and
BOARD/COMMISSION ACTION(S): NONE
ANTICIPATED ACTIONS AND FUTURE
COMMITMENTS:
Completion of negotiations, final document preparation, and
review of the proposed design and use of the tax increment revenues by the
Urban Design Review Board.
For more information on this
and other agenda items, please call the City Clerk’s Office at 515-283-4209 or
visit the Clerk’s Office on the second floor of City Hall,