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HomeMy Public PortalAbout2013-10-18c-JeffersonCityButForReport-COVERMEMO MEMORANDUM TO: Drew Hilpert, Interim City Administrator FROM: Tom Kaleko, Senior Vice President Tom Denaway, Analyst DATE: December 30, 2013 SUBJECT: Impact of Revised Project Budget on But-For Determination Report The project budget and reimbursable project costs in the Capital Mall TIF plan have been revised from the original version of the plan on which the But-For Determination report was based. The Developer revised the project budget by reducing the total overall project costs from $36,883,975 to $35,883,975 due to the elimination of the $1,000,000 financing cost line-item previously included. The Developer had previously requested reimbursement of the financing cost line-item of $300,000 from TIF and $300,000 from CID. As a result of the revised budget, we have been asked to provide comment on the potential impact the revision may have on the findings of the original But-For report. The modified budget lowered the total project cost by $1,000,000. The Developer modified the private cost, and the reimbursable amounts, in a manner that removed $1,000,000 in total costs while still maintaining the same ratio of cost sharing between public and private categories. While the revised project budget is $1,000,000 lower, the Developer is still responsible for funding 57.40% of the project cost, with the remaining 42.6% funded by TIF and CID. This sharing ratio is approximately the same as the original TIF plan budget. Impact on But-For Determination The methodology for determining the potential for the project to proceed without assistance is based on evaluating the rate at which project assumptions would have to change in order for the project to reach feasibility. In the “Return Analysis” section of the original report we indicated the project would need to realize a 26% reduction in project cost for the project to be feasible without assistance. The modified project budget does represent a reduction in project costs of approximately 2.7%; an amount significantly below the rate of change necessary for the project to be feasible without assistance. Therefore it is our conclusion that the modified project budget does not impact our finding that the project would not proceed but-for the requested assistance. Impact on Rate of Return with Assistance One of the calculations illustrated in the But-For report is the potential return realized by the Developer with the requested assistance. The potential impact of the modified budget on the rate of return with-assistance should be negligible, as the Developer has maintained the original ratio of public to private funding. Therefore all parties have benefited equally from the reduced project costs, and the internal rate of return with assistance should be largely unchanged from the original calculation. Springsted Incorporated 9229 Ward Parkway, Suite 104 Kansas City, MO 64114-3311 Tel: 816-333-7200 Fax: 816-333-6899 Email: advisors@springsted.com www.springsted.com Jefferson City, Missouri December 30, 2013 Page 2 Impact of Change in PILOT Calculation The Developer updated their projected TIF revenues to account for revised base value amounts. This change resulted in a slightly higher PILOT revenue stream than previously calculated. However, because the requested reimbursement amount had already been determined, the Developer will not be receiving any increased TIF revenue as a result of this change. The Developer may potentially be repaid their reimbursable amount at a slightly faster pace than previously expected, which would positively impact the development’s return with assistance though we feel it is likely to be a negligible benefit. Additionally, because the but-for determination is based on the feasibility of the development without assistance, the revised base value does not impact the but-for determination.