HomeMy WebLinkAboutMemo - Read Before Packet - 1/15/2013 (7)City of
Fort Collins
MEMORANDUM
DATE: January 14, 2013
TO: Mayor and Councilmembers
THROUGH: Darin Atteberry, City Manager
Mike Beckstead, Chief Financial Officer
FROM: Josh Birks, Economic Health Director
Economic Health Office
300 LaPorte Avenue
PO Box 580
Fort Collins, CO 80522
970.221.6505
970.224.6107 - fax
fcgov.com
RE: RE: ROCKY MOUNTAIN INNOSPHERE — TAX INCREMENT PLEDGE
The memorandum provides additional information based on questions at the January 8, 2013 City
Council work session.
Members of the Fort Collins City Council inquired about the amount of tax increment generated by the
Rocky Mountain Ionosphere (RMI) project at the January 8, 2013 work session. Josh Birks indicated
that the original estimate of tax increment projected was $4.3 million in revenue. However, it was also
stated that actual tax increment collections had not achieve the projected amount. Finally, it was stated
that the North College Urban Renewal Area (North College URA). would have sufficient Tax Increment
Financing (TIF) capacity to meet the pledge of up to $2.8 million in assistance to RMI.
The original estimate of tax increment was based on a projected project cost of $7.1 million; based on
the anticipated construction cost and following the accepted appraisal valuation approach called the
cost -approach. In addition, the estimate assumed the generated increment would reach stabilization in
2010 with 2 percent in annual property value growth.
The 2013 market value, as determined by Latimer County (County), places the value of the RMI
building at $5.3 million. The Finance and Economic Health departments are currently investigating the
difference between the assumed $7.1 million project cost and the actual County value of $5.3 million.
The original estimated TIF revenue of $4.3 million and the revised estimate of $2.8 million are shown in
Table 1. The result is a variance of $1.5 million between the original estimate, prepared in 2009, and the
revised forecast based on current valuation. The variance comes from three differences, as shown in
Table 2:
1. $348,000 is the result of the increment stabilizing in 2012 not 2010 as originally projected;
2. $877,000 is due to the difference in valuation - $5.3 million versus $7.1 million; and
3. $240,000 is due to a more conservative estimate of property value growth — 1 percent annual
growth versus 2 percent.
Despite the variance, the forecast of cash flow for the total North College URA shows sufficient revenue
to cover the TIF pledge to RMI as well as all outstanding obligations.
It is important to note, the pledge of TIF assistance to RMI will not take the form of a check or cash.
The pledge will be credited towards the $5.3 million in principle lent to RMI. The TIF Pledge is also
contingent on RMI refinancing the remaining portion of the loan from the URA with an outside entity
($5.3 loan less $2.8 TIF Pledge — $2.5 that RMI would refinance). RMI will not receive the benefit of
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the TIF pledge unless it refmances the $5.3 million it borrowed from the URA by March 31, 2017.
The URA will then use the TIF revenue as received each year to repay the remaining balance on the
URA loan with the City.
Furthermore, the Redevelopment Agreement between the Fort Collins Urban Renewal Authority
(Authority) and RMI clearly states that the $2.8 million in pledged TIF assistance is intended to offset
specific construction costs, also known as the eligible costs (Section 4.3). Therefore, the amount of the
pledge is subject to the actual, costs incurred by RMI for these eligible costs. Due to the timing of
construction, RMI was able to take advantage of lower labor and materials costs resulting from
constrained economic conditions. As a result,.it is probable that the actual costs may come in lower than
the $2.8 million pledged amount. Staff is working to finalize the actual reimbursable amount.
Table 1
Tax Increment Comparison - Original vs.
Revised
2009
URA Actual and
Estimate
Forecasted
(2%annual
TIF Collections (1%
growth rate)
Annual growth Rate Difference
2009
2010
178,934
178,934
2011
178,934
9,415
169,519
2012
186,091
140,892
45,199
2013'
186,091
144,825
41,266
2014
193,535
147,721
45,813
2015�
193,535
147,721
45,813
2016
201,276
150,676
50,600
2017�
201,276
150,676
50,600
2018
209,327
153,689
55,638
2019�
209,327 -
153,689
55,638
2020
217,700
156,763
60,937
2021�
217,700
156,763
60,937
2022
226,408
159,898
66,510
2023'
226,408
159,898
66,510
2024
235,465
163,096
72,368
2025�
235,465
163,096
72,368
2026
244,883
166,358
78,525
2027�
244,883
166,358
78,525
2028
254,678
169,685
84,993
2029
254,678
169,685
84,993
4,296,595
2,830,908
1,465,687
Table 2
Tax Increment Comparison - Variance Analysis
RMI2 TIF Variance Analysis
Explanation Total
Timing of first full TIF payment
(2010 in the estimate and 2012 actual) 348,452
Building Valuation
($7.1 million in the estimate with a $5.3
million county valuation) 877,357
Assessment Rate Growth Assumption
(2% annual growth rate in the estimate
Ad a 1% annual growth rate in the
URA forecast) 239,878
Total 1,465,687