HomeMy WebLinkAbout33. 16-305
JUNE 14, 2016 16-305 RESOLUTION
(CARRIED 6-0 LOST________LAID OVER________WITHDRAWN________)
PURPOSE: APPROVE TAX INCREMENT DISTRICT NO. 28 PROJECT PLAN;
DESIGNATE TAX INCREMENT DISTRICT NO. 28 BOUNDARIES;
CREATE TAX INCREMENT DISTRICT NO. 28 BEACH BUILDING
REDEVELOPMENT
INITIATED BY: CITY ADMINISTRATION
PLAN COMMISSION RECOMMENDATION: Approved
WHEREAS, the City of Oshkosh (the “City”) has determined that use of Tax
Incremental Financing is required to promote development and redevelopment within the
City; and
WHEREAS, Tax Increment District No. 28 (the “District”) is proposed to be created
by the City as a blighted area district in accordance with the provisions of Wisconsin
Statutes Section 66.1105 (the "Tax Increment Law"); and
WHEREAS, a Project Plan for the District has been prepared that includes:
a. A statement listing the kind, number and location of all proposed public works
or improvements within the District, or to the extent provided in Wisconsin
Statutes Sections 66.1105(2)(f)1.k. and 66.1105(2)(f)1.n., outside of the
District;
b. An economic feasibility study;
c. A detailed list of estimated project costs;
d. A description of the methods of financing all estimated project costs and the
time when the related costs or monetary obligations are to be incurred;
e. A map showing existing uses and conditions of real property in the District;
f. A map showing proposed improvements and uses in the District;
g. Proposed changes of zoning ordinances, master plan, map, building codes and
City ordinances;
h. A list of estimated non-project costs;
i. A statement of the proposed plan for relocation of any persons to be displaced;
j. A statement indicating how the District promotes the orderly development of
the City;
k. An opinion of the City Attorney or of an attorney retained by the City advising
that the plan is complete and complies with Wisconsin Statutes Section
66.1105(4)(f); and
JUNE 14, 2016 16 -305 RESOLUTION
CONTD
WHEREAS, prior to its publication, a copy of the notice of public hearing was
sent to owners of all property in the proposed district, to the chief executive officers of
Winnebago County, the Oshkosh Area School District, and the Fox Valley Technical
College District, and any other entities having the power to levy taxes on property located
within the District, in accordance with the procedures specified in the Tax Increment Law,
and
WHEREAS, in accordance with the procedures specified in the Tax Increment
Law, the Plan Commission, on May 3, 2016 held a public hearing concerning the project
plan and boundaries and proposed creation of the District, providing interested parties a
reasonable opportunity to express their views thereon; and
WHEREAS, after said public hearing, the Plan Commission designated the
boundaries of the District, adopted the Project Plan, and recommended to the Common
Council that it create such District and approve the Project Plan
NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of
Oshkosh that:
1. The boundaries of the District shall be named "City of Oshkosh Tax
Increment District No. 28, Beach Building Redevelopment ", are hereby
established as specified in Exhibit A of this Resolution.
2. The District is created effective as of January 1, 2016.
3. The Common Council finds and declares that:
(a) Not less than 50% by area of the real property within the District is a
blighted area within the meaning of Wisconsin Statutes Section
66.1105(2)(a)1.
(b) Based upon the findings, as stated in 3(a) above, the District is declared
to be a blighted area district based on the identification and classification
of the property included within the District.
(c) The improvement of such area is likely to enhance significantly the value
of substantially all of the other real property in the District.
(d) The equalized value of the taxable property in the District plus the value
increment of all other existing tax incremental districts within the City,
does not exceed 12% of the total equalized value of taxable property
within the City.
JUNE 14, 2016
16 -305 RESOLUTION
CONTD
(e) The City estimates that less than 35% of the territory within the District
will be devoted to retail business at the end of the District's maximum
expenditure period, pursuant to Wisconsin Statutes Section
66.1105(5)(b).
(f) The project costs relate directly to promoting the elimination of blight of
the area consistent with the purpose for which the District is created.
(g) All property within TID #28 was within the City boundaries as of January
1, 2004.
4. The Project Plan for "City of Oshkosh Tax Increment District No. 28, Beach
Building Redevelopment " (attached as Exhibit B) is hereby approved, and
the City further finds the Plan is feasible and in conformity with the master
plan of the City.
BE IT FURTHER RESOLVED that the Common Council of the City of Oshkosh
hereby approves creation of Tax Incremental Financing District No. 28 Beach Building
Redevelopment.
"EXHIBIT A"
TIF 28 BEACH BUILDING REDEVELOPMENT
LEGAL DESCRIPTION
ALL OF BEACH BUILDING CONDOMINIUM, A PART OF LOTS 13, 15, 17 AND 23 OF
BLOCK G OF LEACH'S MAP OF 1894, LOCATED IN THE SOUTHWEST/40F THE
NORTHWEST 1/4 OF SECTION 24, TOWNSHIP 18 NORTH, RANGE 16 EAST,
SEVENTH WARD, CITY OF OSHKOSH, WINNEBAGO COUNTY, WISCONSIN
BOUNDED AND DESCRIBED AS FOLLOWS:
COMMENCING FROM THE WEST '/4 CORNER OF SAID SECTION 24; THENCE
N01 °17'08 "W, 1,010.65 FEET ALONG THE WEST LINE OF THE NORTHWEST '/4 OF
SAID SECTION, THENCE N88 042'32 "E, 34.00 FEET TO THE INTERSECTION OF THE
EAST RIGHT -OF -WAY LINE OF JACKSON STREET AND NORTH RIGHT -OF -WAY
LINE OF ALGOMA BOULEVARD; THENCE S54 036'37 "E, 417.74 FEET ALONG THE
NORTH RIGHT -OF -WAY LINE OF ALGOMA BOULEVARD TO THE
SOUTHWESTERLY CORNERS OF BEACH BUILDING CONDOMINIUM AND LOT 15
OF BLOCK G OF LEACH'S MAP OF 1894 AND POINT OF BEGINNING; THENCE
N27 008'56 "E, 222.48 FEET; THENCE S61 °48'46 "E, 77.56 FEET; THENCE N28 041'02 "E,
28.29 FEET; THENCE S61 °44'56 "E, 8.00 FEET; THENCE N28 015'04 "E, 64.30 FEET TO
THE SOUTHWESTERLY CORNER OF LOT 19 OF SAID BLOCK G; THENCE
S59 036'37 "E, 98.50 FEET ALONG THE SOUTHERLY LINE OF SAID LOT 19 TO THE
SOUTHEASTERLY CORNER OF SAID LOT 19; THENCE S34 024'38 "W, 15.83 FEET
ALONG THE WESTERLY LINE OF LOT 13 OF SAID BLOCK G; THENCE S58 007'30 "E,
55.59 FEET; THENCE S47 012'10 "E, 9.91 FEET TO A POINT ON THE NORTHERLY
LINE OF LOT 17 OF SAID BLOCK G; THENCE S59 034'46 "E, 5.62 FEET ALONG THE
NORTHERLY LINE OF SAID LOT 17; THENCE S31 °18'33 "W, 88.20 FEET; THENCE
N58 041'27 "W, 4.98 FEET; THENCE S31 °18'33 "W, 10.30 FEET; THENCE S58 041'27 "E,
4.99 FEET; THENCE 31 018'33 "W, 38.85 FEET; THENCE S58 036'28 "E, 14.99 FEET;
THENCE S32 012'15 "W, 182.49 FEET TO THE SOUTHEASTERLY CORNER OF SAID
LOT 17, ALSO BEING THE NORTHERLY RIGHT -OF -WAY LINE OF ALGOMA
BOULEVARD; THENCE N54 036'37 "W, 245.88 FEET ALONG SAID NORTHERLY
RIGHT -OF -WAY LINE OF ALGOMA BOULEVARD TO THE POINT OF BEGINNING.
SAID AREA CONTAINS 73,455 SQUARE FEET OR 1.686 ACRES, MORE OR LESS
O.fHKOfH MEMORANDUM
ON THE WATER
TO: Honorable Mayor and Members of the Common Council
FROM: Darryn Burich
Director of Planning Services
DATE: June 9, 2016
RE: Approve Tax Increment District No. 28 Project Plan; Designate Tax Increment
District No. 28 Boundaries; Create Tax Increment District No. 28 Beach Building
Redevelopment (Plan Commission Recommend Approval)
BACKGROUND
TID #28 is being proposed to facilitate the adaptive reuse of the vacant Orville Beach
Memorial Manual Training School office building at 240 Algoma Boulevard into a mixed -use
modern commercial /residential apartment complex and retail /service business center
including three commercial units on the first floor and 22 apartments on the second and third
floors complete with modern finishes, technology and amenities. The overall goal of the
redevelopment project is to provide new active life and full -time residents within the Oshkosh
center city, furthering downtown revitalization efforts. The anticipated project cost is
estimated at $3.3 million with renovations being the most significant cost due to many years
of vacancy and deferred maintenance that essentially require a complete gut and remodel of
the interior to bring the facility back to a competitive new use for the residential component.
TID #28 is an overlay of TID #5 that was created in 1983 (and closed in 2001) that was an
adaptive reuse of an educational facility into an office facility. The rationale behind the
adaptive reuse to office usage was that there was a lack of Class A office space in the central
city and that the redevelopment would fill that void at that time. Since that time, the
significant change that has occurred in the central downtown office environment is the
transformation of the 300,000 + square foot former Park Plaza Mall into the City Center office
complex. That complex has added 1,700 jobs but has also impacted the downtown office
market.
The Project Plan includes a statement listing the kind, number, and location of proposed
improvements. It contains an economic feasibility study, a detailed list of estimated project
costs and timing of those costs as well as a method of financing.
ANALYSIS
In this case TIF is being used through "pay as you go" financing to enhance the internal rate
of return (IRR) on the project to make the project financially feasible from a development
investment perspective. This is a bit different from the traditional way the city has used TIF in
the past which was to provide an up front development assistance loan or grant (DAG) that
then reduced the annual debt service payments on a project to make it financially feasible.
Pay as you go financing helps make a project financially feasible after it has been built by
reducing annual expenses and increasing revenues to get to an acceptable IRR level. The
advantage of pay as you go financing is that there is little risk to the city as the city does not
have to borrow any funds to make the project work and if the value isn't realized the payment
to the developer is reduced. A DAG is more risky to the city because the city has to borrow
funds and rely on the development value to cover debt service payments. If value is not
created, the city is solely responsible for the debt. Whether it is a DAG or Paygo, both impact
a project's IRR, but the Paygo is paid out to the developer with tax increment proceeds over
the life of the project.
With this project the "without TIF" IRR is less than 1 %. In fact the 10 year proforma for the
project shows negative cash flows for the first 10 years. With TIF (at the 75% increment
level) the 10 YR IRR is at 3.38% which from a development perspective is still not an
acceptable return to make the project financially feasible. Staff will be working with the
developer on ways to improve the IRR.
The conclusion, and the reason why staff is supportive of the creation of this TID, is that a
rate of return of less than 1 % for a real estate development project typically does not warrant
a financial investment by a developer when there are other projects and vehicles that may
yield higher rates of return in other areas with less risk. The incentives available through a
TID will encourage redevelopment in the central city, rather than encourage urban sprawl.
The proposed TO project plan is consistent with the goals and objectives of the City's
Comprehensive Plan (2005) objectives to create more housing in the downtown area.
Please refer to the TID # 28 Project Plan for more detailed information regarding the project.
The proposed TO is consistent with the City's recently adopted TID policy and guidelines due
primarily to the project's economic development implications.
FISCAL IMPACT
Being that this is proposed to be a Paygo TIF the fiscal impact to the city should be very
minor with the exception of annual maintenance to administer the TIF district for which the
city will retain a portion of the increment before any payment are made to the developer.
The base value of the property at approximately $575,000 will remain being paid to the
overlying taxing jurisdictions during the term of this TID's statutory lifetime which could be up
to 27 years. After the TID incentives have been used to make the project feasible, the
incremental value of $3.3 million (in 2016 dollars) will return to the tax roll. A separate
developers agreement will be forthcoming to Council prior to any TIF payments to the
developer.
RECOMMENDATION
The Plan Commission approved the TID #28 Project Plan and boundaries at its May 3, 2016
meeting. Staff recommends that Council approve the project plan and TO #28 as well.
Respectfully Submitted,
Darryn Burich
Director of Planning Services
Approved,
Mark Rohloff
City Manager
ITEM: PUBLIC HEARING ON PROPOSED CREATION OF TAX INCREMENT
FINANCING DISTRICT #28 BEACH BUILDING REDEVELOPMENT;
DESIGNATION OF BOUNDARIES AND APPROVAL OF PROJECT
PLAN
Prior to taking action on proposed Tax Increment District (TID) #28 and the designation of
boundaries for said TID, the Plan Commission is to hold a public hearing and take comments
concerning proposed creation of the TID #28. The public hearing is required as part of the
formal review process the City must follow in the creation of any tax incremental financing
district or amendment thereto.
Plan Commission meeting of May 3, 2016
GENERAL INFORMATION
Applicant: Chet Wesenberg
Property Owner: 240 Algoma Blvd, LLC
GENERAL DESCRIPTIONBACKGROUND
TID #28 is being proposed to facilitate the adaptive reuse of the vacant Orville Beach Memorial
Manual Training School office building at 240 Algoma Boulevard into a mixed -use modern
commercial /residential apartment complex and retail/service business center including three
commercial units on the first floor and 22 higher end apartments on the second and third floors
complete with modern finishes, technology and amenities. The overall goal of the
redevelopment project is to provide new active life and full -time residents within the Oshkosh
center city, furthering downtown revitalization efforts. The anticipated project cost is estimated
at $3.3 million with renovations being the most significant cost due to many years of vacancy
and deferred maintenance that essentially require a complete gut and remodel of the interior to
bring the facility back to a competitive new use for the residential component.
In this case, TIF is intended to be used to offset the negative cash flow in the early years of the
project and thereby facilitating a rate of return on the investment to redevelopment and
rehabilitate the Beach Building at 4.91% as opposed to the rate of return of 0.48% that would be
realized without TIF paygo assistance.
TID #28 is an overlay of TID #5 that was created in 1983 that was an adaptive reuse of an
educational facility into an office facility. TID #5 was closed in 2001. The rationale behind the
adaptive reuse to office usage was that there was a lack of Class A office space in the central city
and that the redevelopment would fill that void at that time. The significant change that has
occurred in the central downtown office environment, since the time of creation of TID #5, is the
transformation of the 300,000 + square foot former Park Plaza Mall into the City Center office
complex with 1,700+ jobs and impacted the downtown office market.
The Project Plan includes a statement listing the kind, number, and location of proposed
improvements. It contains an economic feasibility study, a detailed list of estimated project costs
and timing of those costs as well as a method of financing.
Overall costs to implement this project plan are estimated at $3,294,714 with TIF contributing
$292,831 (plus interest costs) of the project costs as pay -go based on improvement value. The
development group is proposing to bring in approximately $1.5 million or 45% equity into the
project and finance the remaining 55 %.
ANALYSIS
In March 2016, a Market Study and Investment Analysis Report for the redevelopment of the
Beach Building was prepared by Invista Analytics, LLC (IA) to provide a market study of the
present rental availability in the near downtown neighborhood that may likely serve both the
University of Wisconsin - Oshkosh and the young professional segment in downtown Oshkosh.
This information was then utilized to create an operational proforma and investment analysis for
the operation of a mixed -use renovation and re -use of the Orville Beach Memorial Manual
Training School building located at 240 Algoma Blvd. in Oshkosh, Wisconsin.
To evaluate the rental potential of the residential units, IA acquired the Apartment Data - 4 or
more Units excel database from the City of Oshkosh Assessor's File Downloads webpage. This
data set was then limited to those properties that fell within a 1 mile driving distance of 240
Algoma Blvd. and that had been constructed since the year 2000, including the 100 N. Main
Apartments and the Anthem Apartments. The data was then submitted to an econometric
quantile regression model that used all of the covariates to predict rents. The resultant model
parameters were then used along with the covariate data for the subject property units to arrive at
an expected rent for the macro, one - bedroom, and two - bedroom units to be rented. The model
resulted in estimates of $569, $704, and $802 per month respectively for the micro, one and two
bedroom units. The developers plan, however, calls for much higher finish levels than many of
the comparable units. Because of this the developers have chosen to start with monthly rents of
$550, $700, and $900 respectively. Completed project valuation, a modified income approach
was employed and the year 1 figures suggest a valuation of $1,245,000 upon completion of the
proj ect.
The operational proforma with TIF assistance starts with a negative cash flow in the first year of
$(22,531) in part due to the ramping up of occupancy in the first year and the lack of increment
payment. The next several years still also show a negative cash flow up until the fifth year but by
the tenth year, there is a positive cash flow of $27,239. The "without" TIF picture is much more
bleak from a real estate development perspective. Under this scenario the developers do not see
any positive cash flow until the ninth year, and even then the returns are modest at best being
only approximately $3,225.
Before the IRR can be calculated, an assumed reversion at the end of year ten must be calculated.
To do this the NOI from year eleven is used and divided by a terminal cap rate. An 11 % loaded
cap rate is used and then subtract off the presumed mill rate of 2.45 %, then rounding down
(which provides more presumed value) a non - loaded cap rate of 8% is arrived at. This results in a
valuation of $2.175 million in the TIF scenario. However after 10 years there would still be
$1,088,099 left to pay off on the mortgage debt. Thus a net reversion of $1,087,155 is used in
addition to the year 10 net cash flow. This leads to a 10 year Internal Rate of Return of 4.91 %
with TIF. A similar calculation without TIF leads to an IRR of 0.48 %, which from a
development prospective is not financially feasible and a disincentive to move forward with
redevelopment.
Item - Creation of TID #28 -Beach Building Redevelopment
The conclusion, and the reason why staff is supportive of the creation of this TID, is that a rate of
return of less than 1% for a real estate development project typically doesn't warrant a financial
investment by a developer when there are other projects and vehicles that return higher rates of
return. A rate of return of just under 5% with TIF would cause many to pause at this investment
but being that this is a local development group that has other similar apartment developments in
the area they benefit somewhat by having an economies of scale for their operations and
management.
The proposed TID and identified project activities are consistent with the goals and objectives of
the City's Comprehensive Plan (2005). Implementation of this Project Plan promotes, orderly
development through the renovation and preservation of a prominent, historical, building located
near the downtown region of the City of Oshkosh. Redevelopment will reduce depreciation of
the property while increasing revenue generated through property taxes. This project will provide
new commercial space, employment opportunities, and address the public demand for more
available housing in between the University of Wisconsin - Oshkosh campus and the downtown
region of the city. Implementation of this project plan accurately reflects the opinion of the
general public. According to public survey data collected in 2014 and 2015, over 75% of
respondents listed "assisting businesses with economic development" and "increasing efforts to
improve the quality of housing" as top priorities for the city to promote. Additionally, this
project is supported in the Downtown Action plan, specifically, item 6.8 which outlined both
long and short-term goals to increase residential and housing development opportunities in the
downtown area.
RECOMMENDATIONS /CONDITIONS
Planning Services asks that the Plan Commission approve the boundaries of TID 428 and the
TID #28 Project Plan, and recommend approval of the TID boundaries and Project Plan to the
Common Council.
The Plan Commission approved the boundaries of TID #28 and the TID #28 Project Plan as
requested. The following is the Plan Commission's discussion on this item.
Mr. Burich presented the item and discussed the purpose of the proposed TID creation, the rental
unit's rates, and the maximum life of the TID, and proposed use. He further discussed the size of
the parcel and value of the property and the increment values and project costs as well as the
economic feasibility and development costs as far as equity, and financing for this project. He
also reviewed the market analysis and project costs with and without the TIF assistance and
stated that this project has been reviewed by the City's financial consultants and the project
meets all the requirements in the State code for creation of a TID.
Mr. Gray discussed the staff and developer's'efforts on this project and stated that he felt there
were inconsistencies in the financial information in the project plan and he cannot verify the
need for additional money for this development. He further stated that he was not sure if TIF
assistance is the correct process for a funding source for this project and would not support it due
to what he felt was inaccurate financial information.
Item - Creation of TID #28 -Beach Building Redevelopment
Mr. Bowen questioned some of the wording on page 8 relating to the historic tax credits that he
felt was incorrect and questioned if the project would be eligible to receive State Historic Tax
Credit assistance as State and Federal tax credits may have been utilized in the mid 1980's when
the site was redeveloped. He felt that this aspect of the plan needed to be looked into as he did
not feel that the Historic Tax Credit assistance could be utilized again to his knowledge. This
would change the financial figures if they were not applicable. He also questioned if the soft
costs of 10% of the developer's fee was counted as part of the developer's equity in the overall
proforma or is it excluded from the number in excess of that.
Mr. Thorns inquired if the developer made any attempt to approach GO -EDC for funding rather
than pursue the TIF assistance as this was economic development.
Mr. Burich responded that they did not pursue that avenue that he was aware of and that the
application was submitted and staff research completed to determine if the request met the
necessary requirements.
Mr. Bowen commented that GO -EDC does not have support for real estate projects and are not
focused on redevelopment projects that do not create jobs.
Chet Wesenberg stated that they did not approach GO -EDC for financial assistance for this
project.
Mr. Thoms questioned if they contacted Winnebago County for low interest loan assistance.
Mr. Wesenberg responded negatively and stated that the Historic Tax Credits are eligible for this
project as they can be re- applied for after five years of receiving assistance and explained their
submitted application process. He also discussed the criteria for the program which requires that
historic preservation needs to identify what features of the structure which are historic and what
can be saved and discussed the process of renovation with this being taken into consideration.
He further discussed the approvals received thus far and the entities involved with the approval
process.
Mr. Bowen inquired where the coffee shop was located within the development.
Mr. Wesenberg responded that it would be on the first floor where the existing drive through
feature of the structure is located and that they already have an entity committed to fill that
commercial use. He also discussed some of the other uses that were planned for the first floor
commercial space.
Barbara Young stated that the TIF assistance concerns her as taxes are kept at a lower rate for the
development which has to be made up by other taxpayers. She also stated that TIF assistance
was utilized as an incentive to start projects and this project appears to already be under way as
work has already been going on at the site. She felt that favoritism was in play and that
developers with deep pockets are the ones that are receiving TIF assistance advantages. She
questioned if this project was going to be ceased if the TIF assistance was denied.
Mr. Gray commented that she was claiming that the developer will be paying less taxes and that
was not how TIF assistance worked. He explained that the developer will pay the same amount
of taxes as any other development and that they will pay the current tax rate for the property and
Item - Creation of TID #28 -Beach Building Redevelopment
the difference is where these tax dollars are applied. He further explained that with TIF
assistance that the taxes are applied to repay the city for the development rather than going to the
school district and other entities that normally receive a portion of the tax payments.
Bernard Pitz, 617 W. Irving Avenue, stated that the building was constructed by his company
and that he does not agree with the developer receiving TIF assistance for this project. He
discussed his research on the property and that the property taxes were decreased in 2015 by a
considerable amount and that the developers are owners that will be moving into the commercial
space created. He further discussed the developer's fees and architect's fees that amount to
around $300,000 that are included in the project plan and that the school system and Winnebago
County will not receive their portion of the tax payment from this property. He questioned how
this TIF assistance can be justified when the school system just passed a referendum for
additional taxes to be paid by property owners. He felt that the developer's and architect's fees
should be removed from the project plan as it is benefiting the parties that will be occupying the
building. He also discussed that TIF assistance is typically sought when the area receiving the
TIF assistance is determined to be 50% blighted and City Hall is directly adjacent to this parcel
and he does not consider it to be a blighted area. He also stated that TIF assistance was meant to
initiate development that would bring in new business and create jobs and increase the tax base
and that this proposed TIF does not meet these requirements. He continued to discuss how TIF
projects are utilized for economic development purposes and that it was meant to provide
funding prior to any work being initiated and that the work on this development has already
begun prior to the TID plan even being approved.
Diane Lammers, 131 Church Avenue, stated that she thought that the TID plan should be
approved before any construction is started and that work has been underway at this site for some
time now. She also commented about the developer receiving a tax break for the next 20 years
which she felt was unfair while they are making money from the development and that she
disagreed with TIF assistance being granted for this project.
Tim Hess, 2645 Templeton Place, stated that he completed the analysis for this project and
discussed its details and stated that from the standpoint of the developers fees, they are applying
for allowable fees as things such as the architect's fees are part of the total expense for the
development. He discussed the comments relating to the developer's and architect's fees that
were claimed to be excessive and their request for $300,000 and explained the allowable fees
related to a TIF project and further explained the hard costs involved with this project. He also
explained the substantial fees involved with a historic tax credit project and the developer's fees
are in the analysis.
Mr. Bowen questioned if these costs were included in the proforma of the developer equity of
$1,494,714 that the developers are bringing into this project.
Mr. Hess responded affirmatively.
Mr. Borsuk again asked to clarify if the apartments would be market rate units.
Mr. Hess responded affirmatively.
Mr. Gray referenced the table on page 32 of the project plan that contained revenue projections
relating to the rental projects and stated that from his calculations, the commercial space rental
Item - Creation of TID #28 -Beach Building Redevelopment
amount should be $90,000 not $68,000 based on the square footage of the commercial space
available.
Mr. Hess responded that 10% is common areas that are not included in this calculation.
Mr. Gray felt that the square footage calculations from floor to floor did not add up correctly.
Motion by Vajgrt to approve the designated boundaries and Project Plan for TID #28-
Beach Building Redevelopment.
Seconded by Borsuk.
Mr. Burich requested that an explanation of what activities are occurring on the site now be
provided and what will occur if the TIF financing is not approved.
Mr. Wesenberg explained that the project is contingent upon TIF and tax credit assistance and
that he was not sure how the project would proceed if these financial aides were not approved as
he did not feel the project would go forward without this assistance as they were counting on this
to help finance the development.
Mr. Thorns stated that this project did not meet the criteria for the purpose of the creation of a
TID and that the developers did not look at alternative financing and that it was difficult to
ascertain that the $300,000 from the TIF assistance would make or break this project at
$3,000,000 and that it was justified.
Mr. Wesenberg commented that he was not sure if other financial avenues to assist with this
project were pursued and that his partner was not present to answer these questions.
Mr. Thorns questioned why work has begun on the project if it was contingent upon receiving
the assistance that has not yet been approved.
Ms. Wesenberg responded that they cannot determine the full exposure without starting work on
the structure as selective demolition was in process as this work must be completed to determine
what historic elements remain within the structure. There is work going on but it was nominal to
determine the historic fabric.
Mr. Thoms commented that he thought that the developer had to apply for TIF assistance and
have it approved prior to any work commencing on the site.
Mr. Burich explained that the TIF is not being used to directly fund any construction activity at
the site but as a financial incentive to complete the project.
Motion by Vajgrt to call the question and end discussion.
Seconded by Bowen.
Motion carried 7 -2. (Ayes Borsuk/BowenIFojtik/Hinz /Cummings /Propp/Vajgrt). Nays -
(Thoms/Lohry)
Item - Creation of TID #28 -Beach Building Redevelopment
Exhibit B
TAX INCREMENT DISTRICT #28
BEACH BUILDING REDEVELOPMENT
PROJECT PLAN
Planning Services Division
Table of Contents
Tables
..............................4
PlanSumma ...........................................
..............................1
Table2 Estimated
Table 3 Tax Increment by Taxing Jurisdiction ........................................................
.............................10
..............................2
Introduction..................................................................................................................
Purpose..........................................................................................................................
..............................2
# 3 Existing Land Use Map ................................................................
.............................14
..............................2
ProjectPlan Activity ........ ............................... .............................................................
Boundaries/Legal Description ............................................... ...............................
""""""" " " " " " " " " " " "3
Name of District ...............................
" "' ..............3
.......................................................................................
16
..................
..............................3
Creation Date .............................................................. ...............................
-
ProjectCosts and Improvements .......................................................................
............................... .......3
# 6 Proposed Improvement Plans ......................................................
Methodof Financing ..................................
..............................4
Master Plan, Zoning, Building and Other Code Considerations ............................
..............................4
.............................24
Appendix
for Development
..............................4
Economic Feasibility/Expectation .................................................
Appendix
..............................6
Promotion of Orderly Development ...........................................................................
Proposed Uses and Existing Conditions .....................................................................
..............................6
AppendixE
— Attorney's Opinion .............................................................................
Non - Project Costs ........................................................................................................
..............................7
Relocation.....................................................................................................................
..............................7
Findings and Report to the Joint Review Board .......................................................
..............................8
Tables
..............................4
Table I Project Costs - Sources and Uses ....................................................................
Annual Increment (Investa -Anal tics ) ....................................................................•9
Table2 Estimated
Table 3 Tax Increment by Taxing Jurisdiction ........................................................
.............................10
Appendix
A — Exhibits
Map ...............................
....................... ...11
# 1 Boundary ..................................................
# 2 Parcel Identification Map and Table ..........................................
.............................12
# 3 Existing Land Use Map ................................................................
.............................14
# 4 Proposed Land Use Map ..............................................................
.............................15
16
# 5 Existing &Proposed Zoning Map .............................................
...............................
# 6 Proposed Improvement Plans ......................................................
.............................17
Appendix
B — Tax Increment Financing Application ..............................................
.............................24
Appendix
C — Market Study and Investment Analysis Report ( Investa- Analytics ) ..........................36
Appendix
D — Notice of Public Hearing ....................................................................
.............................49
AppendixE
— Attorney's Opinion .............................................................................
.............................50
Appendix
F —Plan Commission Public Hearing/Minutes of May 3, 2016
............ .............................51
Appendix
G — Common Council Creation Resolution XXXX X, 2016 .................... ...............................
Appendix
H — Joint Review Board Resolution XXXX X, 2016 ................................
...............................
TAX INCREMENT DISTRICT #28
PROJECT PLAN
CITY OF OSHKOSH
PLAN COMMISSION
May 3, 2016
COMMON COUNCIL
May XX, 2016
JOINT REVIEW BOARD
XXXX XX, 2016
Department of Community Development
May, 2016
Plan Summary
City of Oshkosh
Tax Increment District #28 Project Plan
District Name: City of Oshkosh Tax Increment District #28 Beach Building Redevelopment
TID Type: Blighted Area
Purpose: Redevelop and renovate the 36,000 square foot Orville Beach building at 240 Algoma
Blvd. Specifically this building will be renovated into 3 commercial office spaces on the
first floor, and 22 residential units split amongst the second and third floors.
Max. Life
of TID: 27 Years, but developer projections show that district could be closed after 20 years.
Location: 240 Algoma Boulevard, Oshkosh, Wisconsin.
Size: Approximately 1.69 acres
Parcels: 1
Estimated District
Base Value: $575,000
Estimated District
Value at Closure: $1 ,519,137
Estimated Future
Increment Value $944,137
Proposed Costs: $3.3 million total in private project costs. An estimated $390,442 of tax increment may be
used to offset overall project costs over the term of the district.
Project Financing: Private equity and loans.
Economic
Feasibility: Economic feasibility is based on rehabilitation and redevelopment of the vacant office
space into higher -end apartments and modern commercial business space.
TID # 28
Introduction
Wisconsin's Tax Incremental Financing law provides a mechanism that enables cities and villages to rehabilitate
blighted areas, improve business areas, create mixed -use developments, and/or develop industrial sites. The intent
is to defray the cost of improvements in a designated Tax Incremental District (TID) by using tax revenues or
increments generated from new development to pay for project improvements in the district. The value increment
is the difference between the certified base value of the TID at the time of creation and the increased value of the
property in subsequent years until the TID is dissolved.
Under Tax Incremental Financing, the tax increment generated is used to pay for activities identified in the TID
project plan that will encourage and facilitate blight elimination and new development. These activities may
include construction of public works or financing private investment which can include incurring public debt in
furtherance of the project plan. When the cost of improvements has been recovered and the debt service
attributable to the district has been retired, the TID is dissolved and all taxing jurisdictions benefit on the same
shared basis as before the creation of the TID. If the TID has been successful, each of the taxing jurisdictions
should receive a much larger share of property taxes generated from the new development that came about as a
direct result of the creation of the TID.
Tax incremental financing laws provide benefits to all taxing entities, City, County, Public Schools, and
Technical College, by promoting development of new taxable value which otherwise would not occur. It provides
a tool for municipalities to make reasonable levels of investment using local financing sources to meet identified
needs and fill legitimate public purpose roles. The law also recognizes that since municipalities do not share the
investment risk with other tax entities, they are entitled within a prescribed period of time, to receive all new tax
revenues of the TID as the source of paying off all public investment costs. All other taxing entities receive
benefits in the future from the increased tax base generated as a result of the City's investment in the TID.
Purpose
The primary purpose of this TID is to facilitate redevelopment and rehabilitation of the vacant Orville Beach
Memorial Manual Training School office building at 240 Algoma Boulevard into a mixed -use modern ..
commercial /residential apartment complex and retail /service business center including three commercial units on
the first floor and 22 higher end apartments on the second and third floors complete with modern finishes,
technology and amenities. The overall goal of the redevelopment project is to provide new active life and full -
time residents within the Oshkosh center city and furthering downtown redevelopment efforts consistent with
Comprehensive Plan goals. The anticipated project cost is estimated at $3.3 million with renovations being the
most significant cost due to many years of vacancy and deferred maintenance that essentially requires a complete
gut and remodel of the interior to bring the facility back to a competitive new use.
In this case, TIF is intended to be used to offset the negative cash flows in the project's early years to facilitate a
higher Internal Rate of Return that without TIF is less than 1 %. With TIF assistance the IRR increases to just
under 5% based on project proforma analysis.
Proiect Plan Activities
Project Overview
The developers intend to rehabilitate the Beach Building located at 240 Algoma Blvd in Oshkosh, Wisconsin.
Specifically, this building will be renovated into 3 commercial office spaces on the first floor, and 22 residential
units split amongst the second and third floors. Renovation is required to facilitate the adaptive reuse to
TID # 28
residential units in the upper floors and to address deferred maintenance with little to no funds invested back into
the facility in previous years.
Boundaries/Lelzal Description
ALL OF BEACH BUILDING CONDOMINIUM, A PART OF LOTS 13, 15, 17 AND 23 OF BLOCK G OF LEACH'S MAP OF 1894,
LOCATED IN THE SOUTHWEST'' /4 OF THE NORTHWEST'' /4 OF SECTION 24, TOWNSHIP 18 NORTH, RANGE 16 EAST,
SEVENTH WARD, CITY OF OSHKOSH, WINNEBAGO COUNTY, WISCONSIN BOUNDED AND DESCRIBED AS FOLLOWS:
COMMENCING FROM THE WEST'' /4 CORNER OF SAID SECTION 24; THENCE NO1 °17'08 "W, 1,010.65 FEET ALONG THE
WEST LINE OF THE NORTHWEST/ 40F SAID SECTION, THENCE N88 °42'32 "E, 34.00 FEET TO THE INTERSECTION OF
THE EAST RIGHT -OF -WAY LINE OF JACKSON STREET AND NORTH RIGHT -OF -WAY LINE OF ALGOMA BOULEVARD;
THENCE S54 °36'37 "E, 417.74 FEET ALONG THE NORTH RIGHT -OF -WAY LINE OF ALGOMA BOULEVARD TO THE
SOUTHWESTERLY CORNERS OF BEACH BUILDING CONDOMINIUM AND LOT 15 OF BLOCK G OF LEACH'S MAP OF
1894 AND POINT OF BEGINNING; THENCE N27 °08'56 "E, 222.48 FEET; THENCE S61 148'46 "E, 77.56 FEET; THENCE
N28 041'02 "E, 28.29 FEET; THENCE S61 °44'56 "E, 8.00 FEET; THENCE N28 °15'04 "E, 64.30 FEET TO THE SOUTHWESTERLY
CORNER OF LOT 19 OF SAID BLOCK G; THENCE S59 °36'37 "E, 98.50 FEET ALONG THE SOUTHERLY LINE OF SAID LOT
19 TO THE SOUTHEASTERLY CORNER OF SAID LOT 19; THENCE S34 024'38 "W, 15.83 FEET ALONG THE WESTERLY
LINE OF LOT 13 OF SAID BLOCK G; THENCE S58 007'30 "E, 55.59 FEET; THENCE S47 °12' 10 "E, 9.91 FEET TO A POINT ON
THE NORTHERLY LINE OF LOT 17 OF SAID BLOCK G; THENCE S59 °34'46 "E, 5.62 FEET ALONG THE NORTHERLY LINE
OF SAID LOT 17; THENCE S3 1'18'33"W, 88.20 FEET; THENCE N58 °41'27 "W, 4.98 FEET; THENCE S3 1'18'33"W, 10.30 FEET;
THENCE S58 °41'27 "E, 4.99 FEET; THENCE 31 °18'33 "W, 38.85 FEET; THENCE S58 036'28 "E, 14.99 FEET; THENCE
S320 12' 15 "W, 182.49 FEET TO THE SOUTHEASTERLY CORNER OF SAID LOT 17, ALSO BEING THE NORTHERLY RIGHT -
OF -WAY LINE OF ALGOMA BOULEVARD; THENCE N54 °36'37 "W, 245.88 FEET ALONG SAID NORTHERLY RIGHT -OF-
WAY LINE OF ALGOMA BOULEVARD TO THE POINT OF BEGINNING. SAID AREA CONTAINS 73,455 SQUARE FEET OR
1.686 ACRES, MORE OR LESS.
The proposed boundaries of the TID are shown in Exhibit # 1 in Appendix A. Exhibit # 2 in Appendix A
identifies the parcel information for the TID.
Name of District
The district is identified as City of Oshkosh Tax Increment District #28 (TID #28) — Beach Building
Redevelopment.
Creation Date
The date of creation for the capture of all new taxable value created within TID # 28 shall be January 1, 2016.
The value established as of this date shall be used as the base for computing any increments that will accrue in the
tax base for the district.
Project Costs and Improvements
Overall costs to implement this project plan are estimated at $3,294,714 with TIF contributing up to $390,442 of
the project costs as pay -go based on improvement value over the life of the district. The development group is
proposing to bring in approximately $1.5 million of personal equity (approximately 45 %) into the project and
finance the remaining 55 %. Table 1 below identifies the total project costs and sources of funding to implement
this plan. Exhibit # 6 in Appendix A shows the proposed improvements. Other than utilizing TIF to help finance
the overall adaptive reuse project no other public improvements will be financed through this Project Plan.
TID # 28
Table 1 Overall Project Costs
Sources and Uses
Use Commercial and Housing)
Amount
Acquisition and Renovation
$3,294,714
Source (Financing of Improvements)
Equity
$1,494,714 45%
Bank Financing
$1,800,000 55%
TIF Paygo Funding*
$390,442
*Increment Estimate Over 20 Years based on Proforma Proiections
Administrative Expenses
Administration related expenses include an estimate for administrative, planning, professional, organizational and
legal costs. Components of these costs include cost of salaries and employee benefits for City employees
engaged in the planning, engineering, implementing and administration activities in connection with this Tax
Increment District. The cost of supplies and materials, contract and outside consultant services, and those costs of
city departments such as the City Attorney, Public Works, Finance, Community Development, and
Transportation. The Department of Revenue also charges a set up fee and annual certification fee that will be
paid from the tax increment.
Method of Financing
Implementation of improvements in this project plan will be financed through a "Pay -As- You -Go TIF Note."
With an initial base value of $575,000 and assuming the assessed value will increase at a rate of 1% per year, over
20 years, the total increment will be $944,137. Applying the 75% increment rule, the total note from the city to
the developer would be in the amount of $292,831 plus interest costs which would bring the total estimate of TIF
payments to $390,442 over the term of the district. Additionally, $1,800,000 has been secured through Verve
Mortgage and another $1,494,714 in funding will be contributed from the project developers.
Master Plan, Zoning, Building, and Other Code Considerations
With the exception of a Conditional Use Permit (CUP) for mixed residential/commercial use, no changes are
necessary to implement this Project Plan.
Economic Feasibility/Expectations for Development
In March 2016,'a Market Study and Investment Analysis Report for the redevelopment of the Beach Building was
prepared by Invista Analytics, LLC (IA) to provide a market study of the present rental availability in the near
downtown neighborhood that might likely serve both the University of Wisconsin - Oshkosh and the young
professional segment in downtown Oshkosh. This information was then utilized to create an operational proforma
and investment analysis for the operation of a mixed -use renovation and re -use of the Orville Beach Memorial
Training School building located at 240 Algoma Blvd in Oshkosh, Wisconsin.
To evaluate the rental potential of the residential units, IA acquired the Apartment Data - 4 or more Units excel
database from the city of Oshkosh Assessor's File Downloads webpage. This data set was then limited to those
properties that fell within a 1 mile driving distance of 240 Algoma Blvd and that had been constructed since the
year 2000, including the 100 N Main Apartments and the Anthem Apartments. The data was then submitted to an
econometric quantile regression model that used all of the covariates to predict the rents. The resultant model
TID # 28
parameters were then used along with the covariate data for the subject property units to arrive at an expected rent
for the macro, one - bedroom, and two - bedroom units to be rented. The model resulted in estimates of $569, $704,
and $802 per month respectively for the micro, one and two bedroom units. These estimates then represent the
predicted monthly rent one might expect to pay given the particulars of the units that would be available assuming
they are of roughly similar quality as the comparable tsrBe Because of this the developers have chosen to start with
higher finish levels than many of the comparable
monthly rents of $550, $700, and $900 respectively.
To determine the base valuation of the property, the developers purchased the property on 12/22/2015 from an
unrelated seller with normal financing conditions for the purchase price of $575,000. Thus it is concluded that the
transaction was an arm's- length sale and by definition the base market value should then be the purchase price of
$575,000. To estimate the completed project valuation, a modified income approach was employed and the year
1 figures suggest a valuation of $1,245,000 upon completion of the project.
Potential income was determined by documenting the expected maximum revenue assuming the building is at full
occupancy equating to rent of the commercial space at $9 per square foot annually and rent for the apartments at $550,
$700 and $900 for the micro, 1 bedroom and 2 bedroom units respectively. From this the first floor commercial
space would bring in $68,850 at full occupancy while the second and third floor residential units will bring in
$193,200 annually at full occupancy for total annual income of $262,050.
Total expenses for the project reach a little under $3.3 million. Of those, approximately $2.63 million are
allowable expenses for historic tax credits. On the funding side, the developers have secured a funding
commitment from Verve Credit Union in the amount of $1.8 million. The remaining $1.49 million will be
contributed as cash from the developers. Te plan assumes that the project will be completed by November or
December 2016 and that the assessor will apply the new assessed value on January 1, 2017. Thus the full value of
the project will be on the 2017 tax year assessment and the increment can be paid out in the fall of 2018. The Plan
assumes the assessed value will increase at a rate of 1% per year and that the base value will be $575,000. Thus
over 20 years of payout, the total increment will be $390,444. Applying the 75% rule the total note from the city
due to the developer would be in the amount of $292,831 with a 2.5% interest rate.
The operational proforma with TIF assistance starts with a negative cash flow in the first year of $(22,531) in part
due to the ramping up of occupancy in the first year and the lack of increment payment. The next several years
still also show a negative cash flow up until the fifth year but by the tenth year, we see a positive cash flow of
$27,239. The "without" TIF picture is much more bleak. Under this scenario the developers do not see any
positive cash flow until the ninth year, and even then the returns are modest at best being only approximately
$3,225.
Internal rate of return (IRR) for the project is determined by calculating how much cash the developer is bringing
into the project and net cash flow. The developers are bringing $1,494,714 into this project. However, the
developers will also be receiving 20% federal and 20% state historical tax credits on the estimated $2.6 million of
allowable expenses. This results in roughly $1.05 million worth of credits however it is anticipated that the
developers will be forced to spread out their use of these credits over many years reducing the immediate value of
these credits. To estimate the value of these credits, it is assumed that if the developers need to bring in an equity
partner they would provide 93 cents on the dollar for the federal credits and 60 cents on the dollar for the state
credits equating to an estimate of the tax credits to be worth $805,753. Thus the effective net cash is the
difference, or $688,960.
TID # 28
Before the IRR can be calculated, an assumed reversion at the end of year ten must be calculated. To do this the
NOI from year eleven is used and divided by a terminal cap rate. An 11 % loaded cap rate is used and then the
presumed mill rate of 2.45% is subtracted off this value and then rounded down (which provides more presumed
value) to a non - loaded cap rate of 8 %. This results in a valuation of $2.175 million in the TIF scenario. However
after 10 years there would still be $1,088,099 left to pay off on the mortgage debt. Thus a net reversion of
$1,087,155 is used in addition to the year 10 net cash flow. This leads to a 10 year Internal Rate of Return of
4.91 %. A similar calculation without TIF leads to an IRR of 0.48 %, which from a development prospective is not
financially feasible and a strong disincentive to move forward with redevelopment without any outside financial
incentives, which in this case is both the Historic Tax Credit and TIF assistance.
The City Assessor has reviewed the Market Study, Investment Analysis Report, data provided and estimates that
the redevelopment project will assess at approximately $1,500,000 with a tax increment of $940,000, assuming
$575,000 base value. Table 3 illustrates the tax increment projection based on this anticipated value and values
the future increment at $390,440 over the 20 year duration of the paygo agreement for the project.
Promotion of Orderly Development
Implementation of this Project Plan promotes orderly development through the renovation and preservation of a
prominent, historical building located near the downtown region of the City of Oshkosh. Redevelopment will
reduce depreciation of the property while increasing revenue generated through property taxes. This project will
provide new commercial space, employment opportunities, and address the public demand for more available
housing in between the University of Wisconsin - Oshkosh campus and the downtown region of the city.
Implementation of this project plan promotes values reflected in the opinion of the general public. According to
public survey data collected in 2014 and 2015, over 75% of respondents listed "assisting businesses with
economic development" and "increasing efforts to improve the quality of housing" as top priorities for the city to
promote. Additionally, this project is supported in the Downtown Action plan, specifically, item 6.8 which
outlined both long and short-term goals to increase residential and housing development opportunities in the
downtown area.
Proposed Uses and ExistinIz Conditions
The proposed use of the property will change from an office use to a mixed -use commercial/residential apartment
complex and retail/service business center including commercial units on the first floor and high -end apartments
on the second and third floors after establishment of the TID. The existing and proposed land uses within the TID
are identified on Exhibits #3 and 4 in Appendix A.
Under Wisconsin Statutes certain findings must be made relative to proposed areas being included in a TID. Not
less than 50% of the area must either be found to be "blighted" or "in need of rehabilitation or conservation work"
within the meaning of 66.1337 (2m)(a).
The proposed area within this TID appears to meet the above criteria. The area exhibits signs of blight (both
physical and economic) through obsolescence and deterioration of the existing interior and exterior of the
structure potentially resulting from deferred maintenance and lack of investment by multiple property owners
(structure is currently a 9 -unit condominium) that require would require significant coordinated investment to
modernize the facility and bring it up to market standards relative to a high end apartment complex and
competitive commercial space. Economically, the property is also blighted through its underutilization and
vacancy, as evidenced by an ongoing declining trend in fair market values from a high of $3,061,300 in 2008 to a
TID # 28
fair market value of only $575,000 in 2016. It can be assumed that this trend would continue to drop as the
structure retains less value over time and further deteriorates requiring costly improvements.
Proposed land use and zoning in the area is consistent with the goals and objectives of the City's Comprehensive
Plan and in that regard the existing C -3 zoning will be retained.
Non - Project Costs
It is anticipated there will be no non - project costs related to implementing this Project Plan.
Relocation
Relocation of individuals or businesses will not be required to implement this Project Plan.
TID #28
Findings and Report to the Joint Review Board
More than 50 percent of the property is blighted within the definition of Section 66.1105(2)(a) of Wisconsin
Statutes. Declining property value trends have negatively impacted return on investment projections to the extent
solo development of the property is no longer economically feasible without both TIF assistance and the State and
Historic Tax Credit. The project plan, with TIF assistance, is feasible and in conformity with the City's
Comprehensive Plan and the equalized value of taxable property within the proposed district and all current City
Tax Increment Districts does not exceed 12% of the total equalized value of taxable property within the city.
The project is not financially feasible without the use of TIF assistance, or the Historic Tax Credit as
demonstrated by the low internal rate of return of less than 1%. Stabilized development projects are typically in
the 6 % -12% range depending on risk and complexity.
The project will provide more economic benefits as measured by increases in property tax values and property tax
increment through redevelopment of a functionally obsolete and underutilized structure within the district which
should adequately compensate the residents of the overlying taxing jurisdictions for any costs associated with
improvements within the district. The project will expand residential and retail space near the downtown area,
create employment opportunities, and increase revenue generated through property and sales taxation.
Additionally this project fulfills goals outlined in the City of Oshkosh Downtown Action Plan and supports
general public goals reflected in both the 2014 and 2015 public surveys of supporting economic development and
expanding housing opportunities near the downtown area while also preserving the historical fagade of the
building that resides on the property.
The appropriate use of public dollars will be ensured through a combination of strict financial tracking of the
development process, public hearings, project review, project approval, and the adoption of a resolution by the
Oshkosh Common Council before final review which will be conducted by the Joint Review Board to approve the
TID creation resolution.
TID #28
TABLE 2 - Tax Increment Projection Worksheet
TID 28: Beach Building Redevelopment TO
24OAlgOMa TIFA5s4urrptlC1M
TIF Base ValuE of Site 5 575,ODD
completed Proj_Ect value S1„245.ODD
Project value APpreciation 1.0%
Interest Pate on Loan 2.5%
Qr1 ina'I Loan Principal 292,831
NI*Ct
Year
LevpYea
Tax Year
Vaiue of
Project IncMawnt
Equaked
Tax Rate
Project
Tax P'racec&
Tax Proceeds ABocatian
Tax Enfitks ;Increment
Lom- PA-Op--1
Outstanding
PAWO
Interest
Interest Printi
Raid
w
Tofu
WAS 40
2015
2016
769,6070
-
24.54
.18,882
.18,&6.2
-
292,831
7,320.8
-
e
-
2016
2017
1,245,040
670, 000
24.54
30,5+16
14,106
16,438
300,152
7,503.8
7,504
8,935
1EL438
2017
2018
1,257,450
6KL450
24.54
30,852
14,1.08
16.744
291,217
7,280.4
7,230
9,463
861.744
2018
2019
1,270,075
695,025
24.54
3L, 160
14;108
.17,052
281,754
7,043.8
7,044
11.0,009
17.052
2019
2020
1,282,725
707.725
24.54
31,472
14,.10!8
17,364
271,745
6,793.6
6,7914
10.570
17,364
2020
21021
1,295,552
720,552
24_54
3L786
14;105
17,679
261,175
6,529_4
6,529
11,149
17,679
2021
2022
1,306,348
733,508
24,54
32,104
14, 1.08
17,947
250,026
6,250_6
6,251
1L,746
17,997
2022
2023
1,321,593
746,593
24.54
32,425
14,108
18,318
238,280
5,957.0
5,957
1x,361
L8,31S
2023
2034
1,33+1,809
759,509
24.54
32,750
14,108
18,642
225,919
5,645.0
5,648
12,994
18.642
DD
20624
20125
1,348,157
773,157
24154
33,077
14,108
18.969
212,925
5,323.1
5,323
13.646
M969
11
2025
2026
1,361,635
786,638
24.54
33,408
14,108
19,300
199,279
4,952.0
4,982
14,318
19,370
2026
2027
1,375, 255
500, 255
224.54
33,742
54,1178
19,634
184,961
4,624.0
4,624
15,010
19.634
2027
2028
1,364,007
814,007
24.54
34,079
14,108
19,972
169,950
4,245.8
4,249
15.723
1%972
14
2028
2029
1.,402,597
827,897
24:54
34,420
14,108
20,312
154,227
3,855.7
3,856
16,457
20,312
2029
2030
1,416, 926
84L,926
24.54
34,764
14,108
20,657
137,771
3,444.3
3,444
17,212
20,657
it
2034
2031
1,4331,095
$56,095
24.54
35,112
14,108
21,Ot74
120,558
3,014.0
3,014
17,990
.21,004
17
2031
2032
1,445,406
370,406
24.54
35,463
14,108
2L,355
102,5%6
2,564.2
2,564
18,791
2L,355
1.0
2032
2033
1,459,560
884,860
24.54
35,81:8
14,108
21,710
83,777
2;094.4
2,044
19,616
2.,710
2033
2034
1,474,459
899, 459
24.54
36,176
14,108
2ZO58
61,.161
1,604.0
46M
20,464
22,068
20L34
2035
1,489,244
914,204
24.54
36,538
14;1.06
2-4430
43,697
1,0-92-4
1,092
2L,33B
22.434
21
2035
2036
1,504,096
929,096
24.54
36,90!3
14,108
22,795
22,359
559.0
559
2'x,23%
2-,195
22
2036
20171
1,5 '4,137
9414,L37
24.54
37.272
14,106
23,L64
123
3.1
3
123
1 L26
$944,137 value added after TO Closure
0
a- :i,:f+.c
TABLE 3 - Tax Increment by Taxing Jurisdiction
TID 28: Beach Building Redevelopment TID
Estimated share by taxing jusisdiction of projected tax increments to be paid by
owners of taxable property in each of the taxing jusisdictions overlying the Tax
Increment District.
Revenue
Year
City
County
School
District
Vocational
School
Total
37.527%
20.817%
36.729%
4.279%
2016
$
6,169
$
3,422
$
6,038
$
703
$
16,438
2017
$
6,284
$
3,486
$
6,150
$
716
$
16,744
2018
$
6,399
$
3,550
$
6,263
$
730
$
17,052
2019
$
6,516
$
3,615
$
6,378
$
743
$
17,364
2020
$
6,634
$
3,680
$
6,493
$
756
$
17,679
2021
$
6,754
$
3,746
$
6,610
$
770
$
17,997
2022
$
6,874
$
3,813
$
6,728
$
784
$
18,318
2023
$
6,996
$
3,881
$
6,847
$
798
$
18,642
2024
$
7,118
$
3,949
$
6,967
$
812
$
18,969
2025
$
7,243
$
4,018
$
7,089
$
826
$
19,300
2026
$
7,368
$
4,087
$
7,211
$
840
$
19,634
2027
$
7,495
$
4,158
$
7,336
$
855
$
19,972
2028
$
7,622
$
4,228
$
7,460
$
869
$
20,312
2029
$
7,752
$
4,300
$
7,587
$
884
$
20,657
2030
$
7,882
$
4,372
$
7,715
$
899
$
21,004
2031
$
8,014
$
4,445
$
7,843
$
914
$
21,355
2032
$
8,147
$
4,519
$
7,974
$
929
$
21,710
2033
$
8,281
$
4,594
$
8,105
$
944
$
22,068
2034
$
8,417
$
4,669
$
8,238
$
960
$
22,430
2035
$
8,554
$
4,745
$
8,372
$
975
$
22,795
Total
$
146,520
$
81,278
$
143,405
$
16,707
$
390,440
NOTE: The projection shown above is provided to meet the requirements of the
Wisconsin State Statute 66.1105(4)(i)4.
10
Appendix A
Exhibits
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2
3
4
5
6
7
8
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07- 0142 -0400
07- 0142 -0500
07- 0142 -0600
07- 0142 -0700
07- 0142 -0800
07- 0142 -0900
07- 0142 -1000
07-01. 2-1100 1240
240 ALGOMA BLVD LLC
240 ALGOMA BLVD LLC
240 ALGOMA BLVD LLC
240 ALGOMA BLVD LLC
240 ALGOMA BLVD LLC
240 ALGOMA BLVD LLC
240 ALGOMA BLVD LLC
240 ALGOMA BLVD LLC
ALGOMA BLVD LLC
240 ALGOMA BLVD 100
240 ALGOMA BLVD 101
240 ALGOMA BLVD 102
240 ALGOMA BLVD 200
240 ALGOMA BLVD 201
240 ALGOMA BLVD 202
240 ALGOMA BLVD 203
240 ALGOMA BLVD 204
240 ALGOMA BLVD 300 1
$25,700
$55,100
$22,000
$29,400
$33,100
$22,000
$22,000
$25,700
$132,200
$42,200
$75,300
$30,100
$30,900
$29,000
$20,600
$21,100
$25,4001
$127,8001
$67,900
$130,400
$52,100
$60,300
$62,100
$42,600
$43,100
$51,100
$260,0001
$67,900
$130,400
$52,100
$60,300
$62,100
$42,600
$43,100
$51,100
$260,0001
B
B
DUNGARVIN WI INC
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OSHKOSH CENTRAL CR.UNION
0
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B
B
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TODD STEVENS ASSOC.
0
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WINNEBAGO COUNTY DA
0
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WINNEBAGO COUNTY DA
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MULTI OFFICES- WINNEBAGO CTY DA
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TOTALS:
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$402,4001
$769,6001
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Map 3 - Existing Land Use
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PROJECT CODE SUMMARY
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BEACH
BUILDING RENOVATION
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OSHKOSH, WISCONSIN
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CHET VDESENBERG ARCHITECT LLC
OWNER
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STRUCTURAL ENGINEER
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FIRE PROTECTION -UNITED STATES
ALLIANCE FIRE PROTECTION, LLC
PLUMBING
SBS PLUMBING, INC
HVAC ENGINEER
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A202
Appendix B
Tax Incremental Financing Application
240 Algoma Blvd. LLC — The Beach Building.?�❑
PO Box 1099 • Oshkosh, WI 54903 • Phone: (920) 410 -6200 • Fax: (920) 230 -4910
E -Mail: chet.wesenberg @cwarchitect.net
Date: 3/25/2016
RE: Summary Letter — 240 Algoma Blvd. TIF Application
C /O: Mark Rohloff
City Manager— Oshkosh, WI
215 Church Avenue
Oshkosh, WI 54903
Dear Mr. Mark Rohloff:
It is with great pleasure that I present to you today the next Central City Redevelopment project that will be a
significant contributor to the communities' effort to revitalize Downtown Oshkosh. The semi - abandoned Orville
Beach Memorial Building, situated at 240 Algoma Boulevard, could be the new location for 22 luxury apartments
& 10,000 Sq. Ft of Class -A Commercial space with your help. The property has been secured, the plans are
drawn up, financial modeling complete and we are writing you today to request that a TIF be created to make this
project viable, and to help us take the next steps..
Name of Developer & Owner: Eric Hoopman & Chet Wesenberg (Co- Developers / Co- Owners)
Description of Site /Building: The Orville Beach Memorial Manual Training School consists of 30,000 Sq. Ft. of
vacant office space and sits on a parcel of roughly 73,000 Sq. Ft. in Downtown Oshkosh.
Current & Proposed Uses: Renovation of the Orville Beach Memorial Manual Training School from 30,000 Sq.
feet of vacant commercial space to a mixed use commercial /residential modern apartment complex and office
center.
Description of End Users: With fiber broadband connections and a modern urban feel, we feel this space will be
uniquely positioned to draw young professionals to the residential units. Roughly 6,000 Sq. Ft. of the commercial
space will be utilized as business incubator space. A coffee shop will take up another 1,500 Sq. Ft. of space,
while the remaining 2,500 Sq. Ft. will envision being utilized by an attorney or another professional that would
benefit from close proximity to City Hall or the Courthouse building.
Project Start & End Dates: Construction could start as soon as May 2016 and is targeted to be completed by
November 2016.
Description of Public Benefit (Job Creation): With fiber broadband connections and a modern urban feel, we
feel this space will be uniquely positioned to draw professionals from many of the downtown businesses and
surrounding communities to become residents of our downtown fabric. Full -time professional residents will
support downtown business expansion and contribute positively to our Urban Revitalization efforts. The multi-
million dollar redevelopment costs will bring immediate impact to construction revenue in Oshkosh providing for
dozens of local businesses and families in 2016. Our property management and maintenance teams at
BlackTeak will grow by 1 FTE as well as we bring online this project and at other development opportunities in the
central city. We also estimate the coffee shop will provide 8 new half -time jobs.
Overview of Private Sector Funding and Total Development Costs: Verve Credit Union will be our private
financing partner for the project providing a $1,800,000 loan, with Eric Hoopman & Chet Wesenberg making
capital investments in the collective amount of $1,494,714 to cover the $3,294,714 total project development
costs.
Summary of Increment Projections and TIF Assistance Requested: Over the next 20 years, we estimate
$390,442 of additional tax increment to be generated by this project. We are requesting the full 75% of the
increment, or $292,831, as a PayGo note to be paid over the course of the 20 -year payback period.
2 4
The 'But For' Provision: The Beach building is listed on the National Park Service's Register of Historical
Places. As a historical preservation project, significant additional expenses will be incurred to accommodate
additional requirements to maintain as much of the historical content as possible. While we will be obtaining that
will help in offsetting these costs, without TIF assistance we estimate that this project would yield a 0.48% 10 -year
internal rate of return on the project. Even with the TIF assistance requested, the 10 -year internal rate of return is
only 4.91 %. To be perfectly frank, many investors would shy away from a 4.91 % rate of return, let alone the
0.48% we estimate without TIF. However, both Eric and myself believe in the central city revitalization efforts this
project exemplifies and in maintaining historical buildings and thus are willing to move forward with your
assistance.
Again, we strongly feel this with the City's collaboration, together we can move forward with this project that
benefit the entire city. Please feel free to contact me with any questions or clarifications that might be needed.
Best regards,
Chet Wesenberg, AIA
25
Tax Incremental Financing
Policy and Application
Please complete and submit the following information to the City of Oshkosh for a more detailed review of
the feasibility of your request for Tax Incremental Financing (TIF) assistance. The application is comprised
of five parts:
1. Applicant Information
2. Project /Property Information
3. Project Narrative
4. Project Budget /Financial Information
5. Buyer Certification and Acknowledgement.
Where there is not enough space for your response or additional information is requested, please use an
attachment. Use attachments only when necessary and to provide clarifying or additional information.
The Department of Community Development (DCD) reviews all applications for TIF assistance. Failure to
provide all required information in a complete and accurate manner could delay processing of your
application and DCD reserves the right to reject or halt processing the application for incomplete submittals.
For further information please refer to the "City of Oshkosh Tax Incremental Financing Policy" document.
Legal Name: 240 Algoma Blvd. LLC
Mailing Address: PO Box 1099 Oshkosh, WI 54903
Primary Contact #: Chet Wesenberg
E -mail: chet.wesenberg @cwarchitect.net
Attorney: Brian Hamill
Cell #: (920) 410 -6200
FAX #:
Legal Entity: Individuals) Joint Tenants Tenants in Common Corporation
LLC X Partnership Other
If not a Wisconsin corporation /partnership /LLC, state where organized:
Will anew entity be created for ownership? Yes X No
Principals of existing or proposed corporation /partnership /LLC and extent of ownership interest.
Name: Address: Title: Interest:
Eric Hoopman PO Box 211 Oshkosh, WI 54903
Co -Owner
Chet Wesenberg 146 Algoma Blvd. Suite E Oshkosh, WI 54901 Co -Owner
80%
20%
Is any owner, member, stockholder, partner, officer or director of any previously identified entities, or any
member of the immediate family of any such person, an employee of the City of Oshkosh? Yes_ No X
If yes, give the name and relationship of the employee:
Have any of the applicants (including the principals of the corporation /partnership /LLC) ever been
charged or convicted of a misdemeanor or felony? Yes No X
If yes, please furnish details:
26
Tax Incremental Financing
Policy and Application
Overall Project Summary and Objectives: Renovation of the Orville Beach Memorial Manual Training School
from 36,000 Sq. feet of vacant commercial space to a mixed use commercial residential modern apartment
complex and retail center.
Current and Proposed Uses: Currently vacant office space with dated finishes last remodeled in the 1980s.
We are proposing 22 high end end apartments will provide a new life and full -time residents to further downtown
redevelopment efforts complete with modern finishes, technology & amenities on the 2nd and 3rd floor. The first floor
will house 3 commercial units.
Description of End Users: The apartments will be higher end in finishes and price which will ultimately draw more
young professionals as tenants. Benefiting the college community by bringing in more young professional
housing and getting away from more "student housing ". The commercial space will house a business incubator and
a coffee shop. The third space we envision an attorney or other professional service that might benefit from close
proximity to City Hall or the courthouse.
Property Summary:
Parcel /Land Area: 73,454 SF
Building Area: 36,000 SF
# of Dwelling Units: 22
# of Stories: 3
# of Parking Spaces: 75
Describe any zoning changes that will be needed:
Change from Commercial Office to Residential / Commercial Mix
Identify any other approvals, permits or licenses (i.e. Liquor License, Health Department, etc):
None
Describe briefly what the project will do for the property and neighborhood:
With fiber broadband connections & a modern urban feel, we feel this space will be uniquely
positioned to draw professionals from many of the downtown businesses such as DealerSocket, 4 Imprint and
Silver Star brands to become residents of our downtown fabric. Full -time professional residents will support
downtown business expansion and contribute positively to our Urban Revitalization efforts.
2'7
city Tax Incremental Financing
of
Oshkosh
Policy and Application
Project/Property Summary:
Project Timetable Date
Final Plan /Specification Preparation: 5/10/2016
Bidding and Contracting: 4/1/2016
Firm Financing Approval: 3/1/2016
Construction /Rehabilitation: 6/1/2016 - 10/15/2016
Landscaping /Site Work: 9/1/2016
Occupancy /Lease Up: 10/15/2016
Development Team
Developer: Eric Hoopman & Chet Wesenberg
Architect: Chet Wesenberg
Surveyor:
Contractor: Eric Hoopman & Chet Wesenberg
Other Members:
Describe Team expertise and experience in developing similar projects:
Chet Wesenberg has put his stamp on some of the most progressive pieces of architecture in Oshkosh. FloorQuest, Assurance Title & DealerFire (531 North Main)
Eric Hoopman, with Black Teak Properties has been responsible for many redevelopment efforts in Downtown Oshkosh including: 146 Algoma Blvd. 531 North Main, 415 N Main Apartments, etc.
Other current Team projects in development:
Just finished 531 North Main Street and are currently evaluating other Downtown development opportunities.
Financial ability of the applicant to complete the project:
100%
Full and part -time jobs to be created by the proposed project including estimated salary:
We anticipate 1 FTE to manage and perform maintenance. ($36K salary) The coffee shop may employ 8
half -time employees at $22K salary.
rofessional Studies
Market Studies: Applications for commercial and residential projects must include a comprehensive market
udy. The market study must identify target markets, analysis of competition, demographics, market rents,
tters of intent /interest from prospective tenants, or for housing developments, sale prices or rental rates of
tmparable properties.
ppraisal: All projects that involve the transfer of land must include a recent appraisal. Projects that include
ad as a form of equity or collateral must also submit a recent appraisal. The appraisal must value the property
s is ", and the impact on value must be considered for such items as demolition, environmental remediation,
location of utilities, lease buy -outs, and other work necessary to make the site developable. The property
ust be valued assuming that the highest and best use is the proposed use.
28
Tax Incremental Financing
Policy and Application
Sources and Uses of Funds
Identify the sources of funds used to finance the project. Typical sources include equity, lender financing,
mezzanine financing, government financing, other anticipated types of public assistance, and any other types
or methods of financing.
Uses of Funds
Amount ($)
$ per SF of Building Area
Land Acquisition:
$575,000
$15.97 / SF
Demolition:
$78,000
$2.17 / SF
Environmental Remediation:
$500
$0.01 / SF
Site Clearance and Preparation:
$5,000
$0.14 / SF
Soft Costs/ Fees:
$656,214
$18.23 / SF
Soft Cost Contingency:
$40,000
$1.11 / SF
Hard Construction Costs:
$1,940,000
$53.89 / SF
Total Project Costs:
$3,294,714
$91.52 / SF
Sources of Funds
Equity
Developer Equity:
Other Equity:(
Total Equity:
Loans
Construction Financing:
Permanent Financing:
TIF Assistance
Other: (
Total Sources of Funds
$1,494,714
Rate Term
$ 1,800,000 4.25 % 20
$ 292,831 (paygo)
$3,294,714
% of total project costs
45 %
MOS.
yrs. 55 %
8.9 (paygo) %
100%
Financing
Source Amount Terms: Years /Interest Contact Information
Equity: Eric Hoopman & Chet Wesenberg Cash + TIF eric @hoopman.co 1 (702) 629 -8880
Loans 1: Verve Credit Union 4.25% / 20 Year Amortization John Hill - jhill @verveacu.com I (p) 920.230.3021
2:
3:
4:
2 9
Tax Incremental Financing
Policy and Application
Detailed Pro Forma (must correspond to line items for Uses of Funds on previous page)
Land Acquisition
$ 575,000
Demolition
$ 78,000
Site Clearance and Preparation
Infrastructure
$
Utilities /removal
$
Utilities /relocation
$ 5000
Utilities /installation
$
Hazardous Materials Removal
$ 500
Other( )
$
Total Site Clearance and Preparation
$658,500
Soft Costs /Fees
Project Management ( %)
$100,000
General Contractor (_%)
$ 132,800
Architect /Engineer (_%)
$ 97,000
Developer Fee (10 %)
$ 235,330
Appraisal
$1,500
Soil Testing
$ -
Market Study
$1,000
Legal /Accounting
$ 5,000
Insurance
$ 8,303
Title /Recording /Transfer
$1,500
Building Permit
$ 8,000
Mortgage Fees
$ 2,000
Construction Interest
$ 39,807
Commissions
$
Marketing
$ 5,000
Real Estate Taxes
$18,974
Other Taxes
$
Other ( )
$
Other ( )
$
Sub -total Soft Costs /Fees
$ 656,214
Soft Cost Contingency
$ 40,000
30
Tax Incremental Financing
Policy and Application
Pro Forma Income and Expense Schedule
Applicants whose projects involve the rental of commercial, retail, industrial, or living units must submit
project pro formas that identify income and expense projections on an annual basis for a minimum five -year
to a maximum eleven -year period. If you expect a reversion of the asset after a holding period please include
that in your pro forma as well. Please check with city staff to determine the time` period needed for the pro
forma. Identify all assumptions (such as absorption, vacancies, debt service, operational costs, etc.) that
serve as the basis for the pro formas. Two sets of pro formas are to be submitted. The first set should show
the project without TIF assistance and the second set with TIF assistance.
For owner - occupied industrial and commercial projects, detailed financial information must be presented
that supports the need for financial assistance (see below).
Analysis of Financial Need
Each application must include financial analyses that demonstrate the need for TIF assistance. Two
analyses must be submitted: one WITHOUT TIF assistance and one WITH TIF assistance. The applicant
must indicate the minimum return or profit the applicant needs to proceed with the project and rationale for
this minimum return or profit. The analyses will necessarily differ according to the type of project that is be-
ing developed.
Rental Property: For projects involving rental of space by the developer to tenants (tenants include offices,
retail stores, industrial companies, and households), an internal rate of return on equity must be computed
with and without TIF assistance based on the pro forma of income and expense prepared for the Income
and Expense Schedule below. The reversion at the end of the ten -year holding period must be based on the
capitalized 11th year net operating income. The reversionary value is then added to the 10th year cash flow
before discounting to present value. State all assumptions to the analyses.
For Sale Residential: Show profit as a percent of project cost (minus developer fee and overhead and minus
sales commissions and closing costs, which should be subtracted from gross sales revenue). Other measure
of profitability may be submitted, such as profit as a percent of sales revenue.
Mixed Use Commercial / For -Sale Residential: Provide either separate analyses for each component of the
project or include in the revenue sources for the for -sale portion, the sale value of the commercial component
based on the net operating income of the commercial space at stabilization. Indicate how the sale value was
derived.
Owner - Occupied Commercial: For projects, such as "big -box" retail projects, provide copies of the analyses
that the company needs to meet or exceed the company's minimum investment threshold(s) for proceeding
with the project.
Competitive Projects: In instances where the City is competing with other jurisdictions for the project (e.g.,
corporate headquarters, new manufacturing plant), present detailed analyses that demonstrate the capital
and operating cost differential between the proposed location(s) in Oshkosh and locations that are seriously
being considered by the applicant.
31
Tax Incremental Financing
Policy and Application
Revenue Projections - Rental Project
Income rent per sf (or avg.)
Commercial Rent
Commercial Expense Recoveries
Residential Rent
Other Revenue ( Laundry )
Gross Potential Income
Commercial Vacancy
Residential Vacancy
Effective Gross Income (EGI)
Expenses
Maintenance & Repairs
Real Estate Taxes
Insurance
Management Fee
Professional Fees
Other Expense ( utilities
Other Expense ( Advertising
Total Expenses
12 then 10 ova
7 %
Year 1
Year 2
>>Year 11
$9
$9.27
$12.10
$ 68,850
$ 70,916
$ 92,529
$ 17,098
$ 17,269
$ 18,887
$ 193,200
$ 197,064
$ 235,510
$ 4,000
$ 4,040
$ 4,418
$ 266,050 $ 272,020 $ 332,457
$ 8,262 $ 7,092 $ 9,253
$ 13,524 $ 13,794 $16,486
$ 244,264 $ 251,133 $ 306,718
$ 34,540
$ 34,885
$ 38,154
$ 18,882
$ 30,546
$ 33,408
$ 8,496
$ 8,581
$ 9,385
$ 17,098
$ 17,269
$ 18,887
$ 4,248
$ 4,290
$ 4,692
$ 28,320
$ 28,603
$ 31,283
$ 14,656
$ 14,802
$ 16,189
$ 126,240 $ 138,978 $ 151,998
Net Operating Income (NOI)
$ 118,024
$ 112,155
$ 154,720
Capital Expenses (reserves, tenant improvements, commissions)
$ 6,800
$ 6,868
$ 7,511
Debt Service
$ 133,755
$ 133,755
$ 133,755
Net Cash Flow (before depreciation)
$ (22,531)
$ (28,467)
$ 13,454
Reversion in Year 10
Year 11 NOI before Debt & Capital Expenses $154,720
Capitalization Rate 8 %
Gross Reversion $ 1,934,000
32
Tax Incremental Financing
Policy and Application
Revenue Projects - For -Sale Project
Gross Sales Revenue
Housing Units Unit Type* Number Price /Unit
Total Housing Sales: $
*affordable units if any
Housing Unit Upgrades: $
Commercial Space Unit Type Size -sf Price per sf
Total Commercial Sales: $
Total Gross Sales Revenue $
Cost of Sales
Commissions % $
Marketing % $
Closing % $
Other Costs ( ) % $
Total Costs of Sales % $
Net Sales Revenue $
33
Tax Incremental Financing
Policy and Application
Summary Letter
Provide a summary of the project in the form of a letter addressed to the City Manager. The letter should not
exceed two (2) pages in length and should include only the following essential information about the project:
• Description of site or building
• Current and proposed uses
• Description of end users
• Project start and end dates
• Profitability
• Description of public benefits,
including job creation.
• Overview of private- sector financing
• Amount of TIF assistance requested
• Summary of increment projections
• Name of developer and owner
• Total development costs
• Statement regarding why TIF is essential and why the
"but for" provision will be met.
Note: In the "but for" discussion you must clearly describe why TIF is needed to help this project and
why the project will not /cannot proceed without such support. Failure to clearly provide the
"but for" explanation will delay action on your application.
Project Narrative
Provide an in -depth overview of the project in narrative format. The narrative must include a description of
the following aspects of the project:
• Current condition of the site and historical overview that includes the size and condition of
any existing structures, environmental conditions, and past uses of the site.
• Proposed use(s) of project (e.g. industrial, commercial, retail, office, residential for sale or
for rental, senior housing, etc.)
• Construction information about the project including: size of any existing structure to be
demolished or rehabbed; size of any new construction: types of construction materials
(structural and finish); delineation of square foot allocation by use; total number and individual
square footage of residential units: type of residential units (e.g. for -sale, rental, condominium,
single - family, etc); number of affordable residential units; number and type of parking spaces;
and construction phasing.
• If in an existing TID or redevelopment area, confirm that this project is consistent with the goals and
objectives in the Project or Redevelopment Plan.
• A summary of the proposed "green" features to be included in the project. All projects that receive
TIF assistance are encouraged to include environmentally friendly features.
34
Tax Incremental Financing
Policy and Application
Filing Requirements
You must provide all of the following items with your signed application:
1. Fee: An application fee of 1% of the requested TIF assistance or $10,000, whichever is greater. This
fee is to cover City costs associated with evaluating the TIF application and does not cover the
use of outside consultants, which if required will be paid for by the applicant. Make your
check payable to the City of Oshkosh.
2. Site Maps: Provide a map that shows the location of the site. Also provide a map that focuses on
the project and its immediate surroundings. Both maps should be no larger than
11x17 inches. Larger maps will be required for projects presented to the Plan
Commission, Redevelopment Authority, or Common Council.
3. Project Renderings: Provide preliminary architectural drawings, plans and renderings for the
project. These drawings should be no larger than 11x17 inches. Larger maps will be required
for projects presented to the Plan Commission, Redevelopment Authority, or Common
Council.
Notes
The City charges an administrative fee of 5% of the annual tax increment revenue.
If the project requires planning and zoning approvals, you must make these applications concurrent
with this request.
Agreement
I, by signing this application, agree to the following:
1. I have read and will abide by all the requirements of the City for Tax Incremental Financing.
2. The information submitted is correct.
3. I agree to pay all costs involved in the legal and fiscal review of this project. These costs may
include, but not be limited to, bond counsel, outside legal assistance, and outside financial
assistance, and all costs involved in the issuance of the bonds or loans to finance the project.
4. I understand that the City reserves the right to deny final approval, regardless of preliminary
approval or the degree of construction completed before application for final approval.
5. The undersigned authorizes the City of Oshkosh to check credit references and verify financial and
other information.
6. The undersigned also agrees to provide any additional information as may be requested by the City
after filing of this application. /
Applicant N
ate 3/16/2016
35
Appendix C
Market Study and Investment Analysis
Report
INVISTA
ANALYTIC
240 ALGOMA BLVD LLC
MARKET STUDY and
INVESTMENT ANALYSIS REPORT
MARCH 15, 2016
Prepared Exclusively For:
Mr. Eric Hoopman and Mr. Chet Wesenberg
240 Algoma Blvd, LLC
Prepared By:
Timothy M Hess, PhD
Invista Analytics, LLC
member of
inf'�o
36
CONTENTS:
Introduction / Objective ........................................... ..............................1
MarketStudy ...........................................................
..............................1
PropertyValuation ..................................................
..............................3
Investment Analysis ................................................
..............................4
PotentialIncome ................................................
..............................4
Budgetand Funding
......................................... ..............................5
TIFFunding ........................................................
..............................5
Operational Proforma
....................................... ..............................7
Return On Investment
...................................... .............................10
37
INTRODUCTION / OBJECTIVE
Invista Analytics, LLC (IA) has been engaged to provide a market study of the present rent-
al availability in the near downtown neighborhood that might likely serve both the University
of Wisconsin - Oshkosh and the young professional segment in downtown Oshkosh. This
information was then utilized to create an operational proforma and investment analysis for the
operation of a mixed -use renovation and re -use of the Orville Beach Memorial Training School
building located at 240 Algoma Blvd in Oshkosh, Wisconsin. This 36,034 Sq Ft building is listed
on the National Park Service Register of Historic Places and as such qualifies this project for
Historic Tax Credit incentives.
Additionally, the developers of this project are requesting Tax Incremental Financing (TIF)
through the City of Oshkosh. Thus Invista Analytics sought to provide reasoning for methods
of valuation for both the existing building and the completed project. Two different proformas
were generated to evaluate the effect of the potential TIF funding mechanism. Finally, return on
investment metrics were calculated on the with TIF and without TIF investment scenarios.
Source of Information
In many instances in this report IA was required to seek outside sources of information
including assessment data from the City of Oshkosh, financing terms, capitalization rates,
among other metrics. In all cases we sought to document the sources of information and any
assumptions used. While much of the information was provided by the developers, these terms
should be reviewed to be sure they align with any potential changes the developer may have
in securing potential funding. It is also recommended that any reader also perform his /her own
investment analysis.
This report should be acceptable for external investing and /or lending purposes. Invista Ana -
lytics will be available to answer any questions related to these market findings, operational
proforma and investment analyses.
MARKET STUDY
The developers intend to renovate the Orville Beach building at 240 Algoma Blvd in Oshkosh,
Wisconsin. Specifically this building will be renovated into 3 commercial office spaces on the
first floor, and 22 residential units split amongst the second and third floors. The developers
own a fair number of similar commercial buildings in and around the downtown area of Osh-
kosh that presently command an average of $9 per square foot per annum and feel comfort-
able with this rate for the first floor spaces for this project.
To evaluate the rental potential of the residential units, IA acquired the Apartment Data - 4 or
more Units excel database' from the city of Oshkosh Assessor's File Downloads webpage.
This data set was then limited to those properties that fell within a 1 mile driving distance of
240 Algoma Blvd and that had been constructed since the year 2000. After careful inspection it
was noted that both the 100 N Main Apartments and the Anthem Apartments were not included
in this file and thus subsequently added to our comparison set.
The locations of all potential comparable properties found through this search process are
displayed in Figure 1 on the following page.
1. 'http: //www.ci.oshkosh.wi.us/ assessor/ assets /downloads /Apartments_4up.xis' accessed March 10, 2016
240 ALCOMA BLVD LLC INVESTMENT ANALYSIS
38
_r Figure 1:
Potential Comparable Apartment Locations
_Y
151 Dawes 495 Pearl 431 Marion 210 Dawes 500 Marion 240 Algoma
Map Ind
8
3
9
5
10
7
V`I Ir it eve fair
Sq Ft
695 950
799 1111
715 987
965
682 695
U'ic tie`r1 #C"�' Of
r
Beds
1 C ry
1 2
�1 .k'c'>i1
d
t 8 j810r � �, 111
1 2
2
0 1 2
Baths
1 2
1 2
1 2
2
1 1
1
1 1 1
f
covered covered
covered covered
lot lot
lot
lot lot
P61
fr j
Laundry
on site on site
Vasil ""t n .:-
in unit In unit
5
on site on site
In unit
5�� Lit 7=
� � s -❑ �
no - no
yes yes
u 3`
no
yes s
ye
yes
yes yes yes
�•i�r-
.:titnpsr5r
no no
yes yes
yes
�e
yes
yes yes yes
Elea
no no
no no
no no
no
no no
W71hAve
no no no
1,4
no no
yes yes
p.�}'tI
2thA:C
no no
'�\ ^Bill e
no no no
Fitness
no no
Careful inspection noted that properties 1, 2, and 4 above are townhouse developments. While
these might well compete for potential tenants, the overall living experience was determined
to be different enough to not consider these in the determination of potential rent. Similarly
subject property 6 is a senior living apartment structure which also would not likely serve the
demographic targeted by this development.
For each of the remaining comparable subject properties an online search was conducted to
obtain information on the characteristics of the types of offerings, amenities and rental rates for
each of the properties. Most of the properties had their own website that contained all of the
Comparable Apartment Data
Concord Place 100 N Main Morgan Crossing Anthem Fox Point Apts Radford Place Beach Bldg
151 Dawes 495 Pearl 431 Marion 210 Dawes 500 Marion 240 Algoma
Map Ind
8
3
9
5
10
7
11
Sq Ft
695 950
799 1111
715 987
965
682 695
900
403 700.6 852.5
Beds
1 2
1 2
1 2
2
1 2
2
0 1 2
Baths
1 2
1 2
1 2
2
1 1
1
1 1 1
Parking
covered covered
covered covered
lot lot
lot
lot lot
lot
lot lot lot
Laundry
on site on site
In unit in unit
in unit In unit
In unit
on site on site
In unit
on site on site on she
Heat
no - no
yes yes
no no
no
yes s
ye
yes
yes yes yes
Water
yes yes
no no
yes yes
yes
yes yes
yes
yes yes yes
Elea
no no
no no
no no
no
no no
yes
no no no
High
no no
yes yes
no no
yes
no no
no
no no no
Fitness
no no
yes yes
yes yes
yes
no no
no
no no no
Rent
650 830
799 969
689 869
900
650 798
850
Source
http: / /alexanderbis
http: / /www.S00nOF
http: / /www.apanm
http: / /www.acc
http: / /www.foxpoin
http: / /www.apart
hop.com /residential
thmain.com /amenh
ents.com /morgan-
managementgro
teapt.com/
ments.com /radfor
/pcif /concordplaceb
ies.php
crossing - apartments
up.com /rental /o
d- village— hkosh-
rochure.pdf
Oshkosh-
verview.php ?pro
wi /rchc.to/
wi /sxkd275/
perty1D =142
I INVISTA -ANALY T ICS.COM
39
information needed. Two had the information listed on the third party website, apartments.com.
For both the 100 N Main and Anthem properties, a range of rents were given for their room
types. It was assumed that the higher ends of these ranges represented either rooms with sce-
nic views; i.e. either facing the river or being on the top floors. The units in the Beach building'
would have neither of these amenities. Thus in these situations we recorded the lowest end of
the rental ranges provided under the assumption that these rates would represent rooms most
similar to the subject property. The data generated from this exercise is displayed in the table
at the bottom of the previous page.
The data was then submitted to an econometric quantile regression mode12 that used all of
the covariates to predict the rents. The resultant model parameters were then used along with
the covariate data for the subject property units to arrive at an expected rent for the macro,
one - bedroom, and two- bedroom units to be rented. The model resulted in estimates of $569,
$704, and $802 per month respectively for the macro, one and two bedroom units.
These estimates then represent the predicted monthly rent one might expect to pay given the
particulars of the units that would be available assuming they are of roughly similar quality as
the comparable properties. The developers plan, however, calls for much higher finish levels
than many of the comparable units. Because of this the developers have chosen to start with
monthly rents of $550, $700, and $900 respectively. These monthly rents will be utilized in all
subsequent analyses.
PROPERTY VALUATION
Any proposed TIF assistance requested from the developers will be subject to the city's 75%
rule which states that at most 75% of the net present value of the increment generated by the
project shall be made available to the project. To calculate this increment we need both the
present (base) value of the building as it exists now and the value of the project upon comple-
tion.
Base Valuation
According to the City of Oshkosh Assessor's Frequently Asked Questions webpage3 the value
of a property is to be determined by determining the price a typical buyer would pay for it in
its present condition. In other words, market value is defined as the amount a typical, well -in-
formed purchaser would be willing to pay for a property. The seller and buyer must be unrelat-
ed, the seller must be willing, but not under pressure to sell, and the buyer must be willing, but
not under any obligation to buy. The property must be on the market for a reasonable length of
time, the payment must be in cash or its equivalent, and the financing must be typical for that
type of property. If all of these conditions were present, this would be a market value, arm's -
length sale.
The developers purchased the property on 12/22/2015 from an unrelated seller that was not
under pressure to sell with normal financing conditions. Thus we conclude the transaction was
an arm's - length sale. By definition then the base market value should then be the purchase
price of $575,000.
Completed Project Valuation
To arrive at a valuation for the completed project we employed a modified income approach.
With this approach, one simply takes the Net Operating Income (NOI) of a property and divides
by the appropriate cap rate to arrive at a valuation. However, when arriving at a valuation for a
tax assessment purpose, one needs to factor the property tax out of the NOI calculation or risk
running into a circular argument.
To carry out our calculations we utilized the excel spreadsheet provided by the City of Oshkosh
Assessor. However, an error was noted in the formula for the NOI. The original spread
2. Koenker, Roger (2005), Quantile Regression. Cambridge University Press. ISBN 0- 521 -60827 -9
3. http: / /Opa.d.oshkosh .wi.us /pt/forms /htmftme.aspx ?mode= contenttfaq.htm accessed March 10, 2016
240 ALGOMA BLVD LLC INVESTMENT ANALYSIS j
40
sheet took the formula for NOI to be
NOI = EXPENSE - TAXES.
We instead employed the formula
NOI = EGI - (EXPENSE - TAXES)
which factors the taxes out of the calculation. Then the modified NOI is divided by a loaded
cap rate. Following the assessor's lead, we employed a loaded cap rate of 11 %. Data for the
effective gross income (EGI) and other values can be found on the Profit and Loss Proforma
with TIF on page 8.
244,264
1st Floor
251,133
ann rent /sf
306,718
Unit 1
126,240
18,882
136,906
51.68%
56.05%
138,978
30,546
55.34%
151,998
49.56%
33,408
Unit 3
142,702
56.82%
188,128
61.34%
11.00 %
1,244,600
11.00%
2nd Floor
11.00%
Rent Per
1,297,300
Micro
1,710,300
550
1,650
1 Bed /1 Bath
4
700
2,800
769,594
4
1,245,000
3,600
1,361,638
TAX VALUE = Calulation of projected property tax expense capitalized at 2.45% effective tax rate
The year 1 figures would suggest a valuation of $1,245,000 upon completion of the project.
Subsequent analyses in this report use this figure.
INVESTMENT ANALYSIS
Potential Income
We first document the expected maximum revenue assuming the building is at full occupancy.
Again, the developers plan to rent the commercial space at $9 per square foot annually. This
will include utilities and common area maintenance. The residential space will be rented at
$550, $700 and $900 for the macro, 1 bedroom and 2 bedroom units respectively.
Maximum Rental Income Potential
1st Floor
Sq Ft
ann rent /sf
Subtotal (monthly)
Unit 1
4,000
9
3,000
Unit 2
1,650
9
1,238
Unit 3
2,000
9
1,500
Subtotal
5737.5
2nd Floor
No Units
Rent Per
Subtotal
Micro
3
550
1,650
1 Bed /1 Bath
4
700
2,800
2 Bed /1 Bath
4
900
3,600
Subtotal
8,050
3rd Floor
No Units
Rent Per
Subtotal
Micro
3
550
1,650
1 Bed /1 Bath
4
700
2,800
2 Bed /1 Bath
4
900
3,600
Subtotal
8,050
Monthly Total
$21,837.50
Annual Total
$262,050.00
Residential Annual
$193,200.00
Commercial Annual
$68,850.00
I INV)STA- ANALYTICS.COM
41
From this we find that the first floor commercial space would bring in $68,850 at full occupancy
while the second and third floor residential units will bring in $193,200 annually at full occupan-
cy.
Budget and Funding
Next we look at the detailed budget and source of income. The table below lists all expect-
ed expenses. The columns labeled TIF and HTC represent an indicator as to whether each
expense is allowable for reimbursement for either the TIF funding mechanism or historical tax
credits. Total expenses for the project reach a little under $3.3 million. Of those, approximately
$2.63 million are allowable expenses for historic tax credits and $2.59 million are allowable TIF
expenses.
On the funding side, the developers have secured a funding commitment from Verve credit
union in the amount of $1.8 million. The remaining $1.49 million will be contributed as cash
from the developers.
TIF Funding
We assume that the project will be completed by November or December 2016 and that the
assessor will apply the new assessed value before the first of the year, 2017. Thus the full
value of the project will be on the 2017 tax year assessment and the increment can be paid out
in the fall of 2018. We assume the assessed value will increase at a rate of 1 % per year and
that the base value will be $575,000. Thus over 20 years of payout, the total increment will be
$390,444. Applying the 75% rule the total note from the city due to the developer would be in
the amount of $292,831. With a 2.5% interest rate, this note can be paid down over 20 years.
(See TIF Note payoff schedule on the following page.)
240 ALGOMA BLVD LLG INVESTMENT ANALYSIS 1
42
Detailed Project Bu et
Amount
TIF
HTC
Notes
Acquisition & Site Pre
Land Acquisition
575,000
Demolition
78,000
1
1
Utilities /relocation
5,000
1
1
Hazardous Materials Removal
500
1
1
Subtotal
$658,500
Soft Costs Fees
General Contractor (12 %)
232,800
1
1
(WHEDA allows 14 %)
Architect /Engineer
97,000
1
1
3.5K per Res Unit +20K Comm
Developer Fee (10 %)
235,330
1
1
(WHEDA allows 12 - 15 %)
Appraisal
1,500
Market Study
1,000
Legal /Accounting
5,000
Insurance
8,303
Title /Recording/Transfer
1,500
Building Permit
8,000
Mortgage Fees
2,000
Construction Interest
39,807
1
1.8M @ 3.95 for 6 mo
Marketing
5,000
Real Estate Taxes
18,974
0.25
13 days in 2015 + 2016
Soft Cost Contingency
40,000
Subtotal
$696,214
Hard Costs
Commarcial Space Build -out
400,000
1
1
Residential Units Build -out
1,540,000
1
1
Subtotal
$1,940,000
Total Project Costs
$3,294,714
Hist Tax Credit Allowable Costs
2,633,180
TIF Allowable Costs
2,588,630
Source of Funding
Permanent Financing
1,800,000
Verve Mortgage
Other Cash Funds
1,494,714
cash from developers)
Total Source of Funds
3,294,714
On the funding side, the developers have secured a funding commitment from Verve credit
union in the amount of $1.8 million. The remaining $1.49 million will be contributed as cash
from the developers.
TIF Funding
We assume that the project will be completed by November or December 2016 and that the
assessor will apply the new assessed value before the first of the year, 2017. Thus the full
value of the project will be on the 2017 tax year assessment and the increment can be paid out
in the fall of 2018. We assume the assessed value will increase at a rate of 1 % per year and
that the base value will be $575,000. Thus over 20 years of payout, the total increment will be
$390,444. Applying the 75% rule the total note from the city due to the developer would be in
the amount of $292,831. With a 2.5% interest rate, this note can be paid down over 20 years.
(See TIF Note payoff schedule on the following page.)
240 ALGOMA BLVD LLG INVESTMENT ANALYSIS 1
42
Project
Year
Levy Year
Tax Year
Value of
Project Increment
0)
Project
Tax Proceeds
A
Loan Principal
Outstanding
D
Interest.
Paid
Z
Total
Prin & Int
1
2015
r
769,600
h
24.54
18,882
18,882
240 Algoma TIF Assumptions
Q
7,320.8
TIF Base Value of Site $ 575,000
Completed Project Value $1,245,000
2016
2017
Project Value Appreciation 1.0%
670,000
24.54
Interest Rate on Loan 2.5%
14,108
16,438
Original Loan Principal $ 292,831
Project
Year
Levy Year
Tax Year
Value of
Project Increment
Equalized
Tax Rate
Project
Tax Proceeds
Tax Proceeds Allocation
Tax Entities Increment
Loan Principal
Outstanding
Acrued
Interest
Interest.
Paid
Principal
Paid
Total
Prin & Int
1
2015
2016
769,600
-
24.54
18,882
18,882
-
292,831
7,320.8
-
2
2016
2017
1,245,000
670,000
24.54
30,546
14,108
16,438
300,152
7,503.8
7,504
8,935
16,438
3
2017
2018
1,257,450
682,450
24.54
30,852
14,108
16,744
291,217
7,280.4
7,280
9,463
16,744
4
2018
2019
1,270,025
695,025
24.54
31,160
14,108
17,052
281,754
7,043.8
7,044
10,009
17,052
5
2019
2020
1,282,725
707,725
24.54
31,472
14,108
17,364
271,745
6,793.6
6,794
10,570
17,364
6
2020
2021
1,295,552
720,552
24.54
31,786
14,108
17,679
261,175
6,529.4
6,529
11,149
17,679
7
2021
2022
1,308,508
733,508
24.54
32,104
14,108
17,997
250,026
6,250.6
6,251
11,746
17,997
8
2022
2023
1,321,593
746,593
24.54
32,425
14,108
18,318
238,280
5,957.0
5,957
12,361.
18,318
9
2023
2024
1,334,809
759,809
24.54
32,750
14,108
18,642
225,919
5,648.0
5,648
12,994
18,642
10
2024
2025
1,348,157
773,157
24.54
33,077
14,108
18,969
212,925
5,323.1
5,323
13,646
18,969
11
2025
2026
1,361,638
786,638
24.54
33,408
14,108
19,300
199,279
4,982.0
4,982
14,318
19,300
12
2026
2027
1,375,255
800,255
24.54
33,742
14,108
19,634
184,961
4,624.0
4,624
15,010
19,634
13
2027
2028
1,389,007
814,007
24.54
34,079
14,108
19,972
169,950
4,248.8
4,249
15,723
19,972
14
2028
2029
1,402,897
827,897
24.54
34,420
14,108
20,312
154,227
3,855.7
3,856
16,457
20,312
15
2029
2030
1,416,926
841,926
24.54
34,764
14,108
20,657
137,771
3,444.3
3,444
17,212
20,657
16
2030
2031
1,431,095
856,095
24.54
35,112
14,108
21,004
120,558
3,014.0
3,014
17,990
21,004
17
2031
2032
1,445,406
870,406
24.54
35,463
14,108
21,355
102,568
2,564.2
2,564
18,791
21,355
18
2032
2033
1,459,860
884,860
24.54
35,818
14,108
21,710
83,777
2,094.4
2,094
19,616
21,710
19
2033
2034
1,474,459
899,459
24.54
36,176
14,108
22,068
64,161
1,604.0
1,604
20,464
22,068
20
2034
2035
1,489,204
914,204
24.54
36,538
14,108
22,430
43,697
1,092.4
1,092
21,338
22,430
21
2035
2036
1,504,096
929,096
24.54
36,903
14,108
22,795
22,359
559.0
559
22,236
22,795
22
2036
2037
1,519,137
944,137
24.54
37,272
14,108
23,164
123
3.1
3
123
126
390,442
ill:
Operational Proforma
The operational proforma, both with and without TIF assistance can be found on the following
two pages. The following assumptions were used to generate these:
• Commercial rental income will increase on average of 3% per year.
• Residential rental income will increase on average of 2% per year.
• Laundry facilities income will increase by 1 % per year.
• The first year the commercial vacancy rate will be 12 %, then each
subsequent year will have a 10% vacancy rate.
• The residential vacancy rate will hold constant at 7% per year.
• Expenses including Maintenance and Repairs, Insurance, Manage-
ment Fees, Professional Fees, Utilities and Trash, and Advertising will
all increase by I% per year.
• The first year will be taxed under the present assessment however
subsequent years will start at 2.45% of the $1,245,000 value and
increase by I% per year in accordance with the TIF note payout
schedule.
• Capital reserves will increase by 1 % per year.
• Debt service will be fixed over the first 10 years with a 20 year amorti-
zation schedule and a 4.25% interest rate offered through Verve credit
union.
Estimated expenses were arrived by taking averages of over 288 apartment units across 8
different multi -unit complexes the developers are involved with within the Oshkosh / Neenah
area. It as anticipated that the proposed development can be run with comparable efficiencies.
The proforma with the TIF assistance starts with a negative cash flow in the first year of
$- 22,531 in part due to the ramping up of occupancy in the first year and the lack of increment
payment. The next couple of years still show a negative cash flow up until the fifth year. By the
tenth year we see a positive cash flow of $27,239.
The "without' TIF picture is much more bleak. Under this scenario the developers do not see
any positive cash flow until the ninth year, and even then the returns are modest at best.
240 ALGOMA BLVD LLC INVESTMENT ANALYSIS I
44
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240
Algoma Blvd - Profit and Loss With TIFI'
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Income
Income rent per sf (3 % +)
$9.00
$9.27
$9.55
$9.83
$10.13
$10.43
$10.75
$11.07
$11.40
$11.74
$12.10
Commercial Rent
$68,850
$70,916
$73,043
$75,234
$77,491
$79,816
$82,211
$84,677
$87,217
$89,834
$92,529
Commercial Expense Recoveries
Residential Rent (2 % +)
$193,200
$197,064
$201,005
$205,025
$209,126
$213,308
$217,575
$221,926
$226,365
$230,892
$235,510
Other Revenue: Laundry (1 % +)
$4,000
$4,040
$4,080
$4,121
$4,162
$4,204
$4,246
$4,289
$4,331
$4,375
$4,418
TIF Recapture
$0
$16,438
$16,744
$17,052
$17,364
$17,679
$17,997
$18,318
$18,642
$18,969
$19,300
Gross Potential Income
$266,050
$288,458
$294,873
$301,433
$308,144
$315,007
$322,028
$329,209
$336,555
$344,070
$351,757
Commercial Vacancy (12% then 10 %)
$8,262
$7,092
$7,304
$7,523
$7,749
$7,982
$8,221
$8,468
$8,722
$8,983
$9,253
Residential Vacancy (7 %)
$13,524
$13,794
$14,070
$14,352
$14,639
$14,932
$15,230
$15,535
$15,846
$16,162
$16,486
Effective Gross Income (EGI)
$244,264
$267,572
$273,498
$279,558
$285,756
$292,094
$298,576
$305,207
$311,988
$318,924
$326,018
Expenses
Maintenance & Repairs
$34,540
$34,885
$35,234
$35,587
$35,942
$36,302
$36,665
$37,032
$37,402
$37,776
$38,154
Real Estate Taxes
$18,882
$30,546
$30,852
$31,160
$31,472
$31,786
$32,104
$32,425
$32,750
$33,077
$33,408
Insurance
$8,496
$8,581
$8,667
$8,753
$8,841
$8,929
$9,019
$9,109
$9,200
$9,292
$9,385
Management Fee
$17,098
$17,269
$17,442
$17,617
$17,793
$17,971
$18,150
$18,332
$18,515
$18,700
$18,887
Professional Fees
$4,248
$4,290
$4,333
$4,377
$4,420
$4,465
$4,509
$4,554
$4,600
$4,646
$4,692
Utilities &Trash
$28,320
$28,603
$28,889
$29,178
$29,470
$29,765
$30,062
$30,363
$30,667
$30,973
$31,283
Advertising
$14,656
$14,802
$14,950
$15,100
$15,251
$15,403
$15,557
$15,713
$15,870
$16,029
$16,189
Total Operating Expenses
$126,240
$138,978
$140,368
$141,771
$143,189
$144,621
$146,067
$147,528
$149,003
$150,493
$151,998
Net Operating Income (NOI)
$118,024
$128,594
$133,130
$137,787
$142,567
$147,473
$152,509
$157,679
$162,985
$168,431
$174,020
Capital Reserves
$6,800
$6,868
$6,937
$7,006
$7,076
$7,147
$7,218
$7,291
$7,363
$7,437
$7,511
Debt Service (20yr @ 4.25 %)
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
Net Cash Flow (before depreciation)
- $22,531
- $12,029
- $7,561
- $2,974
$1,736
$6,571
$11,536
$16,633
$21,867
$27,239
$32,754
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240AIgoma'Blvd
- Profit and Loss Without TIF
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Income
Income rent per sf (3 % +)
$9.00
$9.27
$9.55
$9.83
$10.13
$10.43
$10.75
$11.07
$11.40
$11.74
$12.10
Commercial Rent
$68,850
$70,916
$73,043
$75,234
$77,491
$79,816
$82,211
$84,677
$87,217
$89,834
$92,529
Commercial Expense Recoveries
Residential Rent (2 % +)
$193,200
$197,064
$201,005
$205,025
$209,126
$213,308
$217,575
$221,926
$226,365
$230,892
$235,510
Other Revenue: Laundry (1 % +)
$4,000
$4,040
$4,080
$4,121
$4,162
$4,204
$4,246
$4,289
$4,331
$4,375
$4,418
TIF Recapture
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Gross Potential Income
$266,050
$272,020
$278,129
$284,381
$290,780
$297,328
$304,031
$310,891
$317,913
$325,100
$332,457
Commercial Vacancy (12% then 10 %)
$8,262
$7,092
$7,304
$7,523
$7,749
$7,982
$8,221
$8,468
$8,722
$8,983
$9,253
Residential Vacancy (7 %)
$13,524
$13,794
$14,070
$14,352
$14,639
$14,932
$15,230
$15,535
$15,846
$16,162
$16,486
Effective Gross Income (EGI)
$244,264
$251,133
$256,754
$262,506
$268,392
$274,415
$280,580
$286,889
$293,346
$299,954
$306,718
Expenses
Maintenance & Repairs
$34,540
$34,885
$35,234
$35,587
$35,942
$36,302
$36,665
$37,032
$37,402
$37,776
$38,154
Real Estate Taxes
$18,882
$30,546
$30,852
$31,160
$31,472
$31,786
$32,104
$32,425
$32,750
$33,077
$33,408
Insurance
$8,496
$8,581
$8,667
$8,753
$8,841
$8,929
$9,019
$9,109
$9,200
$9,292
$9,385
Management Fee
$17,098
$17,269
$17,442
$17,617
$17,793
$17,971
$18,150
$18,332
$18,515
$18,700
$18,887
Professional Fees
$4,248
$4,290
$4,333
$4,377
$4,420
$4,465
$4,509
$4,554
$4,600
$4,646
$4,692
Utilities & Trash
$28,320
$28,603
$28,889
$29,178
$29,470
$29,765
$30,062
$30,363
$30,667
$30,973
$31,283
Advertising
$14,656
$14,802
$14,950
$15,100
$15,251
$15,403
$15,557
$15,713
$15,870
$16,029
$16,189
Total Operating Expenses
$126,240
$138,978
$140,368
$141,771
$143,189
$144,621
$146,067
$147,528
$149,003
$150,493
$151,998
Net Operating Income (NOI)
$118,024
$112,155
$116,386
$120,734
$125,203
$129,794
$134,513
$139,361
$144,343
$149,461
$154,720
Capital Reserves
$6,800
$6,868
$6,937
$7,006
$7,076
$7,147
$7,218
$7,291
$7,363
$7,437
$7,511
Debt Service (20yr @ 4.25 %)
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
$133,755
Net Cash Flow (before depreciation)
- $22,531
- $28,467
- $24,305
- $20,026
- $15,628
- $11,107
- $6,460
- $1,684
$3,225
$8,270
$13,454
Return on Investment
To calculate the return on investment in the form of an internal rate of return (IRR), we first
must arrive at an effective amount of cash the developers are putting into the transaction. As
shown in the detailed budget table, the developers are bringing $1,494,714 into this project.
However, the developers will also be receiving 20% federal and 20% state historical tax credits
on the estimated $2.6 million of allowable expenses. This results in roughly $1.05 million worth
of credits. However, there are very few entities with the capability to utilize this much credit in
a single year, thus the developers will be forced to spread out their use of these credits over
many years reducing the value of these credits given the principal of the future time -value of
money.
To estimate a value of these credits we spoke with 2 tax credit brokers. Vickie Holland, with
Dimension Development, LLC based out of Madison, WI, suggested a good estimate if the
developers were to bring in an equity partner would be 93 cents on the dollar for the federal
credits and 60 cents on the dollar for the state credits. These estimates were confirmed by
Donald Bernards, CPA and tax credit broker with Baker Tilly, again based out of Madison. Us-
ing this estimate of value, we estimate the tax credits to be worth $805,753. Thus the effective
net cash is the difference, or $688,960.
Before we can calculate the IRR we need to calculate an assumed reversion at the end of year
ten. To do this we use the NOI from year eleven and divide by a terminal cap rate. We again
follow the lead of the assessor and use the 11 % loaded cap rate and subtract off the presumed
mill rate of 2.45 %, then rounding down (which provides more presumed value) we arrive at
a non - loaded cap rate of 8 %. This results in a valuation of $2.175 million in the TIF scenario.
However after 10 years there would still be $1,088,099 left to pay off on the mortgage. Thus
a net reversion of $1,087,155 is used in addition to the year 10 net cash flow. This leads to a
10 year Internal Rate of Return of 4.91%. A similar calculation without TIF leads to an IRR of
0.48 %, again, a very bleak prospect for this investment.
I INVISTA- ANALYTICS.COM
47
Return on Investment Metrics
With TIF
W ithout TI F
Initial Cash Outlay
1,494,714
1,494,714
Historic Tax Credits
1,053,272
1,053,272
HTC Present Value
805,753
805,753
Net Effective Cash
688,960
688,960
Net Cash Flow Reversion Total
Net Cash Flow Reversion
Total
- 688,960
- 688,960
- 688,960
- 688,960
Year 0
Year 1
- 22,531
- 22,531
- 22,531
- 22,531
Year
- 12,029
- 12,029
- 28,467
- 28,467
Year 3
-7,561
-7,561
- 24,305
- 24,305
Year 4
-2,974
-2,974
- 20,026
- 20,026
Years
1,736
1,736
- 15,628
- 15,628
Year 6
6,571
6,571
- 11,107
- 11,107
Year 7
11,536
11,536
-6,460
-6,460
Year 8
16,633
16,633
-1,684
-1,684
Year 9
21,867
21,867
3,225
3,225
Year 10
27,239
1,087,155
1,114,394
8,270 845,902
854,172
Yr 11 NOI
174,020
154,720
Terminal Cap Rate
8.00%
8.00%
Gross Reversion
2,175,254
1,934,002
Mortgage Payoff
1,088,099
1,088,099
Net Reversion
1,087,155
845,902
30yr IRR =>
4.91%
10yr IRR =>
0.48%
Before we can calculate the IRR we need to calculate an assumed reversion at the end of year
ten. To do this we use the NOI from year eleven and divide by a terminal cap rate. We again
follow the lead of the assessor and use the 11 % loaded cap rate and subtract off the presumed
mill rate of 2.45 %, then rounding down (which provides more presumed value) we arrive at
a non - loaded cap rate of 8 %. This results in a valuation of $2.175 million in the TIF scenario.
However after 10 years there would still be $1,088,099 left to pay off on the mortgage. Thus
a net reversion of $1,087,155 is used in addition to the year 10 net cash flow. This leads to a
10 year Internal Rate of Return of 4.91%. A similar calculation without TIF leads to an IRR of
0.48 %, again, a very bleak prospect for this investment.
I INVISTA- ANALYTICS.COM
47
The findings presented herein are based upon the information available and received at
the time this report was compiled. Invista Analytics (IA) has taken every possible precau-
tion to evaluate this information for its completeness, accuracy and reliability. To the best
of its knowledge, IA feels the information and conclusions presented herein are sound and
reliable.
It should also be understood that normal economic and marketplace conditions change con
stantly. IA assumes no responsibility for information that becomes outdated once this report
is written; nor is it responsible for keeping this information current after March 15. 2016.
The results presented in this report are the professional opinion of IA and are based on the
information available at this time. These opinions infer proper and professional management
of the business operation. The opinions also infer that market conditions do not change the
information received upon which these opinions are based. IA assumes no responsibility for
changes in market conditions.
Furthermore, it is assumed that the reader of this report completely understands its contents,
assumptions and recommendations. If the reader does not fully understand the contents
contained herein, clarification should be sought from Invista Analytics.
Finally, IA assumes no responsibility should the management of the proposed business ven-
ture deviate from any recommendations that may have been provided in this report.
Any further questions about this report should be directed to IA
Sincerely, /
Timothy Hess, PhD
e0,,1NV1STA
ANALYTICS
146 Algoma Blvd - Suite H
Oshkosh, WI 54901
920.203.2177
www.invista-analyties.com
240 ALGOMA BLVD LLC INVESTMENT ANALYSIS I
48
Appendix D
Notice of
Public Hearing
NOTICE OF PUBLIC HEARING
BEFORE THE CITY OF OSHKOSH PLAN COMMISSION
Tuesday, May 3, 2016
4:00 pm, Room 404
City Hall, Oshkosh, WI
The Plan Commission will hear public comments on the designation of boundaries and
Project Plan for proposed Tax Incremental District #28 Beach Building Redevelopment.
The primary purpose in creating the district is to facilitate rehabilitation and
redevelopment of a vacant office building into a mixed -use commercial/residential
apartment complex.
The District is generally located at 240 Algoma Blvd., Oshkosh.
Interested persons are encouraged to attend. The draft Project Plan will be available for
review on or about April 26, 2016. For information, call the City of Oshkosh Planning
Services Division at 920 - 236 -5059 between 8:00 am — 4:30 pm, Monday thru Friday.
PUBLISHED: April 19 & 25, 2016
49
Appendix E
Attorney's opinion
CITY HALL
215 Church Avenue
P. 0. Box 1130
Oshkosh, 90211300 City of Oshkosh
_0
olt -Kpn H
City Attorney's Office
Phone: (920) 236 -5115
Fax: (920) 236 -5106
http: / /www.ci.oshkosh.wi.us
May 13, 2016
Darryn Burich
Director of Planning Services
City of Oshkosh
215 Church Avenue
Oshkosh, WI 54903 -1130
Dear Mr. Burich:
I have reviewed the project plan for City of Oshkosh Tax Increment District # 28 Beach Building
Redevelopment, pursuant to Section 66.1105(4)(f) of Wisconsin Statutes. I find that the plan
includes a statement listing the kind, number, and location of proposed public improvements.
There are no planned public improvements. It also shows an economic feasibility study, a detailed
list of estimated project costs, and a description of the method of financing all estimated project
costs, and the time when the costs are to be incurred. The plan contains maps of existing and
proposed uses and zoning of the real property in the district and additional details showing
proposed improvements in the district. The plan further shows that the district will promote the
orderly development within the City, which is consistent with the City's Comprehensive- Plan
(Master Plan), building codes and other city ordinances in relation to project elements.
Upon adoption of the project plan by the Plan Commission and their submission to the City
Council, all requirements of Section 66.1105(4)(0, Wisconsin Statutes, shall be complete and it is,
therefore, my opinion that the project plan attached hereto is complete and complies with Sec.
66.1105, Wis. Stats.
Sincerely,
CITY OF OSHKOSH
E-yKn A. Lorenson
City Attorney
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Appendix F
Plan Commission /Public Hearing
Minutes of May 3, 2016
PLAN COMMISSION MINUTES
May 3, 2016
PRESENT: David Borsuk, Ed Bowen, Jeffrey Thoms, Thomas Fojtik, John Hinz, Steve
Cummings, Kathleen Propp, Gary Gray, Donna Lohry, Robert Vajgrt
EXCUSED: Karl Nollenberger
STAFF: Darryn Burich, Director of Planning Services; David Buck, Principal Planner;
Jeffrey Nau, Associate Planner; Brian Slusarek, Zoning Code Enforcement
Inspector; Elizabeth Williams, Associate Planner; Deborah Foland, Recording
Secretary
Chairperson Fojtik called the meeting to order at 4:00 pm. Roll call was taken and a quorum
declared present.
VII. PUBLIC HEARING ON PROPOSED CREATION OF TAX INCREMENT
FINANCING DISTRICT #28 BEACH BUILDING REDEVELOPMENT;
DESIGNATION OF BOUNDARIES AND APPROVAL OF PROJECT PLAN
TID #28 is being proposed to facilitate the adaptive reuse of the vacant Orville Beach Memorial
Manual Training School office building at 240 Algoma Boulevard into a mixed -use modern
commercial /residential apartment complex and retail /service business center including three
commercial units on the first floor and 22 higher end apartments on the second and third floors
complete with modern finishes, technology and amenities. The overall goal of the redevelopment
project is to provide new active life and full -time residents within the Oshkosh center city,
furthering downtown revitalization efforts. The anticipated project cost is estimated at $3.3 million
with renovations being the most significant cost due to many years of vacancy and deferred
maintenance that essentially require a complete gut and remodel of the interior to bring the facility
back to a competitive new use for the residential component.
Mr. Burich presented the item and discussed the purpose of the proposed TID creation, the rental
unit's rates, and the maximum life of the TID, and proposed use. He further discussed the size of
the parcel and value of the property and the increment values and project costs as well as the
economic feasibility and development costs as far as equity, and financing for this project. He also
reviewed the market analysis and project costs with and without the TIF assistance and stated that
this project has been reviewed by the City's financial consultants and the project meets all the
requirements in the State code for creation of a TID.
Mr. Gray discussed the staff and developer's efforts on this project and stated that he felt there were
inconsistencies in the financial information in the project plan and he cannot verify the need for
additional money for this development. He further stated that he was not sure if TIF assistance is
the correct process for a funding source for this project and would not support it due to what he felt
was inaccurate financial information.
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May 3, 2016
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Mr. Bowen questioned some of the wording on page 8 relating to the historic tax credits that he felt
was incorrect and questioned if the project would be eligible to receive State Historic Tax Credit
assistance as State and Federal tax credits may have been utilized in the mid 1980's when the site
was redeveloped. He felt that this aspect of the plan needed to be looked into as he did not feel that
the Historic Tax Credit assistance could be utilized again to his knowledge. This would change the
financial figures if they were not applicable. He also questioned if the soft costs of 10% of the
developer's fee was counted as part of the developer's equity in the overall proforma or is it
excluded from the number in excess of that.
Mr. Thorns inquired if the developer made any attempt to approach GO -EDC for funding rather
than pursue the TIF assistance as this was economic development.
Mr. Burich responded that they did not pursue that avenue that he was aware of and that the
application was submitted and staff research completed to determine if the request met the
necessary requirements.
Mr. Bowen commented that GO -EDC does not have support for real estate projects and are not
focused on redevelopment projects that do not create jobs.
Chet Wesenberg stated that they did not approach GO -EDC for financial assistance for this project.
Mr. Thorns questioned if they contacted Winnebago County for low interest loan assistance.
Mr. Wesenberg responded negatively and stated that the Historic Tax Credits are eligible for this
project as they can be re- applied for after five years of receiving assistance and explained their
submitted application process. He also discussed the criteria for the program which requires that
historic preservation needs to identify what features of the structure which are historic and what can
be saved and discussed the process of renovation with this being taken into consideration. He
further discussed the approvals received thus far and the entities involved with the approval process.
Mr. Bowen inquired where the coffee shop was located within the development.
Mr. Wesenberg responded that it would be on the first floor where the existing drive through feature
of the structure is located and that they already have an entity committed to fill that commercial use.
He also discussed some of the other uses that were planned for the first floor commercial space.
Barbara Young stated that the TIF assistance concerns her as taxes are kept at a lower rate for the
development which has to be made up by other taxpayers. She also stated that TIF assistance was
utilized as an incentive to start projects and this project appears to already be under way as work has
already been going on at the site. She felt that favoritism was in play and that developers with deep
pockets are the ones that are receiving TIF assistance advantages. She questioned if this project was
going to be ceased if the TIF assistance was denied.
Mr. Gray commented that she was claiming that the developer will be paying less taxes and that
was not how TIF assistance worked. He explained that the developer will pay the same amount of
taxes as any other development and that they will pay the current tax rate for the property and the
difference is where these tax dollars are applied. He further explained that with TIF assistance that
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the taxes are applied to repay the city for the development rather than going to the school district
and other entities that normally receive a portion of the tax payments.
Bernard Pitz, 617 W. Irving Avenue, stated that the building was constructed by his company and
that he does not agree with the developer receiving TIF assistance for this project. He discussed his
research on the property and that the property taxes were decreased in 2015 by a considerable
amount and that the developers are owners that will be moving into the commercial space created.
He further discussed the developer's fees and architect's fees that amount to around $300,000 that
are included in the project plan and that the school system and Winnebago County will not receive
their portion of the tax payment from this property. He questioned how this TIF assistance can be
justified when the school system just passed a referendum for additional taxes to be paid by
property owners. He felt that the developer's and architect's fees should be removed from the
project plan as it is benefiting the parties that will be occupying the building. He also discussed that
TIF assistance is typically sought when the area receiving the TIF assistance is determined to be
50% blighted and City Hall is directly adjacent to this parcel and he does not consider it to be a
blighted area. He also stated that TIF assistance was meant to initiate development that would bring
in new business and create jobs and increase the tax base and that this proposed TIF does not meet
these requirements. He continued to discuss how TIF projects are utilized for economic
development purposes and that it was meant to provide funding prior to any work being initiated
and that the work on this development has already begun prior to the TID plan even being
approved.
Diane Lammers, 131 Church Avenue, stated that she thought that the TID plan should be approved
before any construction is started and that work has been underway at this site for some time now.
She also commented about the developer receiving a tax break for the next 20 years which she felt
was unfair while they are making money from the development and that she disagreed with TIF
assistance being granted for this project.
Tim Hess, 2645 Templeton Place, stated that he completed the analysis for this project and
discussed its details and stated that from the standpoint of the developers fees, they are applying for
allowable fees as things such as the architect's fees are part of the total expense for the
development. He discussed the comments relating to the developer's and architect's fees that were
claimed to be excessive and their request for $300,000 and explained the allowable fees related to a
TIF project and further explained the hard costs involved with this project. He also explained the
substantial fees involved with a historic tax credit project and the developer's fees are in the
analysis.
Mr. Bowen questioned if these costs were included in the proforma of the developer equity of
$1,494,714 that the developers are bringing into this project.
Mr. Hess responded affirmatively.
Mr. Borsuk again asked to clarify if the apartments would be market rate units.
Mr. Hess responded affirmatively.
Mr. Gray referenced the table on page 32 of the project plan that contained revenue projections
relating to the rental projects and stated that from his calculations, the commercial space rental
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May 3, 2016
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amount should be $90,000 not $68,000 based on the square footage of the commercial space
available.
Mr. Hess responded that 10% is common areas that are not included in this calculation.
Mr. Gray felt that the square footage calculations from floor to floor did not add up correctly.
Motion by Vajgrt to approve the designated boundaries and Project Plan for TID #28 -Beach
Building Redevelopment.
Seconded by Borsuk.
Mr. Burich requested that an explanation of what activities are occurring on the site now be
provided and what will occur if the TIF financing is not approved.
Mr. Wesenberg explained that the project is contingent upon TIF and tax credit assistance and that
he was not sure how the project would proceed if these financial aides were not approved as he did
not feel the project would go forward without this assistance as they were counting on this to help
finance the development.
Mr. Thoms stated that this project did not meet the criteria for the purpose of the creation of a TID
and that the developers did not look at alternative financing and that it was difficult to ascertain that
the $300,000 from the TIF assistance would make or break this project at $3,000,000 and that it was
justified.
Mr. Wesenberg commented that he was not sure if other financial avenues to assist with this project
were pursued and that his partner was not present to answer these questions.
Mr. Thoms questioned why work has begun on the project if it was contingent upon receiving the
assistance that has not yet been approved.
Ms. Wesenberg responded that they cannot determine the full exposure without starting work on the
structure as selective demolition was in process as this work must be completed to determine what
historic elements remain within the structure. There is work going on but it was nominal to
determine the historic fabric.
Mr. Thoms commented that he thought that the developer had to apply for TIF assistance and have
it approved prior to any work commencing on the site.
Mr. Burich explained that the TIF is not being used to directly fund any construction activity at the
site but as a financial incentive to complete the project.
Motion by Vajgrt to call the question and end discussion.
Seconded by Bowen.
Motion carried 7 -2. (Ayes Borsuk/Bowen/Fojtik/Hinz /Cummings /Propp /Vajgrt). Nays -
(Thoms/Lohry)
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