The EDA through an interfund loan from the city has previously funded $300,000 towards the redevelopment of the former city hall site.  Those funds have been spent to complete the environmental studies, demolition, clearing, compaction of the site along with the financial and legal work necessary to setup the Tax Increment Financing District.  The city has spent approximately $260,000 to date on those items.

This Resolution approves an additional note of $2,132,400 to be funded for the redevelopment of the site based on actual monies expended.  The total note, including the original $300,000 already authorized, is $2,432,400. The repayment revenue is secured from the TIF.  Those funds are collected by the County and forwarded to the city.  Those funds will be used to pay down the city's note at 3%. 

The city's payments are secured by payment of the property taxes by the developer.  Should the developer not pay the taxes, their lender would assume that liability.  Should the lender not pay the taxes, the city has remedies under its taxing authority for repayment.  Given the significant investment in the project of a factor of at least six times, the city is in a relatively secure position, especially since the TIF payments come directly to the city.  The developer is providing guarantees to ensure that the project meets the tax value and is also waiving its rights to appeal any valuation.

Based on typical projects that the State of Minnesota has reviewed, TIF payments typically in redevelopment projects are accelerated since no inflation has been factored into the twenty five year value so repayments tend to accelerate.  The city would earn 3% on the loan until it is fully repaid.

The EDA and Council previously discussed that by structuring the TIF note this way that it would get this particular property back on the tax rolls sooner since the interest rate is competitive and also the city receives a slightly better return on its funds that it currently receives.