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DEC. 11. 2000 9 : 17AM EHLERS & ASSOCIATES O. 6272 P. 3 <br /> Use of TIF <br /> December 11, 2000 <br /> Page 2 <br /> 4. Duration: State Law allows housing TIF districts to remain in place for up to 25 years. <br /> The actual term of payment is a key element of every project negotiation. The developer <br /> will push for a longer term with greater assistance. The City typically seeks a shorter <br /> with less assistance and a quicker end of the TIF district. Each project is a balancing act. <br /> 5. Local Contribution: State Law requires that the City make a "qualifying local <br /> contribution" to the TIE district. The contribution represents 5% of the annual tax <br /> increment. The City must use its own funds to pay for project relates expenses. These <br /> expenses can include such items as streets, utilities, and traffic controls. <br /> 6. Bank Qualified Bonds: The project will be financed with tax-exempt bonds. The City of <br /> Orono may be asked to issue these bonds on behalf of the non-profit owner of the <br /> housing. The bonds are secured solely with the revenues of the project and do not create <br /> a debt of the City. These bonds do, however, count against the City's annual allocation of <br /> "bank qualified" bonds. Under federal treasury regulations,the City may designate up to <br /> $10,000,000 each year as bank qualified. This status results in lower interest rates for the <br /> City's bonds. The spread ranges from 5 to 30 basis points, depending on market <br /> conditions at the time of sale. It appears that the combined total of bonds for the project <br /> and bonds for City needs will exceed 510,000,000 in 2001. In response to this situation, <br /> nothing, (2) have the developer find another issuer <br /> : (1) doP <br /> three basic options <br /> the Cityhas <br /> p <br /> of the bonds, or(3) negotiate a"hold harmless" fee from the developer. <br /> 7. Land Control: The City has discussed the potential to acquire the site and lease it to the <br /> developer as a means of having long-term control for the use of the housing. Would the <br /> City finance acquisition through reserves or borrowing? Would the City seek <br /> reimbursement through TIF or from project lease payments? <br /> N,1Minnsoio\OAONO\T1Plx.u0121l,wpd <br />