HomeMy WebLinkAbout7.a. Review of White Funeral Home ProposalCITY OF ROSEMOUNT
EXECUTIVE SUMMARY FOR ACTION
PORT AUTHORITY COMMISSION MEETING DATE: APRIL 6, 1993
AGENDA ITEM: REVIEW OF WHITE FUNERAL HOME
AGENDA SECTION:
MORTUARY PROPOSAL
OLD BUSINESS
PREPARED BY: JOHN MILLER,
AGENDAfM7 A
ECONOMIC DEVELOPMENT COORDINATOR
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ATTACHMENTS: MEMORANDUM FROM JOHN MILLER
APP OVE B .
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Please see attached memorandum.
I will have a verbal report of my continuing discussions with Mr. White and
Mr. Virkiness.
RECOMMENDED ACTION:
None. Discussion item only.
PORT AUTHORITY ACTION:
MEMO
TO: Port Authority Chairperson Dunn
Commissioners Anderson, Carroll, Edwards, McMenomy, Sinnwell, Wippermann
FROM: John Miller, Economic Development Coordinator
DATE: March 26, 1993
RE: Preliminary Financial Analysis of Mortuary Proposal
At the March 16 Port Authority meeting, the members heard a proposal from Jim White of the White
Funeral Homes. Mr. White asked the members to consider the purchase of the Todd Franz property at
13942 South Robert Trail. It was further suggested by Mr. White that the Port Authority deed the
property to the White Funeral Homes, demolish the buildings, and extend utilities to the site. Mr. White
also asked the Port Authority to finance the construction of a funeral home in the approximate amount of
$350,00. White asked for a 25 year payback period.
After the Whites made their proposal, the board members asked me to do a preliminary financial analysis
including sites other than the Franz property.
Attached for your review is a very quick and dirty analysis of three sites. Included are:
• The Todd Franz property at 13942 South Robert Trail. An area of about 1.17 acres.
• The Lund/Thorsen property at the northwest quadrant of C.R. 42 and T.H. 3. An area of
1.17 acres was analyzed.
• Land at the corner of 145th Street West and Burnley Avenue. This site was earlier
considered for the Johnson's professional building. Area of this site is only .89 of an acre
but it is possible that shared parking with the lot on the west side of Burnley could be
arranged.
Here is a review of the project as it might work at three different sites.
SOUTH METRO AUTO BROKERS (TODD FRANZ)
Estimate of Tax Increment
Not in district
No benefit $0.00
Elements of Finance Plan
Cost to Finance
Land (78,000) (1.40)("
$109,200
Improvements(2'
$110,000
Demolition
$ 15,000
Relocation
Commercial
$ 20,000
Residential(')
$ 50,000
Legal
$ 10,000
Building
$350,000
TOTAL TO FINANCE
$664,200
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Repayment
Port Authority $314,200
White Funeral $350,000
TOTAL FINANCED $664,200
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Franz purchased the property about one year ago for $78,000. Land value shows appreciation due
to armory construction and demolition of low value commercial buildings.
`Z' Utilities must be extended to the site
i3' Includes two residential rental tenants
LUND THORSEN SITE
Estimate of Tax Increment
Value of Improvements
EMV Factor
Project Estimated Market Value
Tax Capacity
Current Tax Rate
Estimated Tax Increment
Year of Construction
First Increment Received
Final Increment Received
Term in Years
Total TIF Received
Elements of Finance Plan
Costs to Finance
Land
Improvements
Buildings
Legal
TOTAL TO FINANCE
Repayment
Port Authority
White Funeral
TOTAL FINANCED
MCMENOMY/PORT AUTHORITY/KLEVETER SITE
Estimate of Tax Increment
Value of Improvements
EMV Factor
Project Estimated Market Value
Tax Capacity
Current Tax Rate
Preliminary Tax Increment
Less Kleveter Tax Payment"
Less McMenomy Tax Payment')
Estimated Tax Increment
2
$458,000
.90
$412,200
19,347
115.00%
$ 22,249
1993
1995
2000
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$133,494
$100,000
103,000
350,000
5,000
$558,000
$208,000
350,000
$558,000
$350,000
.90
315,000
15,750
115.00%
18,112
- 564
- 1,482
16,066
Year of Construction
Y
1993
First Increment Received
1995
Final Increment Received
2000
Term in Years
6
Total TIF Received
$96,396
Elements of Finance Plan
Costs to Finance
Land:
McMenomym (105,000)(1.30)
$136,500
Kleveterm (55, 900) (1.30)
72,670
Relocation
McMenomy
61,000
Kleveter
25,000
Demolition
McMenomy
12,000
Kleveter
10,000
Legal
15,000
Building
$350,000
TOTAL TO FINANCE
$682,170
Repayment
Port Authority
$332,170
White Funeral
350.000
TOTAL FINANCED
$682,170
cn 1991 Tax Data
1992 Port Authorit A raisal
PP
From this very simple analysis I think we can agree that a project in the TIF district has considerable
advantage over a project outside the district. In fact we can probably agree, that from a financial point -
of -view, to the following ranking.
1. Bare land project in TIF district.
2. Building acquisition and demolition project in TIF district
3. Bare land project outside TIF district.
4. Building acquisition and demolition project in TIF district.
In looking at the Port Authority cost to purchase land for the funeral home, for example, the bare land
Lund -Thorsen site has a cost of only $203,000 and that includes utilities. The McMenomy-Kleveter site
has a cost of $322,170 and the Franz site a cost of $314,200. Reduce the Lund -Thorsen and McMenomy-
Kleveter sites by an average of $100,000 each for tax increment generated and the difficulty of working
outside the TIF district can be appreciated.
Let me change directions. I've visited with Dan O'Neil regarding the sale of bonds to finance the land
acquisition and building construction. Mr. O'Neil has indicated that it would be difficult to sell bonds
with a 25 year maturity, especially taxable bonds. It was suggested that a 12 year maturity was about the
maximum with interest rates as high as 8 percent.
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It was suggested by Mr. O'Neil that mortgage payments by the White Funeral Home could be amortized
over a 25 year period but with a balloon payment at the end of 12 years. He indicated there was some
risk in this option. By way of scale, financing $664,000 for redevelopment of the Franz property would -
require bond payments of almost $80,000 annually over 12 years.
In conclusion, what options does the Port Authority have?
1. Promote Redevelopment of the Todd Franz Property
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A. Negatives: The land purchase of the Todd Franz property and subsequent transfer to the
White Funeral Homes would be very expensive and there would be little
return on the investment. Assuming the land purchase and site improvement
costs were $515,000, the City would be contributing about 90 cents to the
project for each dollar of increased estimated market valuation. There would
be no benefit to the Port Authority's tax increment funds. In addition, bond
sales and funding of the project would be difficult.
B. Positives: Franz's use of the site is non -conforming in regard to the city's zoning code
and it is not in compliance with the city's comprehensive plan. The used car
lot is also at odds in an aesthetic sense with the adjacent park and community
center. Redevelopment of the site with a less intrusive land use would be a
benefit to the city. In addition a new business would come to Rosemount.
C. Recommendation: A poor option. Too much public investment for return. Assuming an
increase in EMV of $350,000 and taxes paid at five percent of that
value with 20 percent going to the city's general fund, it would take
about 90 years to get the $315,000 investment back. This simple
analysis makes no provision for the present value of money.
Promote Redevelopment of the McMenomy/Port Authority/Kleveter Property
A. Negatives: The land purchase of these properties and subsequent relocations of the
business and Mrs. Kleveter would be very expensive. The acquisition costs,
this time $330,000, would be about 95 cents for each dollar of increased
estimated market valuation.
B Positives: The site is in the TIF district and the preliminary analysis shows about
$96,000 generated by the project. This would reduce land costs to $234,000,
about $80,000 less than the Franz site. The new building would improve the
aesthetics of 145th Street and further redevelopment of the east side of the
downtown.
C. Recommendation: A better option than the Franz site but still not cost effective.
Assuming an increase in EMV of $290,000 (remember the two existing
structures would be demolished) and taxes paid at five percent of that
value with 20 percent going to the city's general fund after 2000 it
would take about 80 years to get the $234,000 investment back. And
again there is no provision for the present value of money.
Promote Development of the Lund -Thorsen Site
A. Ne atives: While land acquisition costs fall to about $100,000, there are not roads or
utilities in the site.There are also storm water issues to be resolved. To
rectify this situation another $100,000 may be required. With regard to land
use we might ask, "Is this a good site for a mortuary?"
B. Positives: No relocation costs, lower legal costs. Greatest tax increment increase as no
existing buildings are demolished. Project would help initiate development of
-the 7.5 acre site by forcing infrastructure improvements.
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C. Recommendation: The best of the three options with the Port Authority paying out only
about $208,000 with tax increment revenue of $133,000. The cost of
getting $350,000 of EMV then is $75,000. Assuming taxes are paid
on the $350,000 increased EMV at five percent of that value with 20
percent going to the city's general fund after 2000 it would take about
20 years to get the $75,000 investment back. And once again this
includes no provision for the present value of money.
CONCLUSION: At this writing I have scheduled a meeting with Mr. White and his builder, Gary
Verkiness. I will raise the issue of:
1. Selecting a site within the TIF District.
2. Using TIF derived from the new building to promote the project by providing
equity.
I will have a verbal update for you at the April 6 meeting.
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