University Heights One University Place

TIF PlanCity Council Meeting

July 14, 2015

One University Place Project

• South (front) building containing 14,600 sq ft of commercial on first floor.

• Also on first floor will be University Heights Community Center space.

• 24 total residential condominiums on floors two and three.• Underground residential parking

Mixed Use Project featuring:

• North (rear) building will be residential condominiums only. • 5 stories of condominiums with total of 80 units• 2 levels of underground parking

Total estimated valuation of project:$30,500,000

If the city approves the rebate TIF, the developer will be able to borrow $4M at 6.5% interest during the construction phase. The rebate, paid over a 13 year period, would be for the principal $4M and interest for a total of $6.7M.

The TIF District will be set by City Council and consist of the property purchased by Jeff Maxwell from St. Andrew Church shown in the red outline above, and the property already owned by Jeff Maxwell, outlined in green. ONLY residences and commercial property INSIDE this district will have their property tax payments used to rebate the TIF amount. There is no plan to locate any buildings in the green outlined space. After the Sunset/Melrose intersection is realigned, the developer will gift the property to the City of University Heights to be maintained as a natural area.

Jeff Maxwell has requested tax increment financing (TIF) from the City of University Heights for their One University Place project. This request is for $4M in a rebate that will be paid out only after the project is built and generating property taxes.

The Church Property (RED) generated $0 in property tax for 2013The Maxwell Ravine (GREEN) generated $71.32 in property tax for 2013

From John Danos, Dorsey & Whitney, sent to U-H city council 6/18/2015

City of U-Heights has contracted with Tom Jackson of NDC to evaluate OUP and determine necessity of TIF. Highlight of his report 5/22/2015

• “Given its document review and extended follow-up discussions, NDC’s analysis suggests that the Developer’s request for the City to rebate a portion of the property tax increment generated by the Project is reasonable. These Tax Increment Financing (TIF) rebates, $248,337 in the middle of Year 2 of operations and $496,675 in Years 3-15, will assist the Developer in securing private financing necessary to fill a $4 million gap between the Project’s costs and available debt, equity and sales proceeds.”

A critical question for the council to answer regarding TIF was :

Does the project really need incentives, or does it need all of the incentives requested?

• “If, in my initial analysis of the project’s financials, I had found no evidence of a financing gap, I would have informed the City of as much and future considerations could have focused on zoning without any need to debate the use of tax increment financing (TIF). Instead, I identified a financing gap in that initial submission that exceeded $9 million. This number was well in excess of what I was told was the City’s total bonding capacity and it was a number that couldn’t be amortized with a TIF rebate in anything approaching the maximum available terms of private financing.”

Protected Levies not subject to TIF 15-16*

Tax income governmental entities would receive even during TIF

Entitiy Levy Total/1000K valuation Levies % of Protected

ICCSD

$2.34603

Instructional Support2 PPEL leviesDebt Service 48%

Johnson County $1.77673 Debt Service 36%University Heights $0.50717 Debt Service 10%Kirkwood Community College

$0.27005 Debt Service 6%

*Levies subject to certification on July 1, 2015 from Mark Kistler, Johnson Co. Deputy Auditor

EXAMPLE from property inside TIF districtResidential

Sample Condo: $300K valuation multiplied by residential rollback of 55.73% = $167,190 tax valuation. This would annually generate the following protected levy amounts during the TIF:

ICCSD 2.34603 $392.23

Johnson County 1.77673 $297.05

University Heights 0.50717 $84.79

Kirkwood Community College

0.27005 $45.15

TOTAL 4.89998 $819.22

EXAMPLE from property inside TIF districtCommercialSample Business: $500K valuation multiplied by commercial rollback of 90% = $450,000

tax valuation.This would annually generate the following protected levy amounts during the TIF:

ICCSD 2.34603 $ 1055.71

Johnson County 1.77673 $ 799.53

University Heights 0.50717 $ 228.23

Kirkwood Community College

0.27005 $ 121.52

TOTAL 4.89998 $2204.99

Estimated Property Tax Increment: One University Place - 2014 Levy Guidance

YearAssessed Valuation Total Increment Protected Levies

Rebate to Developer

Residual Increment- All Agencies

Protected + Residual Increment

Residual Increment– UH Protected & Unprotected

1 $30,500,000 0 0 0 0 0 0

2 $30,957,500 $298,143 $43,993 $248,337 $5,813 $49,806 $6,154 3 $31,421,863 $605,230 $89,306 $496,675 $19,249 $108,555 $14,579 4 $31,893,190 $614,309 $90,646 $496,675 $26,988 $117,634 $16,883 5 $32,371,588 $623,523 $92,005 $496,675 $34,843 $126,848 $19,223 6 $32,857,162 $632,876 $93,386 $496,675 $42,816 $136,201 $21,597 7 $33,350,020 $642,369 $94,786 $496,675 $50,908 $145,694 $24,007 8 $33,850,270 $652,005 $96,208 $496,675 $59,122 $155,330 $26,453 9 $34,358,024 $661,785 $97,651 $496,675 $67,459 $165,110 $28,936

10 $34,873,394 $671,712 $99,116 $496,675 $75,921 $175,037 $31,456 11 $35,396,495 $681,787 $100,603 $496,675 $84,510 $185,112 $34,014 12 $35,927,443 $692,014 $102,112 $496,675 $93,227 $195,339 $36,610 13 $36,466,354 $702,394 $103,643 $496,675 $102,076 $205,719 $39,245 14 $37,013,350 $712,930 $105,198 $496,675 $111,057 $216,255 $41,920 15 $37,568,550 $723,624 $106,776 $ 496,675 $ 120,173 $226,949 $44,635 16 $ 38,132,078 $734,479 $108,378 $0 $626,101 $734,479 $186,460

Adapted from Tom Jackson, National Development CouncilSubmitted to U-Heights City Council 6/8/2015

Comparison of City, County, ICCSD and Kirkwood CC income during TIF

YearResidual Increment–

University HeightsProtected & Unprotected

ICCSD Protected & Unprotected

Johnson County

Protected & UnprotectedKirkwood CC

Protected & Unprotected1 0 0 0 02 $6,154 $23,573 $16,888 $2,575 3 $14,579 $56,119 $38,190 $5,843 4 $16,883 $65,415 $42,764 $6,561 5 $19,223 $75,045 $47,502 $7,305 6 $21,597 $85,022 $52,411 $8,076 7 $24,007 $95,359 $57,496 $8,874 8 $26,453 $106,067 $62,765 $9,702 9 $28,936 $117,161 $68,223 $10,559

10 $31,456 $128,654 $73,878 $11,447 11 $34,014 $140,561 $79,737 $12,367 12 $36,610 $152,897 $85,806 $13,320 13 $39,245 $165,677 $92,094 $14,307 14 $41,920 $178,917 $98,608 $15,330 15 $44,635 $192,633 $105,357 $16,389 16 $186,460 $408,940 $201,203 $31,593

Responsible TIF Use• Project Based: All diverted revenues are used to repay the

costs of the original project causing the development (e.g., infrastructure for Coral Ridge) or are rebated to developer (e.g., Plaza Towers in I.C.)• When those project costs are paid, the TIF diversion ends.• Rebates do not exceed what is justified• No continued use of TIF to finance projects elsewhere that

couldn’t stand on their own. • No use of TIF to pay general costs of city government, tax

exempt facilities, lobbyists, etc.

From Peter Fisher, Iowa Policy Institute Presentation to U-Heights city council 4/28/2015

Questions to Ask• Will the project itself generate sufficient revenue to pay

the TIF project costs? (If it is a rebate, the answer is yes.)• Is there a public benefit from this project, or are there

features that the city is demanding that the developer would not otherwise incorporate?• Does the project really need incentives, or does it need all

of the incentives requested?• If it does need incentives to be profitable, why should the

city subsidize a project that the market cannot support?

From Peter Fisher, Iowa Policy Institute Presentation to U-Heights city council 4/28/2015

YESYES

YESTo ensure that this propertybecomes part of the tax rolls and is of a quality that residents desire as well as a size that does not overwhelm the rest of the community.

University Heights One University Place

TIF PlanCity Council Meeting

July 14, 2015