Title
Gainesville Greens Revised Incentive Request (B)
Explanation
At the May 15, 2006 CRA meeting the developer of the Gainesville Greens project requested an opportunity to address the CRA Board. The developer has experienced a number of unexpected cost increases and has needed to make several changes to the project and requested additional funding. The developer's cost for the project has grown from $39 million to $59 million. In order to keep the project feasible, in addition to reducing his overall profit margin and raising unit pricing, the developer had, at the May 15, 2006 CRA meeting, proposed a number of options, including reducing the number of stories from 12 to 10; replacing the LEED certification with other accepted green building principles; and removing the affordable housing units. With these changes, the developer requested 80% of the increment generated by the project for 20 years. The net present value of the requested incentive in May was $5,538,451 at an 8% discount rate, with projected incentive payments totaling $12,148,550. The developer also provided three options that added the LEED certification and affordable units at higher tax increment percentages.
Following feedback from the CRA and extensive value engineering, the developer has revised his request to 75% of the increment generated by the project for 20 years, including LEEDS certification and ten affordable units, all priced at $200,000. This revised TIF incentive request equals a net present value of $6,346,186 at a 6.75% discount rate and 3% growth rate, with projected future payments totaling $12,516,171. The number of stories (10) and units (144) has remained the same as the request outlined on May 15, 2006. Since the last CRA meeting, the developer has received approval from the DRB to continue the developmental process of the project with the City. The developer has received revised construction pricing based on the approved plans, which has resulted in a 9.88% increase in the cost of the project. Due to this rise in costs the dollar amount of the incentive is higher then what was requested at the May 15, 2006 meeting, although the actual TIF percentage requested has been reduced, as has the developer's profit margin, because the cost of the project has risen. The discount rate on the net present value of the incentive has also decreased, from 8% to 6.75% based on revised financing strategies used by the developer to make the project feasible. The developer will outline his revised request in detail at the meeting.
As background on the RFP process to date, Section 163.380(2) of Florida Statutes provides that interests in real property acquired by a CRA (here the option to purchase Lot 10) may be disposed of in accordance with reasonable disposal procedures, in this case, through the CRA's issuance of a Request for Proposal on June 17, 2005.
Section 163.380(3), Florida Statutes, provides that prior to disposing of interests in real property, notice shall be published soliciting proposals from developers, which are to be submitted within 30 days after publication. Thereafter the CRA shall consider any such submitted proposals and accept such proposals as it deems to be in the public interest.
On September 19, 2005, the CRA considered 4 proposals that had been submitted in accordance with the above procedures and ranked the proposal submitted by Gainesville Greens as number 1, a mixed-use residential project proposal submitted by AMJ as number 2, a condominium/hotel project as number 3, and "City Square," a project that demanded upfront incentives, as number 4.
The original proposal for Gainesville Greens that approved by the CRA included a 12-story, 134 unit project with 14 units to be deed restricted for affordable housing, and a green building following LEEDS building methods for increased energy efficiency. The incentive requested was 60% of the increment generated by the project for 15 years.
Because the incentive request has decreased since the last review by consultant PMG and Associates in May, another review was deemed unnecessary. The developer has provided staff with a new pro forma. Based on the last report from the consultant, which recommended 80% funding for twenty years, CRA staff recommends the CRA approve the developer's revised request of 75% of the increment generated by the project for 20 years, requiring a certified LEED green building level and ten affordable units.
Fiscal Note
All CRA incentives are paid after the project is completed and placed on the tax rolls.
Recommendation
Executive Director to the CRA: 1) Provide 75% of the increment generated by the project for 20 years; and 2) require the base certified LEED green building level and ten affordable units as part of the project.