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Home My WebLink About39. 16-400JULY 26, 2016 16 -365 16 -400 PENDING JULY 12, 2016 RESOLUTION (CARRIED PURPOSE: INITIATED BY LOST LAID OVER X WITHDRAWN ) UNTIL AUGUST 10, 2016 COUNCIL MEETING APPROVE UPDATED TAX INCREMENT FINANCING (TIF) POLICY AND APPLICATION GUIDELINES COMMUNITY DEVELOPMENT WHEREAS, the City of Oshkosh is active in its use of tax increment financing (TIF) to promote redevelopment and industrial development activity; and WHEREAS, a formal TIF policy and application better communicates the City's expectations to the development community and public regarding use of TIF; and WHEREAS, Council previously approved TIF policy and application guidelines; and WHEREAS, based on developer interest in utilizing TIF funding and the current market, staff is recommending revisions to three significant policy and criteria elements of the TIF Policy and Application: 1) Criteria for TIF Assistance 2) Payback Period 3) Policy Criteria NOW, THEREFORE, BE IT RESOLVED that the Common Council of the City of Oshkosh hereby approves of the attached revised City of Oshkosh Tax Increment Financing Policy and Application guidelines. Oshkosh TO: Honorable Mayor and Members of the Common Council FROM: Allen Davis, Community Development Director DATE: July 21, 2016 RE: Updated Tax Increment Finance (TIF) Policy and Application Guidelines BACKGROUND The City Council deferred action on this item at their July 12, 2016 meeting. ANALYSIS Staff asked the City's Financial Consultant, Ehlers for TIF information on the Best TIF Practices from around the state. Ehlers has provided two informational Powerpoints for your review and they are attached. Mr. Todd Taves from Ehlers and Associates, is not available for the July 26, 2016 City Council meeting. Mr. Taves is available for the August 10, 2016 City Council meeting. RECOMMENDATION City Council defers action on this item until the August 10, 2016 meeting. Submitted, Approved, Allen Davis Mar Rohloff Community Development Director City Manager FREERS LEADERS IN PUBLIC FINANCE TIF Best Practices Todd Taves, Senior Financial Advisor Mike Harrigan, Senior Financial Advisor Keith Brightman, Financial Advisor 712112016 -Fl-FE Jeopardy Time This La Crosse native and former governor of Wisconsin was an independent vice - presidential candidate on the 1980 ticket with John Anderson Patrick Lucey — Ticket received 6.6% of the popular vote — Lt. Governor 1965 -1967 — Wisconsin Governor 1971 -1977 — US Ambassador to Mexico 1977 -1979 2 0 EHLERS LEADERS 1 R NOLIC FINANCE Session Objective "Fools say that they learn by experience. I prefer to profit by others experience." 3 —Otto von Bismarck 0 EHLERS LEADERS 1 R PURIC MAKE 4 TIF Since 2008 The great recession and its aftermath have hampered many TIN — Economic depreciation eroding project value — Valuation appeals and foreclosures — DOR valuation methodology change in 2010 — Developers exiting market — Difficulty obtaining private capital — Distressed TID legislation — Increased use of TID sharing and restructuring of liabilities 0 EHLERS LEADERS 1 R PURIC FINANCE TIF Since 2008 Amore conservative approach — More thorough vetting of developers — Better definition of risks — More conservative assumptions — Hedging against continued economic deprecation — More development project driven — Leveraging successful TIDs — Greater public investment where warranted 5 0 EHLERS LEADERS 1 R PURIC FINANCE 6 Best Practices —But For "But for" the use of TIF, the development expected in the TID would not occur as proposed More fundamentally, is it a good project? — What local needs or objectives are met? — Consistency with land use and other planning documents — Consideration of alternative uses — Will governing body and public support? — Is the assistance request in line with your risk tolerance? 0 EHLERS LEADERS 1 R PURIC FINANCE 7 Best Practices —But For Joint Review Board (JRB) determines whether testis met, but community must first build the case Standard of proof can be subjective — ultimately it is whatever the JRB finds to be adequate — Geographic disadvantage — Clear impediments to project (e.g. blight, environmental contamination, substantial infrastructure requirements) — Meets an acknowledged public need (e.g. critical service, employment, housing) — Empirical quantification of need — independent proforma review 0 EHLERS LEADERS 1 R PURIC FINANCE 8 Best Practices — Proforma Review We have come along way on the "But For Analysis" — Communities used to rely on: Developer Representations Historic or anecdotal knowledge. Uncle Fred or the Mayor said it wouldn't happen. Many communities are now asking for the numbers Is there a financing "gap" or not? Developers need to make a Profit But there are standards and ranges of return needed to attract capital to a deal Standards change with market conditions You need to have someone knowledgeable in your corner who can perform a good analysis 0 EHLERS LEADERS 1 R NOLIC FINANCE 9 Best Practices — Proforma Review From Developer's perspective: — Developers don't like divulging their financials. — Numbers can be kept confidential (to a point) if provided to a private consultant to perform analysis — The more sophisticated the developer generally, the more willing to provide an "open book" if a competent review is conducted — Analysis can be provided to Council or Board in closed session as part of negotiation process 0 EHLERS LEADERS 1 R PURIC MAKE Best Practices — Proforma Review Four types of review: Development comparison to industry standards Profit Cash -on -cost on for -sale projects for housing & commercial Cash -on -cash return on rental projects Internal rate of return on rental projects 10 0 EHLERS LEADERS 1 R PURIC FINANCE Best Practices — Proforma Review Do they Need TIF Participation? 0 If so, how much is enough? Only an independent analysis running your own numbers will allow testing of "tolerance" of the deal to different levels of TID participation Begin by using developers numbers Tie out to their projections to verify the math Then do your own sensitivity by varying inputs 0 EHLERS LEADERS 1 R PURIC FINANCE 12 SOURCES and USES and PROFIT STATEMENT COST/ USE SUMMARY Amount Percent Land Acquisition 1,912,750 Site work 200,000 Total Acquisition 2,112,750 Rehabilitation / New Construction 7,500,000 Commercial Construction and Tenant Improvements 1,700,000 Contingency 426,159 City Fees- Impact Fees 152,615 Total Construction Costs 9,778,774 Architectural and Engineering 355,000 Sale Fees & Marketing 853,759 Interim Costs 836,888 Financing Fees and Expenses 71,800 Total Carrying Costs 908,688 Finance Related Costs 109,000 Legal, Survey, Title 119,000 Developer Overhead 600,000 TOTAL PROJECT COSTS 14,836,971 Income Sources Summary Total Total Sale Price of Units 12,444,000 Commercial Sale 1,977,000 TIF 1,900,000 Total Proceeds 16,321,000 Less Project Cost (14,836,971) Allowable Profit 1,484,029 Percent of Cost 10.00% 12.89% 1.35% 14.24% 50.55% 11.46% 2.87% 1.03% 65.91% 2.39% 5.75% 5.64% 0.48% 6.12% 0.73% 0.80% 4.04% 100.00% 0 EHLERS LEADERS 1R PAUL FINANCE Cash on Cash & IRR — Sources Anytown, Wisconsin Mixed Use Residential Rental & Retail Project SOURCES Bank Loan Brownfield Grant DEVELOPER EQUITY Amount Prior to Venture I TID participation TO Participation TOTAL SOURCES 13 % OF TOTAL % OF FINANCE TOTALS 63.14% 63.14% 51000,000 1.26% 1.26% 100,000 22.34% 22.34% 117691423 86.74% 6,869,423 13.26% 13,26% 1,050,000 100.00% 7,919,423 0 EHLERS LEADERS 1 R PAUL FINANCE Cash on Cash & I RR —Uses USES Per Sq. Ft. % OF TOTAL SUBTOTAL TOTALS ACQUISITION COSTS 120,661 Property - 13.05 19.89% 1,575,000 1,575,000 CONSTRUCTION COSTS 5,233,484 Demolition I Remediation 2.19 1.26% 100,000 Building Construction - Trade Subcontracts 97.69 56.25% 4,454,749 General Conditions 4.82 2.78% 220,000 General Contractor Fee 3.56 2.05% 162,500 Contingency 3.74% 296,235 SOFT COSTS DEVELOPMENT COSTS 432,901 Design & Engineering 3.66% 289,950 Taxes & Insurance 0.76% 60,406 Fees & Permits 0.35% 27,545 Legal & Professional 0.38% 30,000 Marketing & Other 0.32% 25,000 Financing 235,437 Loan Fees 0.32% 25,000 Interest Reserve 2.66% 210,437 Operating Reserve 79,260 DEVELOPER FEE 250,000 Developer Overhead Fee 3.16% 250,000 Contingency 1.43% 113,341 113,341 Total Soft Costs 1,110,939 TOTAL USES 173.67 100,00% 7,919,423 14 EHLERS LEACEn M NOLIC FRNAKE 15 Assumptions INFLATION ASSUMPTIONS YEAR 2013 2014 2015 2016 2017 ResidentialRental Revenue 0.00% 2.00% 2.00% 2.00% 2.00% Retail Rental Revenue 0.00% r 3.00% r 3.00% r 3.00% 3.00% Other Income 0.00% r 2.00% r 2.00% r 2.00% 2.00% Expenses 0.00% 2.00% 2.00% 2.00% 2.00% Vacancy Retail 5.00% 5.00% 5.00% 5.00% 5.00% Vacancy Residential 7.00% 7.00% 7.00% 7.00% 7.00% MONTHS OPERATING 12 0 EHLERS LEADERS 1 R PURIC FINANCE 16 Income CASH FLOW - INCOME Garage Parking Tandem Parking Miscellaneous Total Other 2013 2014 2015 2016 2017 Rental Revenue 777,674 795,179 813,093 831,425 850,187 Residential Rentals 529,524 540,114 550,917 561,935 573,174 Retail Rentals 195,170 201,025 207,056 r 213,268 219,666 0 0 0 0 0 0 Total Rental 724,694 741,140 757,973 775,203 792,839 Other Revenue Garage Parking Tandem Parking Miscellaneous Total Other 37,500 6,480 9,000 52,980 38,250 6,610 9,180 54,040 39,015 6,742 9,364 55,120 39,795 6,877 9,551 56,223 40,591 7,014 9,742 57,347 Gross Revenue 777,674 795,179 813,093 831,425 850,187 Vacancies Retail 9,759 10,051 10,353 10,663 10,983 Vacancies Parking & Other 3,709 3,783 3,858 3,936 4,014 Vacancies Residential 37,067 37,808 38,564 39,335 40,122 Effective Income 727,140 743,537 760,318 777,491 795,067 EHLERS I &In ;; I .il d I• I IN.Aii 17 Operating Expenses, N01 and Cash Flow CASH FLOW • EXPENSES AND DEBT OPERATING EXP • 2013 2014 2015 2016 2017 Payroll & Related 4,078 4,160 4,243 4,328 4,414 Landscaping & Snow removal 2,039 2,080 2,121 2,164 2,207 Uilities 18,349 18,716 19,090 19,472 19,862 Redecorating 4,078 4,160 4,243 4,328 4,414 Maintenance 20,388 20,796 21,212 21,636 22,069 MANAGEMENT AND OTHER FEES Management Fees - 3% 21,814 22,306 22,810 23,325 23,852 Property Taxes 113,085 113,085 113,085 113,085 108,406 Marketing 3,058 3,119 3,182 3,245 3,310 Office Operations & Insurance 21,407 21,835 22,272 22,717 23,172 TOTAL FEES 159,364 160,345 161,348 162,372 158,740 TOTAL EXPENSES 208,296 210,256 212,257 214,299 211,705 NET OPERATING INCOME 518,844 533,281 548,061 563,192 583,362 11D PAYGO PAYMENTS CASH FLOW AVAIL. FOR DEBT SERVICE 518,844 533,281 548,061 563,192 583,362 DEBT SERVICE ( -) - Bank Loan 310,029 346,776 393,179 393,179 393,179 Capital Reserve 10,445 10,445 10,445 10,445 10,445 Guarantee Payment 8,245 4,810 1,306 CASH FLOW AFTER FINANCING 190,125 171,250 143,131 159,568 179,738 RETURN ON I NVES.- ANNUAL 10.75% 9.68% 8.09% 9.02% 10.16% RETURN ON INVES.- AVERAGE 10.75% 10.21% 9.50% 9.38% 0 EHLERS LEADERS 1 R PAUL FINANCE 18 Operating Expenses, N01 and Cash Flow (cont.) OPERATING EXP. ( -) 2018 2019 2020 2021 2022 Payroll & Related 4,502 4,592 4,684 4,778 4,874 Landscaping & Snow removal 2,251 2,296 2,342 2,389 2,437 Uilities 20,259 20,664 21,077 21,499 21,929 Redecorating 4,502 4,592 4,684 4,778 4,874 Maintenance 22,510 22,960 23,419 23,888 24,366 MANAGEMENT AND OTHER FEES Management Fees - 3% 32,522 33,259 34,012 34,784 35,573 Property Taxes 110,574 112,786 115,041 117,342 119,689 Marketing 3,376 3,444 3,513 3,583 3,655 Office Operations & Insurance 23,635 24,108 24,590 25,082 25,583 TOTAL FEES 170,108 173,596 177,156 180,791 184,500 TOTAL EXPENSES 224,133 228,701 233,364 238,122 242,979 NET OPERATING INCOME 588,922 602,764 616,945 631,473 646,357 TID PAYGO PAYMENTS CASH FLOW AVAIL. FOR DEBT SERVICE 588,922 602,764 616,945 631,473 646,357 DEBT SERVICE ( -) - Bank Loan 393,179 393,179 393,179 393,179 393,179 Capital Reserve 10,445 10,445 10,445 10,445 10,445 Guarantee Payment 0 0 0 0 0 CASH FLOW AFTER FINANCING 185,299 199,141 213,322 227,850 242,734 RETURN ON INVES.- ANNUAL 10.47% 11.25% 12.06% 12.88% 13.72% RETURN ON INVES.- AVERAGE 9.69% 9.92% 10.18% 10.48% 10.81% 0 EHLERS t &Iii 'ti Ifl : Il,il l•;. t INgI10E Infernal Rafe of Return (IRR) ANNUAL EQUITY REQUIREMENT INTERNAL RATE OF RETURN ANALYSIS - EQUITY PARTNERS Year Initial CASH Sale Total Amount of Equity 1,769,423 Years Year Investment Flow Price Cash Flow Minimum Rate Of Return - Percent 100.00% 2012 (1,769,423) (1,769,423) Minimum Rate Of Return - Amount 1,769,423 1 2013 0 0 2 2014 190,125 190,125 3 2015 171,250 171,250 SALE ANALYSIS 4 2016 143,131 143,131 5 2017 159,568 159,568 Net Operating Income End 2022 646,357 6 2018 179,738 179,738 Divided By Cap Rate 7.75% 7 2019 185,299 185,299 Gross sale price 8,340,094 8 2020 199,141 199,141 Minus Debt - Bank - End 2019 4,488,836 9 2021 213,322 213,322 Minus Debt - SBA - End 2019 10 2022 227,850 3,726,157 3,954,006 Minus Debt Ventue End 2019 Net Sale amount 3,851,258 Total (1,769,423) 1,669,424 3,726,157 3,626,157 sales expense - 2% 125,101 Final amount 3,726,157 IRR 14.15% 19 t4v EHLERS t[;�F WIN PUOLIG FIN AKF 20 Best Practices — Proforma Review • So now we have a BEST ESTIMATE of what the profitability will look like - BUT - - -- We know no matter how much diligence is done up front, the actual experience will vary The best way to manage the ultimate TID participation amount is through a "LOOK BACK" clause in the development agreement A look back is simply a provision wherein the developer agrees to provide the ACTUAL sources I uses and cash flow numbers at project stability or upon sale 0 EHLERS LEADERS 1 R PAUL FINANCE 21 Best Practices — Proforma Review The Look Back identifies an agreed upon maximum level of profitability that the developer is entitled to AFTER WHICH the developer agrees to share the upside with the City up to the amount of TID participation Assume the stipulated uncapped IRR up front is 16 %. The IRR is run upon sale or agreed date and shows a 17.5% return. Of the additional 1.5 %Developer gets 0.75% for a total of 16.75% and City gets 0.75% - -- assuming a 50150 split was agreed upon This helps assure a higher level of integrity to the process up front 0 EHLERS LEADERS 1 R PURIC FINANCE 22 Best Practices — Proforma Review When do you do a look back? – After project stability, upon sale or agreed upon date– typically 5- 10 years –could go longer. Why would you do a look back? – Keeps developers honest. – Assures elected officials and citizens that TID is not unduly enriching the developer. – Good business —after all, it is supposed to be a "partnership Share in the "up side" – Developer is still incented to do better than projections – City will use funds to close TO sooner. 0 EHLERS LEADERS 1 R PURIC MAKE 23 Best Practices — Planning the TID Build a cushion — Plan to recover all project cost obligations using no more than 70 %- 80% of the maximum allowable TID life — Structure debt and other project cost obligations to require no more than 80% - 90% of annual projected cash flows (comparable to revenue bond underwriting standards of 125 — 1.10coverage) Challenge assumptions — Don't take the developer's word on project value — do your diligence — Don't use assumed economic appreciation, or other unreliable assumptions, to make a cash flow work 0 EHLERS LEADERS 1 R PURIC MAKE Best Practices — Planning the TID Mitigate risk — Where possible, provide development incentives on a "pay as you go" basis vs. capital up front — Provide protections for public investment in development agreement — Require committed projects prior to making expenditures, and phase expenditures — Ensure the developer has sufficient skin in the game — Understand the worst case scenario and determine whether the community could manage through it 24 0 EHLERS LEADERS 1 R NOLIC FINANCE 25 Best Practices — Planning the TID Some options for developer agreements to protect against cash flow shortfalls — Valuation benchmarks tied to receipt of incentives — Value guarantees — Shortfall guarantee — Direct debt repayment guarantee — Deferred special assessments (a.k.a. "springing" specials) Depending on specific language, guarantees may cause financing to become taxable — consult your bond attorney 0 EHLERS LEADERS 1 R PURIC MAKE Best Practices — Planning the TID Some enforcement options for developer agreements — Irrevocable letter of credit — Performance bonds — Mortgage lien (on project or other property) — Assignment of securities or other collateral — Restrictions on assignment of developer agreement — Withholding of permits or other approvals — Personal guarantee 26 0 EHLERS LEADERS 1 R PURIC FINANCE 27 Best Practices —Don't Forget the Assessor Assessor needs to be part of your TIF team — Seek opinion on probable value — don't rely on developer's representation or construction cost estimate Income approach valuation Subsidized rents Tax- exempt personal property — Review annual TID reports for errors, omissions and to avoid big surprises at tax collection time 0 EHLERS LEADERS 1 R PURIC FINANCE 28 Best Practices - JRB Relations View the JRB as partners in the process — Don't let the statutorily required notice be the first notification of your TID creation or amendment plans — Use the JRB organizational meeting to gauge support and hear concerns — Submit your required annual reports — Consider annual JRB update briefing — Seeing more formal and informal development of TIF approval standards among overlapping taxing jurisdictions 0 EHLERS LEADERS 1 R NOLIC MAKE Best Practices - JRB Relations Understand TID impacts on overlapping jurisdictions — Counties and technical colleges impacted in the same fashion as cities and villages: If the but for test is satisfied, no loss in tax revenues Continue to receive net new construction levy limit benefit Receive levy limit bump at TID closure (currently 50% of value) Receive pro -rata share of any TID increment remaining at TID closure after satisfaction of all project costs — Schools are impacted differently... 29 0 EHLERS LEADERS 1 R NOLIC FINANCE Best Practices — Understanding School Impacts How does the TO impact school district revenues and taxlevy? Start Here - Wl school finance can be counter-intuitive. 30 0 EHLERS LEADERS 1 R NOLIC FINANCE Best Practices — Understanding School Impacts During the life of a TID — No direct impact on taxes, state aid, revenue authority, etc. (TID- Out) — Indirect -may increase population and student enrollment — Indirect - helps to sustain (or grow) non -TID tax base As a TID is Closed — Increases tax base — Impacts (reduces) tax rate (one year)* — Impacts (reduces) state aid (one year delay) — Potential for receiving TIF residual funds (one time revenue) *Typical — need to validate local impact 31 0 EHLERS LEADERS 1 R PAUL FINANCE Best Practices — Understanding School Impacts • The Numbers (Stale Aid): — Need to run local impact. Adjust the current aid worksheet to reflect increase to property valuation — Will decrease aid for most districts (offset by increased property tax collection) — An example district went from $8.3 million in aid to $7.9 million — That's a $400,000 reduction — Actual aid impact delayed one year "Special Adjustment Aid" could further delay impact 32 0 EHLERS LEADERS 1 R PAUL FINANCE 33 Best Practices — Understanding School Impacts The Numbers (Available Revenue): — No impact The Numbers (Tax Levy and Tax Rate) — The first year, no increase to levy but a reduction to the tax rate (higher valuation) — The second year, aid is reduced and tax levy increases (perceived tax levy/rate increase ?) (Example district increases levy by $400,000) — But, over the two years (and beyond), tax rate is likely flat meaning no LIT Tax Rate impact of TID closure 0 EHLERS LEADERS 1 R PAUL FINANCE 34 Best Practices — Understanding School Impacts The Numbers (Know Your District's Numbers!): — Prudent to know your local school district impact to gain local school district support for your project — Often, TID's will expire in 10 or 20 years — Very complicated (if not impossible) to predict future local tax base, state tax base, school enrollments, future state budgets, etc. (and then overlay the future impact of the TID) — Run the impact as if it all happens today. Gives a good "degree of magnitude" or "steady state" impact 0 EHLERS LEADERS 1 R PAUL FINANCE 35 TIF Under Scrutiny? Currently at least seven pieces of introduced TID related legislation — While aspects of most are beneficial, trend seems to be to use opportunity to place restrictions on local control and judgment — Perception that deals are being made that are detrimental to taxpayers Proposed Legislative Council study on TIF Local governments can use TIF best practices to demonstrate financial prudence and taxpayer accountability 0 EHLERS LEADERS 1 R NOLIC MAKE Questions? 361& 0 EHLERS LEADERS 1 R PURIC FINANCE Todd Taves, CIPFA Senior Financial Advisor (262) 796 -6173 ttaves a,ehlers- inc.com Keith Brightman Financial Advisor (262) 796 -6178 kbrightmanAehlers- inc.com 37 EHLERS LEADERS IN PU91.1C FINANCE Michael C. Harrigan, CIPFA Senior Financial Advisor (262) 796 -6165 mharrigan a�,ehlers- inc.com FREERS LEADERS IN PUBLIC FINANCE Tax Increment Financing Basics Todd Taves, Senior Municipal Advisor /Principal May 23, 2016 -Fl-FE Overview TIF Program History What is Tax Increment Financing? Basic TI F rules Approval process 0 EHLERS LEADERS 1 R PURIC FINANCE TIF Program History • Original program created by the State Legislature in 1975 — Recognized the challenges associated with stimulating economic development — Means to require cost participation amongst all taxing jurisdictions that ultimately benefit from increased property values 0 EHLERS LEADERS 1 R PURIC FINANCE TIF Program History • Utilization — 1,908 districts have been created since 1976 — 765 districts have been dissolved — 1,151 active TI Ds currently in existence — 426 communities in Wisconsin have used TIF 4 0 EHLERS LEADERS 1 R NOLIC MAKE TIF Program History IIU 100 90 80 70 fi(I 50 40 30 20 10 Annual TO Creation e $1 11,01 el $1 -' ?e" e ? e e � �,I? I�eI�e �%,�`,� %, El 0 EHLERS LEADERS 1 R PURIC MAKE TIF Program History Town �5. 60.85): 'Mixed-Use, Industrial. C Environmental: 1s I egWit ve Exceptions: 8 0 EHLERS LEACEn M NOLIC F NAKE 7 What is Tax Increment Financing? An economic development financing too Community undertakes projects to attract and facilitate development and/or redevelopment, such as: — Installation or rehabilitation of public infrastructure — Acquisition of land — Payment of development incentives Community investment is repaid over time by capturing the increased property tax revenue generated within the District 0 EHLERS LEADERS 1 R PURIC FINANCE What is Tax Increment Financing? Key acronyms: — TIF =Tax Increment Financing (the tool) — TID =Tax Increment District (where the tool is used) How it works.... 8 0 EHLERS LEADERS 1 R PURIC FINANCE What is Tax Increment Financing? t s d L Soundafy of TO area estahllshed by Community Base Value of A reAestablished and certified by ®DR 9 How a TID Functions and Generates Revenue 1G 4r,1,111 9.M.(14 °.,DR UM 7MM EAM MON Increment Growth IMON ri+}u p��m 6.9 IN ! . a ❑ 0 ❑ ❑ J ❑ ❑ ❑ ❑ ❑ f ❑ ❑ ❑ G 4 0 ❑ a ¢ 4 ❑ H q t% rr N N W N N N W N N. h N. h N N N 1 gau ftue 1 incremel Base value is "frozen" Apprtclatlanls added tathR Increment ualue. 0 EHLERS LEADERS 1 R PURIC RNAKE 10 Basic TIF Rules —The "But For" Test Key underpinning of the TIF program is referred to as the "but for" test — "But for" the use of TIF, the proposed development would not occur: as proposed within the same time frame with the same level of value Joint Review Board must make a "but for" finding before the TO creation process can occur 0 EHLERS LEADERS 1 R PURIC MAKE Basic TIF Rules — Determining Boundaries Properties must be contiguous (whole parcels only) Equalized valuation test — Equalized value of all real and personal property proposed to be included in the TID ( "base value ") may not exceed12% of the city's total equalized value — The incremental value of any existing TIDs is also considered (base value of proposed TID plus the incremental value of existing TIDs may not exceed 12 %) 0 EHLERS LEADERS 1 R PURIC MAKE Basic TIF Rules — Determining Boundaries Creation Date Total EV (TID In) 12% Test Total Existing Increment Projected Base of New or Amended District 5/23/2016 Valuation Data Currently Available 2015 3,987,273,400 478,472,808 105,720,500 86,660,188 Percent Change 1.00% Valuation Data Est. Creation Date 4,027,146,134 478,472,808 105,720,500 1.00% 87,526,789 Total Value Subject to 12% Test 192,380,688 193,247,289 Compliance 12 EWERS t[;�F WIN PALIG FIN AKF 13 Basic TIF Rules — District Types Mixed Use 20 Years Suitable for a combination of Max 35% industrial, commercial and (Plus Density residential uses Requirement) Industrial 20 Years Zoned and suitable for industrial Not Allowed development as defined in Wis. Stats. § 66.1101 Blighted Area 27 Years Blighted as defined in Wis. Stats. § Not Allowed 66.1105(2)(a)1, Conservation or 27 Years In need of conservation or Not Allowed Rehabilitation rehabilitation as defined in Wis. Stats. § 66.1337(2m)(a) 0 EHLERS LEADERS 1 R PAUL FINANCE 14 Basic TIF Rules — Expenditure Period Maximum time period TID can incur expenses related to project plan Five years shorter than the maximum un- extended life — 15 years for a TID with a 20 year maximum life — 22 years for a TID with a 27 year maximum life Certain payments can made beyond expenditure period — Project cost debt service — Repayment of advances or other liabilities, such as development incentives 0 EHLERS LEADERS 1 R PURIC FINANCE Basic TIF Rules — Eligible Project Costs • Public works & improvements • Financing costs • Real property assembly costs (land write -down) Professional service costs Relocation costs Organizational costs Pro -rated costs of utility infrastructure Cash grants (requires developer agreement) Administrative costs i Environmental remediation Contribution to Community Projects within' /2 mile of Development Authority or district Redevelopment Authority 15 EHLERS LEADERS 1 R PURIC MAKE 16 Basic TIF Rules — Prohibited Project Costs Costs of constructing or expanding administrative, police, fire, community, recreational, library and school buildings Costs of constructing or expanding facilities if similar facilities are financed only with utility user fees General government expenses unrelated to the TIF district Costs associated with newly platted residential development (except in Mixed Use districts where the density test has been met) 0 EHLERS LEADERS 1 R NOLIC FINANCE 17 Basic TIF Rules — Maximum Life A district may remain open until the earliest of the following occurrences: — The district's maximum life is reached, which varies by type of district (either 20 or 27 years) — When total tax increments collected are sufficient to pay all of the district's project obligations — City determines to close the district prior to recovering project costs 0 EHLERS LEADERS 1 R PURIC FINANCE 18 Basic TIF Rules — Maximum Life Extensions Four year extension — Available for blighted area and in need of rehabilitation or conservation TIDs created on or after October 1, 1995 but before October 1, 2004 Three year extension — Available for all TIDs created on or after October 1, 2004 — Available for any TID eligible to collect increment as part of the 2014 levy (Wisconsin Act 258 —Tech College Adverse Impact) Extensions require Project Plan amendment, but JRB must approve if an independent audit demonstrates requirement for additional years to recover project costs 0 EHLERS I &In ;; I .il d I• I IN.Aii 19 Basic TIF Rules — Maximum Life Extensions One year extension for improvement of housing stock — Any TID that has recovered its project costs may be kept open one additional year even if it has reached its maximum life — Requires adoption of a resolution by Council specifying how it will use the funds to improve housing stock 75% of the funds must be used for housing that costs a household no more than 30 percent of the household's gross monthly income Costs can be incurred anywhere in City — Resolution must be sent to DOR, but no other approvals required 0 EHLERS LEADERS 1 R PURIC FINANCE 20 Basic TIF Rules — Maximum Life At closure: — Remaining funds distributed proportionately to taxing jurisdictions, OR — Any unreimbursed project costs become general liability of the municipality 0 EHLERS LEADERS 1 R PURIC FINANCE 21 Basic TIF Rules — Project Plan A detailed document explaining the purpose of the TID, the projects to be undertaken and how they will be paid for Must be adopted by the Plan Commission and Common Council 0 EHLERS LEADERS 1 R PURIC FINANCE 22 Basic TIF Rules— Project List of kind, number and location of proposed public works or improvements Plan Proposed changes of zoning ordinances, master plan, map, building codes and ordinances Economic feasibility study s List of estimated non - project Detailed list of estimated project costs costs s Proposed method of relocation Description of the methods of of any persons to be displaced financing &time when incurred s Explanation of how District Map of existing uses and creation promotes orderly conditions within the district development Map showing proposed Opinion from city attorney that P improvements and uses plan is complete 0 EHLERS LEADERS 1R PURIC FINANCE 23 Basic TI F Rules — Amendments Territory amendment — May add and/or subtract property — Must be in compliance with 12% test to add territory — Limit of four allowed during life of district — One additional amendment permitted for any TID eligible to collect increment as part of the 2014 levy (Wisconsin Act 258 — Tech College Adverse Impact) Plan amendment — Used to amend list of projects to be undertaken — No limit to number allowed (except maximum expenditure period) 0 EHLERS LEADERS 1 R PAUL FINANCE 24 Basic TI F Rules — Amendments Allocation amendment — Allows a successful TID to share excess increment with a struggling TID — Recipient TID must be a blighted area TID, a TID in need of conservation or rehabilitation, have been declared distressed or severely distressed, or have project costs related to creation or rehabilitation of low cost housing, or remediation of environmental contamination TID amendments must follow the same process used to create a TID 0 EHLERS LEADERS 1 R PURIC MAKE Approval Process — Required Steps Feasibility study Initial Joint Review Board meeting Plan Commission meeting — Public hearing — Approve project plan and boundaries Common Council approval Final Joint Review Board meeting Submittal to Dept. of Revenue/State review & certification 25 0 EHLERS LEADERS 1 R PURIC FINANCE 26 Approval Process — Creation vs. Valuation Date Creation date is the date that the resolution creating the TID is approved by the Common Council — Creation date is first date that project costs can be incurred The valuation date of a TID is always January 1 as follows.. — If creation date is prior to October 1st, valuation date is January 1 st of that year — If creation date is on or after to October 1st, valuation date is January 1st of the following year 0 EHLERS LEADERS 1 R PURIC FINANCE 27 Approval Process —JRB and Role Joint Review Board (JRB) — School Board President or designee — County Executive, County Board Chair or designee — City Manager or designee — Tech College Director or designee — Public member (selected by other four) Other taxing entities, such as lake districts, sewerage districts, etc. are not represented on the JRB, but must be furnished with copies of all notices and documents 0 EHLERS LEADERS 1 R PURIC FINANCE 28 Approval Process —JRB and Role JRB has power to make final determination as to whether or not to allow TIF district to be created Cannot alter project plan or boundaries — up or down vote (simple majority) Decision must be made in accordance with specific statutory criteria (principally, "but for ") JRB has 45 days to act following receipt of the creation resolution 0 EHLERS LEADERS 1 R PURIC MAKE Questions? 29 1& 0 EHLERS LEADERS 1 R PURIC FINANCE FREERS LEADERS IN PUBLIC FINANCE Todd Taves, CIPMA Senior Municipal Advisor/ Principal (262) 796 -6173 ttaves a,ehlers- inc.com e71 30 Tax Incremental Financing Policy and Application What is TIF? Tax Incremental Financing (TIF) is a special funding tool available to local municipalities that spurs economic development which otherwise would not occur. When a Tax Increment District (TID) is created property owners within the district continue to pay the same property tax rates as those outside the district. The difference is that tax collections, over and above the "base value are placed into a special fund that is used to pay for project costs. Once all costs incurred by the creation of the TID are recooped by the additional tax increment created the TID is closed TIF Closed and the additional property taxes created are shared 1 by all taxing entities. The use of TIF varies from Purpose; The purpose of this Policy is to articulate to existing or potential businesses the City of Oshkoshs desire to promote economic development that is consistent with the City's Comprehensive Plan and provides a community benefit that will ultimately be shared by all taxing entities (City, School, Technical College, County, and State) impacted through the establishment of Tax Increment District (TID). Notwithstanding compliance with any or all of the guidelines herein, the provision of TIF assistance is a policy choice to be evaluated on a case -by -case basis by the Common Council. The burden of establishing the public value of TIF shall be placed upon the applicant and the application must substantially meet the criteria contained herein. City Administration reserves the right to bring any TIF proposal forward for Council consideration. Meeting statutory requirements, policy guidelines or other criteria listed herein does not guarantee the provision of TIF financial assistance nor does the approval or denial of one project set precedent for approval or denial of another project. TIF Authority. The authority and regulations for Tax Incremental Financing and the establishment of Tax Increment Districts are found in Wis. Stats. 66.1105. The City of Oshkosh reserves the right to be more restrictive than provided under the statutes. project to project and district to district. In some cases, the City uses TIF to promote redevelopment TIF Created of older parts of the community. In other cases the Tax Increment Created City uses TIF to create industrial parks through v Used i`or Projeet Crests land acquisition and construction of infrastructure. w" Base PropertyTax 0 In both cases, increased property tax collections are used to pay down debt service associated with project costs. The following outlines the City's Time policy regarding TIE Purpose; The purpose of this Policy is to articulate to existing or potential businesses the City of Oshkoshs desire to promote economic development that is consistent with the City's Comprehensive Plan and provides a community benefit that will ultimately be shared by all taxing entities (City, School, Technical College, County, and State) impacted through the establishment of Tax Increment District (TID). Notwithstanding compliance with any or all of the guidelines herein, the provision of TIF assistance is a policy choice to be evaluated on a case -by -case basis by the Common Council. The burden of establishing the public value of TIF shall be placed upon the applicant and the application must substantially meet the criteria contained herein. City Administration reserves the right to bring any TIF proposal forward for Council consideration. Meeting statutory requirements, policy guidelines or other criteria listed herein does not guarantee the provision of TIF financial assistance nor does the approval or denial of one project set precedent for approval or denial of another project. TIF Authority. The authority and regulations for Tax Incremental Financing and the establishment of Tax Increment Districts are found in Wis. Stats. 66.1105. The City of Oshkosh reserves the right to be more restrictive than provided under the statutes. Tax Incremental Financing Policy and Application Basic Provisions: As a matter of policy the City of Oshkosh will consider using Tax Incremental Financing to assist private development in those circumstances where the proposed private project shows a demonstrated financial gap and that the financial assistance request is the minimum necessary to make the project feasible. The developer is expected to have exhausted every other financial alternative(s) prior to requesting the use of TIF, including equity participation, other federal and state funds, bonds, tax credits, loans, etc. It is the intent of the City to provide the minimum amount of Tax Incremental Financing assistance to make the project viable and not solely to broaden a developer's profit margin on the project. Prior to consideration of a Tax Incremental Financing request, the City will undertake (at the requestor's cost) an independent analysis of the project to ensure the request for assistance is valid. In requesting TIF assistance, the developer must demonstrate that there will be a substantial and significant public benefit to the community by eliminating blight, strengthening the economic and employment base of the City, positively impacting surrounding neighborhoods, increasing property values and the tax base, creating new and retaining existing jobs, and implementing the Comprehensive Plan. Each project and location is unique and therefore every proposal shall be evaluated on its individual merit, including its potential impact on city service levels, its overall contribution to the economy and its consistency with the Comprehensive Plan, Strategic Plan or other community planning documents. Each project must demonstrate probability of financial success. "BUT FOR" TIF The fundamental principle and that which the City must determine through information provided by the developer is that the project would not occur "but for" the assistance provided through Tax Incremental Financ- ing. The burden is on the developer to make this case to the City and not the City to make this case for the developer. Should this "but for' determination not be made, Tax Incremental Financing for the project cannot move forward. TIF Objectives: The City will consider utilizing Tax Incremental Financing to meet the following basic objectives: 1. Stimulate and continued revitalization of the central city and downtown area by: a. Improving infrastructure; b. Creating a variety of housing opportunities to increase the number of downtown residents; c. Preventing or eliminating slums and blighting conditions; d. Constructing mixed -use developments; e. Attracting desirable businesses and retaining existing businesses. f. Encouraging development projects that enhance the streetscape and pedestrian experience and improve the vitality of the downtown area by adding interest and activity on the first floor of mixed- use buildings. 2. Promote efficient usage of land through redevelopment of blighted areas. 3. Strengthen the economic base of the City and support Economic Development. 4. Stabilize and upgrade targeted neighborhoods. 5. Create and retain family supporting jobs in the City. b. Increase property values and tax revenues. 7. Leveraging the maximum amount of non -city funds into a development and back into the community. 2 Tax Incremental Financing Policy and Application What Development is Eligible? The type of development that the City will consider TIP funding includes: 1. Business development (attraction, retention, expansion). TIF assistance will be evaluated on its impact on existing local markets. 2. Mixed -use developments that creatively integrate commercial and retail projects into a residential development. 3. Revitalization of historically significant or deteriorated buildings. 4. Projects that promote central city office and retail development. 5. Projects that promote neighborhood stabilization or revitalization. 6. Projects that promote industrial development. 7. Projects consistent with approved TIF Project Plans. 8. Projects that involve environmental clean -up, removal of slum and blighting conditions. 9. Projects that contribute to the implementation of other public policies, as adopted by the city in its strategic plans such as promotion of high quality architectural design, energy conservation (i.e. LEER, Energy Star, etc), green infrastructure, etc. The Rivers Assisted Living Facility was completed in 2011 within TID #21 also known as the Fox River Corridor Project. Basler Turbo Conversions is located in TID #8, South Aviation Park, which was developed in 1991 and is approximately256 acres. What Development is Ineligible? The City will not favor use of TIF funding to help support the following types of development. 1. Speculative office development without one or more anchor tenants. 2. Relocation of offices, retail and/or commercial uses for purposes other than retaining or substantially expanding the business. 3. Office and retail development outside of the central city unless part of a city owned business or industrial park. 4. Stand alone residential development projects unless limited by site and environmental conditions beyond which make the project financially infeasible. 5. Projects not consistent with the Comprehensive. Plan. 3 Tax Incremental Financing Policy and Application Eligible Costs: TIF eligible expenditures are defined by Section 66.1105(2)(e) of Wisconsin Statutes, which the City of Oshkosh may further limit on a project by project basis. The following are typical eligible costs. 1. Capital costs, including actual costs of: a. Construction of public works or improvements; b. Construction of new buildings, structures, and fixtures; c. Demolition, alteration, rehabilitation, repair or reconstruction of existing buildings, structures and fixtures, other than historic buildings and structures. d. Acquisition of equipment to service the district, e. Restoration of soil or groundwater affected by environmental pollution; and f Clearing and grading of land. 2. Real property assembly costs. 3. Professional service costs (planning, architectural, engineering, and legal). 4. Relocation costs. 5. Environmental remediation. 6. Organizational costs (environmental and other studies, publication and notification costs). 7. Development Incentives in the form of loans or grants. Criteria for TIF Assistance: All of the following financial criteria must be met in order to be considered for TIF assistance. 1. Equity Requirement. Developers must provide a minimum 15% equity of total project costs. Projects that exceed the 15% equity requirement will be looked upon favorably by the City. Equity is defined as cash or un- leveraged value in land or prepaid costs attributable to the project. TIF shall not be used to supplant cash equity. 2. Maximum Increment Use. For loans, no more than 75% of the net present value of the tax increment generated by a private development shall be made available to the project. For "pay -go" supported projects up to 90% of the generated annual tax increment can be made available if a financial need is demonstrated and there are no other public infrastructure projects planned in the district. 3. Payback Period. Payback period for loans will match the amortization period but in no case will exceed the statutory life of the district. Preference will be given to projects with payback periods of 10 years or under. 4. TIF Cap. The total amount of TIF assistance should not exceed 25% of total project costs. This limitation may be waived if the project involves redevelopment of existing structures or the assembly and clearance of land upon which existing structures are located. 5. Self- Supporting Projects. Each project requesting TIF assistance should generate sufficient tax increment to cover the requested TIF assistance and a portion of any public infrastructure costs within the district. a. No increment from other private development projects within the district may be used to supplement another project's inability to generate sufficient tax increment to cover project costs. 6. Land Assembly Cap. TIF assistance for land /property assembly costs will not be provided in an amount exceeding 10% of the fair market value of the land. The fair market value will be determined by an independent appraiser contracted by the City with cost of appraisal paid for by developer. 4 Tax Incremental Financing Policy and Application Criteria for TIF Assistance continued from previous page... 7. Internal Rate of Return. The amount of assistance provided to a developer will be limited to the amount necessary to provide the developer a reasonable rate of return on investment in the project and the subject site. A developer's return on equity, return on cost or internal rate of return will be based on current market conditions as determined by the City or City's financial advisor. In no case shall the internal rate of return exceed 30 %. 8. Taxable Increase. The project should result in an increase in taxable valuation of at least 20% upon project completion. Policy Criteria In addition to meeting all of the above financial criteria, projects must accumulate at least 50 points based on the following policy criteria. Points can range from 0 to the maximum shown below in each category: Criteria Maximum Points 1. Attracting, retaining or expanding businesses for the purpose of improving the City's economic base. 15 a. Documentation of employment or financial projections must be provided by the party making the request and will serve as the basis for the agreement. 2. Projects that directly implement specific recommendations of the City's strategic planning 15 documents such as the Comprehensive Plan, Downtown Action Plan, Riverwalk Plan, Vision Report, Consolidated Plan, Stortnwater Plans, etc. 3. Projects involving retail development that is targeted to encourage an inflow of customers from outside the city that result in exported goods, or that provide services or fill retail markets that 5 are currently unavailable or underserved in the City. 4. Presence of extraordinary development /redevelopment costs such as: a. Remodeling/Rehabilitation /Demolition b. Environmental Remediation 20 c. Capital purchases d. Facility expansion e. Public infrastructure 5. Proposed employment potential. a. Number of new employees. b. Skill and education levels required for the jobs. c. Range of salary and compensation rates for the jobs as compared with the median income level for the community. 10 d. Cost of public assistance per job. e. Potential for executive relocation. 6. Enhance the streetscape and pedestrian experience. 5 7. Historic Preservation. Preservation /rehabilitation of a locally significant historic structure. 5 8. Provides direct benefit to distressed areas through blight elimination. 15 9. Quality of development and overall aesthetics (architectural, site design, landscaping, etc.) 5 beyond that which is minimally required by the Zoning Ordinance. 10. Higher standards of Building Design, Materials, and Energy Efficiency such as meeting 5 LEED certification, Energy Star, etc. Tax Incremental Financing Policy and Application Process of TIF Approval: Tax Increment District creation requires following statutory prescribed timelines that include notification to the overlying taxing jurisdictions (i.e. public school district, technical college, county, city), property owners within the district, and published meeting notification in the newspaper. Ultimately the City's Plan Commission, Common Council, and Joint Review Board all must approve the TIF creation request. 1. A pre - application meeting is held between the developer and the City. 2. A Tax Incremental Financing Application is submitted by the developer to the City. 3. The City will review the Application and determine completeness and whether the proposed project is eligible under the City's policy and statutory requirements. 4. An analysis of the TIF Plan and financial proformas will be conducted by city staff and /or outside consultants. 5. Within ninety (90) days of receipt of a completed application staff will schedule a public hearing before the Plan Commission on the Project Plan and District Boundaries. If approved by the Plan Commission, the Project Plan and recommended boundaries will be sent to the Common Council for review. 'There is a minimum 14 day wait from the public hearing to Council review. 6. The Common Council may approve or deny the proposal to create the Tax Increment District. The Common Council may also adjust the boundaries (retraction only) of the proposed district from that which was recommended by the Plan Commission. If approved, the plan is forwarded to the Joint Review Board to make the final determination that the development will not proceed "but for" the use of TIF. 7. If approved, a Development Agreement is drafted and negotiated between the City and Developer. 8. Once general agreement has been reached on the terms of the Development Agreement, it will require approval by the Common Council. 9. Execution of the Development Agreement between the City and Developer. Structure for Tax Incremental Financing Assistance: 1. Tax Incremental Financing assistance will be provided by the City on a "pay -go" note method or via bond proceeds. Requests for up -front financing may be considered on a case -by -case basis if increment generation is sufficient to meet initial financing and debt service costs and is not the first dollars spent on a project. 2. For `pay -go" structured projects, the project owner shall agree to pay all other outstanding City of Oshkosh property tax bills prior to disbursement of any pay -go payments by the City. 3. No Mortgage Guarantees. The City will not provide mortgage guarantees. 4, Personal Guarantee. The City will require a personal guaranty for receiving up front TIF assistance. Amount and form shall be acceptable to the City. 5. The property owner shall agree not to protest to the Board of Review or Circuit Court the Assessor's determination of the property value for the properties for which the grant is requested. C Tax Incremental Financing Policy and Application Structure for Tax Incremental Financing Assistance Continued from previous page... 6. The City will retain a maximum of 10% of any tax increment received from the project to reimburse for administrative costs. Until such time as the project generates positive tax increment, the City will charge an administrative fee to the developer to partially offset the cost of record keeping, report preparation, and accounting. 7. When the project is intended as a for -sale development (i.e., office, retail or residential condominiums), the developer must retain ownership of the overall project until final completion; provided, however, that individual condominium units may be sold as they are completed. For all other projects, the developer must retain ownership of the project at least long enough to complete it, to stabilize its occupancy, to establish the project management and to initiate payment of taxes based on the increased project value. 8. Projects receiving assistance will be subject to a "look back' provision. The look back mandates a developer to provide the City or its financial advisor with evidence of its annualized cumulative internal rate of return on the investment (IRR) at specified periods of time after project completion. The IRR shall be calculated with equity, revenues, and expenses in accord with generally accepted accounting principles. When the developer owns the subject property and rents space to tenants, supporting documentation shall include certified records of project costs and revenues including lease agreements and sales on a per square foot basis. If the records indicate that the developer has received a higher return on equity, a higher return on cost, or a higher internal rate of return than originally proposed to the City at the time of development agreement, the developer and the City may split, on a 50150 basis, the increase above the originally projected rates of return. Terms of any split will be negotiated in a Development Agreement. When the subject property is a for -sale development and the IRRI cannot be completed, the developer is to provide financial data after the project is completed. This shall include a calculation of profit on total development costs minus the TIF assistance. If the financial records indicate that the developer has received a higher return on equity, a higher return on cost, or a higher internal rate of return than originally contemplated at the time of development agreement approval, the developer and the City may split, on a 50150 basis, any increase at or above original projected rates of return. Terms of any split will be negotiated in a Development Agreement. 9. Exceptions to TIF Policy. The City reserves the right to amend, modify, or withdraw these policies or require additional statements or information as deemed necessary. Any party requesting waiver from the guidelines found herein or on any other forms provided for TIF assistance may do so on forms provided by the City with the burden being on the requestor to demonstrate that the exception to these policies is in the best interests of the City. 7 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: Mailing Address: _ Primary Contact #: E -mail: Attorney: Cell #: FAX #: Legal Entity: Individuals) joint Tenants Tenants in Common Corporation LLC Partnership Other. If not a Wisconsin corporation /partnershipfLLC, state where organized: Will a new entity be created for ownership? Yes No Principals of existing or proposed corporationlpartnershipfLLC and extent of ownership interest. Name: Address: Title: Interest: 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 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 If yes, please furnish details: Tax Incremental Financing Policy and Application Overall Project Summary and Objectives: Current and Proposed Uses: Description of End Users: Describe any zoning changes that will be needed: Property Summary: Parcel /Land Area: SF Building Area: SF # of Dwelling Units: # of Stories: # of Parking Spaces: Identify any other approvals, permits or licenses (i.e. Liquor License, Health Department, etc): Describe briefly what the project will do for the property and neighborhood: Tax Incremental Financing ' Policy and Application Project/ Property Summary: Project Timetable Date Final Plan /Specification Preparation: Bidding and Contracting: Firm Financing Approval: Construction /Rehabilitation: Landscaping /Site Work: Occupancy /Lease Up: Development Team Developer: Architect: Surveyor: Contractor: Other Members: Describe Team expertise and experience in developing similar projects: Other current Team projects in development: Financial ability of the applicant to complete the project: Full and part -time jobs to be created by the proposed project including estimated salary: ?rofessional Studies darket Studies: Applications for commercial and residential projects must include a comprehensive market tudy. The market study must identify target markets, analysis of competition, demographics, market rents, etters of intent /interest from prospective tenants, or for housing developments, sale prices or rental rates of :omparable properties. kppraisal: All projects that involve the transfer of land must include a recent appraisal. Projects that include and as a form of equity or collateral must also submit a recent appraisal. The appraisal must value the property 'as is ", and the impact on value must be considered for such items as demolition, environmental remediation, .elocution of utilities, lease buy -outs, and other work necessary to make the site developable. The property oust be valued assuming that the highest and best use is the proposed use. 10 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 Land Acquisition: Demolition: Environmental Remediation: Site Clearance and Preparation: Soft Costs/ Fees: Soft Cost Contingency: Hard Construction Costs: Total Project Costs: Amount ($) $ per SF of Building Area Sources of Funds % of total project costs Equity Developer Equity: $ % Other Equity:( } $ % Total Equity: $ % Loans Rate Term Construction Financing: $ % rnos. Permanent Financing: $ % yrs. % TIF Assistance $ % Other: ( } $ % Total Sources of Funds $ 100% Financing Source Amount Equity: Loans 1: 2: 3: 4: Terms Years /Interest 11 Contact Information Tax Incremental Financing Policy and Application Detailed Pro Forma (must correspond to line items for Uses of Funds on previous page) Land Acquisition $ Demolition $ Site Clearance and Preparation Infrastructure $ Utilities /removal $ Utilities /relocation $ Utilities /installation $ Hazardous Materials Removal $ Other( ) $ Total Site Clearance and Preparation Soft Costs /Fees Project Management ( %) $ General Contractor { %) $ Architect /Engineer ( %) $ Developer Fee ( %) $ Appraisal $ Soil Testing $ Market Study $ Legal /Accounting $ Insurance $ Title/Recording/Transfer $ Building Permit $ Mortgage Fees $ Construction Interest $ Commissions $ Marketing $ Real Estate Taxes $ Other Taxes $ Other( ) $ Other ( ) $ Sub -total Soft Costs/Fees $ Soft Cost Contingency $ 12 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 formal 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 TIP 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 kith 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 1 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. 13 Tax Incremental Financing Policy and Application Revenue Projections - Rental Project Expenses Maintenance & Repairs Year I Year 2 >>Year I1 Income rent per sf (or avg.) $ $ $ Commercial Rent $ $ $ Commercial Expense Recoveries $ $ $ Residential Rent $ $ $ Other Revenue ( } $ $ $ Gross Potential. Income $ $ $ Commercial Vacancy % $ $ $ Residential Vacancy % $ $ $ Effective Gross Income (EGI) $ $ $ Expenses Maintenance & Repairs $ $ $ Real Estate Taxes $ $ $ Insurance $ $ $ Management Fee $ $ $ Professional Fees $ $ $ Other Expense { ) $ $ $ Other Expense ( ) $ $ $ Total Expenses $ $ $ Net Operating Income (NOI) $ $ $ Capital Expenses (reserves, tenant improvements, commissions) $ $ $ Debt Service $ $ $ Net Cash Flow (before depreciation) $ $ $ Reversion in Year 10 Year II NOI before Debt & Capital Expenses $ Capitalization Rate % Gross Reversion $ 14 Tax Incremental Financing Policy and Application Revenue Projects - For -Sale Project Gross Sales Revenue Housing Units Unit Type* Number Total Housing Sales: 'affordable units if any Housing Unit Upgrades: Price /Unit $ $ $ $ $ $ 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 $ 15 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 • Overview of private - sector financing • Current and proposed uses • Amount of TIF assistance requested • Description of end users • Summary of increment projections • Project start and end dates • Name of developer and owner • Profitability • Total development costs • Description of public benefits, • Statement regarding why TIF is essential and why the including job creation. "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. 16 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 Notes 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 1 1x17 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. 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 17