Fiscal Note
This resolution would authorize a $225,000 TIF Loan, disbursed to Borrower when certain Borrower obligations are met, for the renovation of a long-vacant property at 4916 and 4930 East Broadway (“Project). The loan would be repaid through incremental taxes generated by the Project and represent approximately 50% of the present value of all incremental taxes anticipated from the Project through the remaining 15-year life of TID #39, created on September 2, 2008.
Funds to capitalize this loan would require an authorizing amendment to the 2013 Capital Budget. While it is anticipated that the incremental taxes generated by the Project will be sufficient to repay the loan within approximately 8 years, the Borrower and its personal guarantor is required to guaranty a minimum payment on their respective loan if sufficient future tax increment is not available.
Staff concludes that the Equity Participation Payment and PILOT provisions normally required in TIF Policy are not applicable concerning this Project.
Generally, the equity participation payment is triggered by the sale of a TIF-assisted, speculative real estate project to an unrelated party when the actual sale price greatly exceeds the sale value projected at the time of TIF Application. In such an event, the City receives a payment upon sale of a percentage of the project’s gross sales proceeds, capped at the amount of TIF assistance provided. In part, this policy has been in place to deter developers from exaggerating the gap.
In this case, however, the value of the property at completion is not the primary cause of a gap. The gap is caused by the private sector lender restrictions placed upon the Borrower’s working capital reserves, such that Borrower may not invest more into the Project without defaulting on the terms of its private sector financing.
Staff concludes that the customary PILOT payment is also not applicable. The tenant is a for-profit entity. The PILOT provision was insti...
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