05.01 - Req for Tax Abatement-Oppidan, Public Hearing

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Sandy Peine Oppidan Development - Business Subsidy Agreement for Tax Abatement October 30, 2009 Page 2 The maximum abatement term is 15 years if the city, county, and school district all participate. If one or more entities decline the maximum term is 20 years for all participating entities, not just the requesting unit of government. The maximum dollar amount an entity can abate per year for all profits is the greater of $200,000 per year or 10% of its net tax capacity. 3. How much abatement is the developer seeking from the City? The developer is seeking $350,000 (present value /principle) from the City over the next 13 years ($593,000 future value /principle and interest). The abatement will be paid semiannually at 6% interest from the increased taxes paid by the development starting in 2012 through 2024. If the actual market value of the project and the City's local tax rate do not generate the estimated taxes needed to payoff the obligation in 13 years, the City is not obligated to extend the abatement. Likewise, if the market value of the project and the City's local tax rate generate more than the estimated taxes, the obligation will be paid off sooner. It is anticipated that the total taxes paid by the development will be approximately $118,715 /year. The abatement amount is based upon the additional taxes that are expected to be generated from construction of the new facility (just like with TIF) and only this portion of the City's taxes will be utilized to pay the abatement. The taxes on the existing land and building value will not be utilized for payment of the abatement and will be dispersed to the various taxing jurisdictions as usual. It is estimated that the annual abatement amount paid by the City will be approximately $45,600 (principle and interest). 4. What is the abatement going to be used for? The developer will be reimbursed for demolition of the site and public improvements consisting of sanitary sewer, lift station and roadway improvements. The developer will need to provide evidence to the City in the form of paid invoices to document expenditures of this amount. To the extent the expenditures are less than $350,000 the amount and term of the abatement will be reduced accordingly. If the costs exceed $350,000, the City is not obligated to reimburse the developer for anything above that amount. 5. Is the developer required to create any jobs as part of this expansion? Yes. Since they are receiving more than $150,000 in assistance, they are required to conform to the City's Business Subsidy Policy. Pursuant to the City's Policy, they are required to create at least one (1) Full- Time - Equivalent (FTE) position at 175% of the �, State's current minimum wage (inclusive of benefits). The State's current minimum