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h ` TO: Mayor Peterson and Councilmembers FROM: Ron Moorse, City AdministratorZ/'� DATE: February 7, 2001 SUBJECT: Tax Increment Financing-Senior Housing Proposal Attachments: 1. Memo from Rusty Fifield dated 1/31/01, titled Housing TIF District 2. Memo from Rusty Fifield, dated 12/7/00, titled Housing TIF Districts 3. Memo from Rusty Fifield, dated 12/11/00,titled Use of TIF 4. City of Orono Dunbar Housing Project Outline of Financing Plan, dated 1/12/01 5. Senior Housing Project Ten Year Cash Flow Projections Frank Dunbar is requesting financial assistance from the City for the senior housing project proposed for the northwest quadrant of Brown Road and Highway 12. The assistance is needed to provide sufficient cash flow while enabling fewer units and lower rental rates. The type of assistance requested is Tax Increment Financing(TIF). TIF enables the City to capture the increased property taxes generated by a development,and use them to provide the financial assistance needed to make a development viable. The attached memo from Rusty Fifield dated 1/31/01, provides information regarding Tax Increment Financing for the senior housing project, and identifies the key elements of the financial assistance package. These elements will be reviewed in-depth at the February 8 worksession. City Control The provision of financial assistance through the use of TIF provides the City with control over significant elements of the use of the property. These include assuring the use remains senior housing, assuring the rents remain at affordable levels,and providing preferential treatment of Orono residents and past Orono residents in terms of access to available units in the development. The City retains this control for the duration of the TIF district,which it appears will be 15 to 20 years. The City may be able to extend its period of control to 30 to 40 years through the use of covenants filed against the property. The only way to extend the City's control for a longer period is for the City to own the property. The disadvantage of the ownership option is that the City would take on the risk of providing the up- front financing for the purchase of the property; and the structure of the financial assistance package to the developer,including the structure of the TIF plan,would have to be changed significantly.Rusty Fifield will be prepared to explain and discuss these issues at the worksession.