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TO: Mayor and City Council <br /> FROM: Ron Moorse, City Administrator 1, <br /> DATE: February 16, 2001 <br /> SUBJECT: Senior Housing Project- Financial Package and City Control <br /> The City's number one priority in relation to the financial package for the senior housing project is <br /> to ensure to the greatest extent possible that the project will continue to serve seniors, and will <br /> continue to provide units with affordable rents for the longest period possible. Two approaches to <br /> this have been discussed. <br /> 1. Put in place a development agreement based on a TIF financing package,put in place <br /> covenants that run for the 40-year term of a tax-exempt bond, and put in place a <br /> number of financial disincentives to converting the senior housing use to another <br /> housing use. <br /> 2. City purchase the property and lease it to the nonprofit corporation for the senior <br /> housing use. <br /> Basic TIF Approach <br /> The provision of financial assistance through a TIF district enables the City to control the use and <br /> the rents for the period of the TIF assistance, which in this case is 20 years. In addition, the City <br /> could place covenants on the property that are tied to the 40-year term of the tax-exempt bonds being <br /> used to finance the project. These covenants can require the senior housing use and affordable rents <br /> to remain in place for the term of the bonds. In addition, there are a number of up-front costs the <br /> City could choose to defer with interest that would be payable at such time as the senior housing use <br /> or the affordable rents were discontinued. These up-front costs could include items such as park <br /> dedication fee,water and sewer fees,the cost of burying the electrical lines,and the cost of installing <br /> streetlights along Highway 12. These costs would total approximately $300.000. If the nonprofit <br /> corporation would choose to change the use at the end of the 20-year TIF district, it would have to <br /> pay these up-front costs with interest accrued over the initial 20-year period. <br /> City Purchase of Property <br /> The second option for giving the City control over the use of the property over the long term is the <br /> City's purchase of the property and leasing it to the nonprofit corporation. Mr.Dunbar has indicated <br /> two concerns with this option. <br /> 1. The cash flow for the project would change significantly. Under the basic TIF <br /> package, the developer pays for the land over 40 years but receives TIF payments <br /> during the first 20 years that are significantly greater on an annual basis than the <br />