HomeMy WebLinkAbout02-11-19 City Commission Packet Materials - A2. Res. 4991, Approving the Ruh Building as an Urban Renewal ProjectCommission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: David Fine, Urban Renewal Program Manager
SUBJECT: Resolution Number 4991 – A Resolution Approving a Project in
the Bozeman Midtown Urban Renewal District as an Urban
Renewal Project, Making Findings with Respect Thereto and
Approving the Use of Tax Increment Revenues or Tax
Increment Revenue Bonds to Pay, Reimburse or Finance
Eligible Costs Thereof; Approving a Related Development
Agreement; and Making a Reimbursement Declaration
MEETING DATE: February 11, 2019
AGENDA ITEM TYPE: Action
RECOMMENDATION:
Adopt Resolution Number 4991.
RECOMMENDED MOTION:
Having reviewed and considered the staff report, application materials, public
comment, and all information presented, I hereby adopt the findings presented
in the staff report and move to adopt Resolution No. 4991.
BACKGROUND:
The attached Staff Report to the Midtown Urban Renewal Board contains
significant detail about this project and the proposed incentive. Please refer to the
Staff Report for this detail.
The Bozeman City Commission created the Midtown TIF Assistance Program
(the “Program”) in 2017 to support redevelopment activity in the District and
advance the goals of the 2015 Midtown Urban Renewal Plan. The Midtown TIF
Assistance Program supports projects that create significant new taxable value as
well as meeting the five goals of the Midtown Urban Renewal Plan. These goals, as
required by statute, focus on mitigating blighting conditions in the urban renewal
area.
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The Applicant, Life Style Solutions Real Estate, LLC, submitted an application
under the Program for the Ruh Building. The Ruh Building is proposed as a 34,066
square foot, 3-story, mixed-use building with restaurant/retail uses on the ground
floor and 16 residential units on the upper floors. The Midtown Urban Renewal
Board considered the application at their regular meeting on December 6, 2018, and
directed Economic Development staff to negotiate a development agreement with
the Applicant and recommended an incentive award under the Program of
$650,000. On January 3, 2019, the Midtown Urban Renewal Board adopted
Resolution 2019-01 recommending that the City Commission designate the Ruh
Building as an Urban Renewal Project.
Resolution Number 4991 designates the Ruh Building as an Urban Renewal
Project and authorizes the City Manager to sign the proposed Development
Agreement. The Resolution approves using tax increment revenues or proceeds of
tax increment revenue bonds to pay or reimburse Life Style Solutions Real Estate,
LLC, as the Developer of the project for certain eligible costs, including public
infrastructure, service lines, gas and electric infrastructure, demolition of structures,
engineering and design fees for infrastructure improvements, demolition of
structures, impact fees, cash-in-lieu of water rights, and cash-in-lieu of parkland (the
“Eligible Costs”). These eligible costs are detailed in Exhibit “C” of the Development
Agreement. The City is agreeing to reimburse the Developer for the Eligible Costs
shortly after the project receives a Certificate of Occupancy showing its completion.
Due to rising construction costs and ongoing engineering work to ensure that
the streetscape elements meet the design intentions for the corridor set by the
Midtown Urban Renewal Board, Staff recommends the inclusion of a 15%
contingency on the overall incentive amount. Reimbursement will be based on
actual invoices for the cost of constructing the improvements. The $747,500 total
proposed incentive award included in the Development Agreement includes this
15% contingency.
The attached Staff Report includes a detailed analysis of the Ruh Building’s
Midtown TIF Assistance Application.
FISCAL EFFECTS:
The Development Agreement stipulates that the City will reimburse the
Developer for Eligible Costs not to exceed $747,500 including the 15% contingency.
The project is expected to be completed in summer 2020 (Fiscal Year 2021). At that
time, Staff will likely recommend that the City Commission issue tax increment
revenue bonds at that time to reimburse the Developer for the eligible costs. Leland
Consulting created a tax generation model for the Midtown Urban Renewal District.
According to their model, the project would produce net new annual tax revenues of
$76,679, which would allow TIF assistance to be paid back in 10 years (assumes a
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5% interest rate on the advanced amount) for new increment-based payback if
assistance is provided at the staff recommended amount.
ATTACHMENTS:
• Staff Report to the Midtown Urban Renewal Board, Ruh Building mixed-use
project
• Leland Consulting Tax Increment Analysis
• EPS: TIF Request Review, Ruh Building
• Resolution 4991
• Development Agreement (Ruh Building)
• The Ruh Building, Midtown TIF Assistance Application
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Staff Report
To: Midtown Urban Renewal Board
From: David Fine, Urban Renewal Program Manager
Date: December 6, 20181
Subject: Ruh Building mixed-use project
605 N. 7th Ave. (N. 7th Ave and Durston Rd.)
TIF Assistance Program Overview
The Bozeman City Commission created the Midtown TIF Assistance Program in 2017 to support
redevelopment activity and advance the goals of the 2015 Midtown Urban Renewal Plan. The
Midtown TIF Assistance Program supports projects that create significant new taxable value as
well as meeting the five goals of the Midtown Urban Renewal Plan. These goals, as required by
statute, focus on mitigating blighting conditions in the urban renewal area. Each of these five
goals is further refined with particular criteria for a total of sixteen categories that can receive
points. Point awards demonstrate specific compliance with the criteria, but are not the only
factors the board may consider in recommending an incentive award. For example, the board
may also consider new taxable value created by the project, or whether the project would be
feasible without a public incentive. In addition to tax generation, the goals of the Urban Renewal
Plan and the need for assistance, the Board must also make affirmative findings as required by
State Law.
Staff Recommendation
The Midtown Urban Renewal District needs catalyst projects to drive growth in taxable
value and create demand for market-driven redevelopment. The City Commission created the
District in 2006 with the vision of a walkable pedestrian centric area with compact urban
density. Redevelopment projects have focused on reuse of existing buildings, which provide less
potential new tax revenue. Vertical mixed-use buildings add residents to support neighborhood
commercial uses and typically share parking among compatible uses, which allows developers to
1 Reorganized and lightly edited for clarity on February 4, 2019 for the February 11, 2019 City Commission
packet.
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produce building forms with more value per acre. These projects, however, are typically more
difficult to finance and develop. The City Commission structured the Midtown Urban Renewal
Plan and the Midtown TIF Assistance Program to focus on vertical mixed-use buildings. To date,
there have been no significant vertical mixed-use projects in the Midtown Urban Renewal
District. The lack of these projects suggests the market for these projects is untested, which
increases the degree of risk for developers, and makes incentives important for early catalyst
projects. Incentives may create the potential for higher returns to mitigate higher risk, which
may attract investment that would not occur without these incentives.
The Midtown TIF Assistance Program allows the payment of eligible costs of
development to incentivize development that meets the goals of the Midtown Urban Renewal
Plan. The applicant is applying for several eligible cost areas totaling $726,666.90. Staff finds
that the proposed costs are eligible for TIF assistance. Staff scored the application based on the
program criteria. Based on our review and the application materials presented, the project
received 38 of 44 available points. The application scored points toward all five goals of the
Midtown Urban Renewal Plan. The project eliminates blight and advances the District goal of
creating urban density land uses and providing increased housing stock within the District to
drive further commercial development.
Leland Consulting Group (LCG) completed a financial analysis of the project to help staff
evaluate the application for creation of new taxable value. Their report analyzed return on
investment (ROI), estimated payback period for the public assistance and proposed target
metrics for the ratio of private investment to public assistance. LGC bases their analysis on
awarding the applicant’s full assistance request. LCG recommends a ratio of private investment
to public assistance of 8:1 or greater for commercial projects; the ratio for this project is 6.77:1.
Several factors related to public infrastructure mitigate the lower than expected
investment ratio. The public infrastructure burden for redeveloping this small corner parcel is
significant. The Transportation Plan’s designation of Durston Rd. as a minor arterial required an
additional 20 feet of right of way dedication along the Durston Rd. frontage. Since the project
faces two arterials and elected a storefront block frontage, the project requires 12-foot
sidewalks, street trees and tree grates on two frontages. Finally, the alley needed to be paved
and widened to facilitate vehicle and fire access, while eliminating a drive approach on N. 7th
Ave. These features of the project, which are all encouraged by the Midtown Urban Renewal
Plan create significant infrastructure costs on a small lot that can only accommodate a small
building while still proving parking. The project is also in an ideal location, at the corner of
Durston Rd and N. 7th Ave., for catalyzing the larger vision for the Midtown corridor. For these
reasons, staff supports this project despite its lower than anticipate return on investment (ROI).
LCG also created a tax generation model for the Midtown URD. According to their
model, the project would produce net new annual taxes of $76,679, which would allow TIF
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assistance to be paid back in 10 years (assumes a 5% interest rate on the advanced amount) for
new increment-based payback if assistance is provided at the staff recommended amount.
The proposed incentive request is larger than past requests, but is consistent with the
goals of the Midtown Urban Renewal Plan. In order to ensure that the level of assistance makes
the project feasible, but does not provide unreasonable returns to the developer, staff hired
Economic and Planning Systems, Inc. (EPS) to provide a third party assessment of the
development pro forma. This component of the review process is new and was primarily
obtained to assess the reasonableness of each applicant’s incentive request. EPS performed
their analysis using a target discount rate and capitalization rate based on Bozeman market
conditions. Their analysis projects that the project would require incentives between $409,000
and $635,600 to meet the reasonable target rates of return. The consultants note, however,
that the applicant’s commercial and residential rent assumptions “are at the high end of what is
likely achievable at this location.” If net operating income (NOI) is lower than expected, the
applicant’s incentive request of $726,666.90 would likely be necessary to meet the reasonable
target return rate. Due to untested nature of the market for Midtown mixed-use and the
catalytic nature of the project, staff recommends that the Midtown Urban Renewal Board
consider an incentive award between $635,600 and $726,666.90.
Criteria for TIF Assistance
Overall District Relevance
1. Relevance to the Midtown Urban Renewal Plan: Documentation of the project’s impact in
relation to the goals and objectives of the Midtown Urban Renewal Plan, particularly mixed-
use development. Urban design elements are also considered, including pedestrian
emphasis and quality of design.
The project eliminates blight by demolishing a vacant and aging structure and replacing it with a
vertical mixed-use building with retail and 16 housing units, which increases the taxable value of
the property use. This 34,066 gross square foot vertical mixed-use project locates a new building
closer to the street adding interest and activity. The proposed 3 story project features a brewery
and additional commercial space on the ground floor, 2 floors of apartments, as well as roof
deck space for brewery patrons, as well as residents.
[5 of 5]
Goal Number 1: Promote Economic Development
2. Tax Generation: The project will increase the taxable value within the District. The increase
in taxable value due to new construction & rehabilitation is estimated by the County
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Assessor’s office or State Department of Revenue to determine tax increment generation.
Submit documentation of estimated tax projections to receive points for these criteria.
Leland Consulting Group (LCG) created a tax revenue generation model for the Midtown URD.
Using data provided by the property owner, LCG estimates that the property will provide an
estimated annual net tax revenue increase of $76,679 for the District. The projected net
increase in value of the property is $5,638,827. For the assumptions related to these
projections, please see the LGC report. [4 of 4]
3. Elimination of Blight: The project’s direct and indirect impact on the physical and fiscal
deterioration within the Tax Increment Financing District and the community. Submit
information showing current conditions of property.
The project eliminates blight by replacing a small low-value vacant shop building with a 34,066
gross square foot vertical mixed-use building that adds storefront retail commercial space and
16 housing units and substantially increases the density of development on the property.
[4 of 4]
4. Employment Generation: Total employment generated by the project assessed in terms of
new permanent and part-time jobs, and construction jobs. Submit documentation of
estimated new jobs to receive points for this criterion.
The project will generate temporary construction jobs. The inclusion of commercial and retail
space in the project provides new space for employment. The brewery is expected to add 10-15
full time employees and 5-10 part time employees. Employment in the remainder of the
commercial space is tenant dependent. [2 of 3]
Goal Number 2: Improve Multi-Modal Transportation
5. Facilitates Public Health and Mobility: Project will construct or improve sidewalks, including
ADA access to buildings. Provide detailed information demonstrating that the current
condition inhibits public health and mobility.
The project adds new 12 foot storefront block frontage standard sidewalks on the N. 7th Ave.
and Durston Rd. frontages. The new building will be ADA accessible. [1 of 1]
6. Reduces Resource Demand: Project promotes the use of transit, ride sharing, or car sharing.
Provide plans, agreements or other methods to demonstrate reduction of resource demand.
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While locating housing and commercial development in Midtown places it in a centrally located
location, this project does not take particularly exceptional or innovative measures to promote
transit use, ride sharing, or car sharing. [0 of 1]
7. Promotes Active Transportation: Project promotes bicycling as an active transportation
option by constructing or improving bike lanes, providing covered bike parking, and/or
participating in a bike share program. Provide plans, agreements or other methods to
demonstrate reduction of resource demand.
No qualifying covered bike parking is proposed. [0 of 1]
Goal Number 3: Improve, Maintain, and Support Innovation in Infrastructure
8. Infrastructure Improvements: Project promotes innovation in infrastructure and/or reduces
long- term costs of maintenance. Provide plans and descriptions of innovations proposed.
The project, with TIF Assistance, plans to extend and utilize the City of Bozeman fiber conduit
system. The project eliminates midblock vehicular access and improves the public alley as the
primary means of vehicular ingress and egress. The alley will be improved next to the
redeveloping parcel and an adjacent parcel to facilitate required fire access. Northwestern
Energy facilities must also be moved to accommodate this project. [2 of 2]
Goal Number 4: Promote Unified Human Scale Urban Design
9. Street Frontage: The project improves the street frontage by eliminating parking between
the right-of-way and the building. Provide plans to demonstrate improvement in street
frontage.
The project provides all parking behind the building, which is consistent with the vision of the
Midtown Urban Renewal Plan. [2 of 2]
10. Vehicular Access Points: The project reduces the number of vehicular access points to the
property and improves the pedestrian experience. Provide plans, agreements or other
methods to demonstrate reduction.
The project proposes removing a drive approach from N. 7th Ave. All vehicular access is
provided through improvement and paving of the public alley. [2 of 2]
11. Street Orientation: The project enhances the North 7th Ave. entryway corridor by having
buildings oriented toward the street and designed to provide interest and activity.
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The proposed structure would orient the structure toward the street and provide new interest
and activity. The building double fronts the arterials of N. 7th Ave and Durson Rd. with
storefront block frontage.
[3 of 3]
12. Pedestrian Experience: The project enhances the pedestrian experience with elements such
as façade transparency, building articulation, street furniture and/or landscaping. Submit
plans and details that address this criterion.
The project provides enhanced façade transparency with a store front design and double
building frontage. The project includes street trees and tree grates as well as 12 foot sidewalks.
No landscaping plan was submitted with this application. [2 of 3]
13. Quality of the Development Exceeds Minimum Requirements. The quality of development
and overall aesthetics (architectural, site design, landscaping, etc.) are beyond that which is
minimally required by the UDC. Submit documentation to demonstrate compliance with this
criterion.
Based on preliminary renderings, the project as proposed appears to exceed the minimal
requirements of the UDC for architecture, site design, and landscaping. [2 of 2]
Goal Number 5: Support Compatible Urban Density Mixed Land Uses
14. Increases Housing Units: The project increases housing units within the District. Submit
plans demonstrating an increase in the number of housing units.
The project includes 16 rental residential units. [4 of 4]
15. Mix of Uses Including Residential: The project has a mix of uses, including residential.
Submit plans detailing the proposed mix of uses within the project.
The project includes a mix of uses and includes 16 residential units. [4 of 4]
16. Shared Parking: The project shares parking among compatible uses. Provide details
demonstrating compliance with the UDC and as well as total number of parking spaces
reduced because of a shared arrangement.
The project appears to share parking between its commercial and residential uses. Future more
detailed plans for parking could show a shared parking arrangement to receive points for this
category. [0 of 2]
Total Points (38/44)
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Criteria for Approval of Urban Renewal Project, 7-15-4217 MCA
1) a workable and feasible plan exists for making available adequate housing for the
persons who may be displaced by the project;
• The project does not displace any persons or housing.
2) the urban renewal plan conforms to the comprehensive plan or parts thereof for the
municipality as a whole;
• The Midtown Urban Renewal Plan adopted in 2015 made findings that mixed-use
projects that included commercial and residential uses were in conformance with
the comprehensive plan.
3) the urban renewal plan will afford maximum opportunity, consistent with the sound
needs of the municipality as a whole, for the rehabilitation or redevelopment of the
urban renewal area by private enterprise; and
• The project includes a request for tax increment financing assistance that makes the
proposed redevelopment project feasible to be undertaken by private enterprise.
4) a sound and adequate financial program exists for the financing of said project.
• The Midtown Urban Renewal District currently has adequate revenue to support the
issuance of tax increment bonds to finance the tax increment finance assistance for
this project.
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Lifestyle Solutions Real Estate LLC
Tax Increment Analysis
November 27, 2018
Prepared by:
Andy Parks, CPA
Leland Consulting/GEL Oregon, Inc.
on behalf of the City of Bozeman Economic Development Department
Summary
Applicant plans to build a mixed-use commercial/residential building located in the heart of Bozeman's Midtown District.
Applicant plans to invest approximately $5.0 million and is requesting $726,667 from the Agency.
The following schedule summarizes our findings of our analysis.
Estimated construction costs to complete project $ 5,643,334
Estimated capitalized interest 83,333
Less: 2018 market value per assessor
(improvements only) 87,840
Net estimated increase in value 5,638,827
Estimated net increase in taxable value 106,574
TIF tax rate - estimated - FY 2021 719.49
Estimated incremental taxes (TIF) - annual 76,679
TIF investment 726,667
ROI - estimated 10.6%
Estimated payback period (years) 10 assumes 5.0% interest rate on advanced amount
Private investment to public investment 6.77 Metric:
Greater than 8 to 1 - commercial
Greater than 5 to 1 - family wage jobs
Assumptions
Cost and timing information provided in application - except construction financing which is estimated
Estimated start date Mar-19
Estimated completion per application is approximately 9 months Nov-19 Winter 2019
Increase in property taxes applicable fiscal year 2021
Construction Interest - estimated 83,333
12 month construction loan rate 5.00% Note: estimated commercial rate
Current property taxes -
Analysis has been performed to determine: Return on Investment (ROI), Estimated payback period and metrics related to
private to public sector investment
http://gis.gallatin.mt.gov/common/parcel_informati
on.aspx?tab=taxcode&taxID=RGG3097&geocodeid=0
6079801405070000
Greater than 10 to 1 - desired for multi-
family
Property valuation is limited to the cost approach, i.e., cost to complete project - real market value will likely differ.
Different valuation methods include but are not limited to; income approach, sales comparisons, and Capital Asset Pricing
Model.
268
Lifestyle Solutions Real Estate LLC
Tax Increment Analysis
November 27, 2018
Estimated Financing Cost - Construction
Borrowing 5,000,000 Construction Financing
Project Costs Amount Beg Month
Ending
Month
Months of
Interest
Estimated
Interest
Mar 555,556 8 18,519
Apr 555,556 7 16,204
May 555,556 6 13,889
Jun 555,556 5 11,574
Jul 555,556 4 9,259
Aug 555,556 3 6,944
Sep 555,556 2 4,630
Oct 555,556 1 2,315
Nov 555,556 - -
Estimated cost to complete 5,000,000 83,333
Note: Financing cost assues 9 month construction period, equal monthly expenditures throughout construction.
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M E M O R A N D U M
To: David Fine, City of Bozeman
From: Brian Duffany and Tim Morzel, Economic & Planning
Systems
Subject: Bozeman URA TIF Request Review: Ruh Building
Date: November 29, 2018
This memorandum provides a summary of the analysis Economic &
Planning Systems (EPS) has completed relating to the request for tax
increment financing (TIF) for the Ruh Building development. EPS has
been contracted by the City of Bozeman to complete an evaluation of
developer requests for TIF and specifically evaluate key project
assumptions, such as construction costs, sales revenues, and operating
revenues and expenditures, as well as overall developer return. The
purpose of this analysis is to ensure that the assumptions presented by
a developer align with current market conditions and industry standards.
This memorandum provides an overview of the evaluation criteria, an
overview of the key inputs, and a summary of the key findings. The
detailed analysis and supporting tables are provided in the appendix of
this memorandum.
Approach
As part of the TIF application process, each development team is
required to submit a formal proposal that includes a project overview
and key project assumptions. These materials include a summary of the
development program, construction costs, eligible costs, sales revenues,
and ongoing revenue and expenditures assumptions. Using this
information as a starting point, EPS has structured a static and time
series pro forma that summarizes this information as well as a number
of other key project metrics such as project return. This analysis
evaluates the performance of each project on an unleveraged pre-tax
basis in order to evaluate the project fundamentals exclusive of the
unique equity and debt structure of each project.
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Project Assumptions
This section provides a summary of the development assumptions submitted by the development
team and a comparison to current market conditions or industry standards.
Development Program
Location: NW Corner of N 7th Avenue and Durston Road
Parcel Area: 0.653 acres (28,445 square feet)
Stories: 3-stories
Total Building Area: 30,538 square feet
Commercial Program: The current proposal contemplates 11,000 square feet of commercial
space that is anticipated to occupy the first floor of the building. The commercial space is
anticipated to be a mix of office space and general retail space.
Rental Multifamily Program: The second and third floors are anticipated to be occupied by 16
rental residential units that are estimated to occupy approximately 16,400 square feet of space.
The residential unit mix currently contemplates four 1-bedroom units and 12 2-bedroom units.
Unit sizes are expected to range from 650 to 800 square feet for the 1-bedroom units and 980 to
1,100 square feet for the 2-bedroom units.
Project Costs
Land Costs
Total: $950,000
Cost per Land SF: $33 per square foot
% of Total Costs: 14 percent of total
Comments: Land costs typically range from 10 to 20 percent of total project costs depending on
the development type. At 14 percent of total, this project is within that range. In addition, land
costs at approximately $33 per square foot are in align with other recent transactions in this
area.
Hard Costs
Total: $4,861,406
Cost per GBA: $159 per square foot
Comments: Average construction costs in the larger market area are estimated to range from
$110 to $150 per square foot. At $159 per square foot, this project falls just above that range.
However, the development team anticipates using higher quality finishes that include brick,
stressed metal siding, stone, concrete and large windows that all contribute to higher
construction costs.
Soft Costs
Total: $817,260
% of Hard Costs: 14 percent
Comments: Generally, soft costs for comparable projects typically range from 20 to 30 percent
of hard construction costs (vertical construction costs). At 14 percent of hard costs this project
falls below that range.
Operating Revenue
Commercial Rental Rate: The 11,000 square feet of space that is contemplated as a mix of
office and retail space is currently estimated to rent for $24 per square foot (NNN). Rental rates
for comparable space in downtown Bozeman are roughly $25 per square foot while rental rates
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for office space outside of downtown can range from $16 to $18 per square foot. The estimated
rental rates for this building are on the higher end of the range in rental rates that are
anticipated to be achievable at this location.
Residential Rental Rate: The 16 multifamily units that are contemplated for construction on
this site are estimated to rent for $1,200 per unit per month for the 1-bedroom units and $1,800
per unit per month for the 2-bedroom units. These rental rates translate to roughly $1.50 to
$1.60 per square foot, which is also on the high end of what may be achievable at this location.
Project Return
The performance of the project with and without a public investment is estimated by using two
primary criteria. The first is an evaluation of the overall project returns on an annual basis. This
approach relies on an evaluation of the projects Net Present Value (NPV) and Internal Rate of
Return (IRR). The second approach is based on a static (single point in time) evaluation of the
project’s total value and compares those to total construction costs. Although this approach is
generally less precise than the times series evaluation, it provides an additional test of overall
project feasibility. The purpose of this analysis is to provide an evaluation of the feasibility of the
project with and without a potential public investment.
Overall Project Return
The first method used to evaluate project return is an evaluation of the project’s internal rate of
return (IRR). Generally, the IRR is the percentage rate earned on each dollar invested for each
period it is invested. The IRR is typically used by investors to compared alternative investments
based on their potential rate of return. Mathematically, the IRR is the discount rate that makes
the net present value (NPV) of a project equal to zero. The NPV is the estimated value of all
future cash flows of an investment discounted to the present. The NPV of a given series of cash
flows is heavily dependent on an investor’s discount rate, which reflects an individual investor’s
opportunity cost of capital. In other words, an investor’s discount rate reflects their expected
rate of return for investments with a comparable level of risk.
For the purpose of this analysis, the discount rate is used as a hurdle rate in determining an
appropriate rate of return for a given project. When determining appropriate discount it is
important to consider the following rates when building up to a project discount rate.
Inflation rate
Riskless rate of return (typically U.S. 10-Year Treasury Note rate of return)
General real estate risk (timing and market cycle risk)
Product type risk (i.e. multifamily, retail, office, etc.)
Market risk (geographic specific)
In addition to an evaluation of these rates EPS referenced published data documenting discount
rates in the western U.S. Finally, in determining an appropriate discount rate for this specific
property EPS considered the following project specific factors:
Program – The mix of uses that are contemplated to include retail, office, and multifamily
were an important factor in determining an appropriate discount rate. Generally, multifamily
development has a lower discount rate and corresponding level of risk than office and retail
development.
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Project Location – While this site is only a short drive from downtown Bozeman, the area is
still relatively untested for the uses proposed for development and this project would
represent an initial test of an unproven market, which results in added risk and warrants a
higher discount rate.
Market Cycle – The nation and generally the local real estate market has experienced nearly
10 straight years of year-over-year growth. In most real estate markets there is a natural
cycle of expansion and contraction that typically ranges from seven to 10 years. Given the
fact that Bozeman is likely at the tail end of this cycle or nearing a phase of oversupply,
there is additional risk associated with the timing of the market.
Without public investment the project achieves an internal rate of return of 6.87 percent. The
factors outlined above and the risks associated with this type of project, at this location, and in
this phase of the real estate cycle warrant a discount rate of 8.25 percent (1.5 percent above the
income capitalization rate, below). While this estimate is somewhat subjective, it reflects a
variety of current market conditions, risk factors, and the mix of development types proposed for
this project. In order to achieve an internal rate of return of 8.25 percent the project requires
approximately $635,600 in public investment.
Static Project Feasibility
Evaluating the project from a static (i.e. single point in time) perspective provides an evaluation
of a given project’s feasibility. This method relies on a comparison of the total project costs to a
given project’s total estimated value. For the Ruh Building project, total value is calculated by
summing the value of the condominium units and adding the estimated value of the commercial
space. The value of the commercial space is calculated by using an estimated capitalization rate
at stabilization. The capitalization rate (cap rate) is relatively straight forward metric that reflects
a project’s net operating income (NOI) and perceived value. Mathematically the cap rate is
calculated by dividing a project’s stabilized NOI by its actual sales value.
For this project a cap rate of 6.75 percent is estimated to be reasonable based on a review of
market data in the western U.S. Compared to the Aspen Crossing building, a lower cap rate was
used for this building due to the presence of rental residential which is trading at low cap rates in
the strong rental market nationally and locally. This cap rate results in a total valuation for the
multifamily and commercial space of $6.27 million. For the Subtracting the total construction
costs of $6.68 million, results in a total project gap of roughly $409,000.
Project Request
The developers of the Ruh Building project are requesting $726,667 in public investment in order
to fund project specific eligible costs. Based on the two methodologies outlined above, EPS
estimates that the project funding gap ranges from $409,000 to $635,600. The developer
request is outside of this range. It is, however, important to note that the commercial rental
assumptions at $24 per square foot (NNN) and the multifamily rental assumptions at roughly
$1.50 to $1.60 per square foot are at the high end for what is likely achievable at this location. If
these rental rates are reduced to more conservative rates (as shown in the sensitivity tables in
the appendix of this memo) the estimated project gap increases to an amount that is greater
than the developer request of $726,667.
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Prepared for:
City of Bozeman
Prepared by:
Economic & Planning Systems, Inc.
Date:
November 27, 2018
EPS #183082
Financial Model
TIF Request Review:
Ruh Building
274
TIF Request Review: City of Bozeman
12/3/2018
Table 1
Project Summary and Key Assumption Sensitivity
TIF Request Review: Ruh Building
Description Amount Developer
Low High
KEY ASSUMPTIONS
Revenue Assumptions
Commercial Rental Rate $24.00 NNN $18.00 $22.00 $24.00 Higher
Multifamily 1-Bed Rental Rate $1.50 per square foot $1.25 $1.50 $1.50 Inside
Multifamily 2-Bed Rental Rate $1.64 per square foot $1.15 $1.40 $1.64 Higher
Cost Assumptions
Land Cost 14.23% % of total cost 10% 20% 14.23% Inside
Hard Construction Costs $159 per GBA $110 $150 $159 Higher
Soft Construction Costs 16.81% % of HC 20% 30% 16.81% Lower
Total Construction Cost $219 per GBA $200 $250 $219 Inside
Return Assumptions
Overall Project Discount Rate 8.25% project discount rate
Project Cap Rate 6.75% project capitalization rate, used to determine static value
PROJECT SUMMARY
Total Cost land, infrastructure, hard, and soft
Stabilized Project Value
Stabilized Building NOI $445,943 at year 4
Building Disposition Revenue at year 10
PROJECT GAP
Developer Request -$726,667 as stated in application
Static Estimate total revenues/value less cost
Time Series Estimate discount rate hurdle
Sensitivity Analysis
Time Series Estimate: Commercial Rental Rate Static Estimate: Commercial Rental Rate
-635,611 7.75% 8.00% 8.25% 8.50% 8.75% -409,052 6.25% 6.50% 6.75% 7.00% 7.25%
$19.44 -$1,091,208 -$1,190,906 -$1,288,331 -$1,383,541 -$1,476,594 $19.44 -$654,024 -$885,664 -$1,100,145 -$1,299,307 -$1,484,733
$21.60 -$770,769 -$876,160 -$979,148 -$1,079,794 -$1,178,161 $21.60 -$300,475 -$545,713 -$772,785 -$983,638 -$1,179,950
$24.00 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $24.00 $92,357 -$167,990 -$409,052 -$632,895 -$841,301
$26.40 -$58,682 -$176,724 -$292,074 -$404,802 -$514,977 $26.40 $485,189 $209,733 -$45,319 -$282,153 -$502,653
$29.04 $332,965 $207,966 $85,817 -$33,556 -$150,226 $29.04 $917,304 $625,228 $354,788 $103,665 -$130,140
Time Series Estimate: 1-Bed Rental Rate Static Estimate: 1-Bed Rental Rate
-635,611 7.75% 8.00% 8.25% 8.50% 8.75% -409,052 6.25% 6.50% 6.75% 7.00% 7.25%
$1.22 -$571,022 -$679,970 -$786,434 -$890,478 -$992,165 $1.22 -$70,490 -$324,573 -$559,836 -$778,294 -$981,686
$1.35 -$496,987 -$607,246 -$714,991 -$820,288 -$923,199 $1.35 $6,648 -$250,402 -$488,412 -$709,421 -$915,188
$1.50 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $1.50 $92,357 -$167,990 -$409,052 -$632,895 -$841,301
$1.65 -$332,464 -$445,637 -$556,230 -$664,309 -$769,940 $1.65 $178,066 -$85,578 -$329,692 -$556,370 -$767,414
$1.82 -$241,976 -$356,752 -$468,911 -$578,521 -$685,647 $1.82 $272,346 $5,076 -$242,396 -$472,191 -$686,139
Time Series Estimate: 2-Bed Rental Rate Static Estimate: 2-Bed Rental Rate
-635,611 7.75% 8.00% 8.25% 8.50% 8.75% -409,052 6.25% 6.50% 6.75% 7.00% 7.25%
$1.33 -$1,118,061 -$1,217,321 -$1,314,317 -$1,409,107 -$1,501,751 $1.33 -$640,453 -$872,615 -$1,087,580 -$1,287,190 -$1,473,034
$1.47 -$784,902 -$890,062 -$992,824 -$1,093,251 -$1,191,402 $1.47 -$293,332 -$538,845 -$766,172 -$977,261 -$1,173,792
$1.64 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $1.64 $92,357 -$167,990 -$409,052 -$632,895 -$841,301
$1.80 -$44,548 -$162,821 -$278,397 -$391,346 -$501,737 $1.80 $478,047 $202,865 -$51,932 -$288,530 -$508,810
$1.98 $362,646 $237,161 $114,538 -$5,299 -$122,421 $1.98 $902,305 $610,806 $340,900 $90,273 -$143,070
Time Series Estimate: Construction Hard Cost Static Estimate: Construction Hard Cost
-635,611 7.75% 8.00% 8.25% 8.50% 8.75% -409,052 6.25% 6.50% 6.75% 7.00% 7.25%
$129 $508,942 $397,225 $288,057 $181,369 $77,098 $129 $1,016,024 $755,677 $514,615 $290,772 $82,366
$143 $71,415 -$40,301 -$149,470 -$256,158 -$360,429 $143 $578,498 $318,151 $77,089 -$146,755 -$355,161
$159 -$414,725 -$526,442 -$635,611 -$742,298 -$846,569 $159 $92,357 -$167,990 -$409,052 -$632,895 -$841,301
$175 -$900,866 -$1,012,582 -$1,121,751 -$1,228,439 -$1,332,710 $175 -$393,784 -$654,131 -$895,193 -$1,119,036 -$1,327,442
$193 -$1,435,621 -$1,547,337 -$1,656,506 -$1,763,194 -$1,867,464 $193 -$928,538 -$1,188,885 -$1,429,947 -$1,653,791 -$1,862,197
Source: Economic & Planning Systems
\\EPSDC02\Proj\183082-Bozeman MT P3 Development Analysis\Models\[183082-MODEL-Ruh Building-11-21-2018.xlsm]T-Summary
TIF Request Review: City of Bozeman
12/3/2018
Table 2
Eligible Costs Summary
TIF Request Review: Ruh Building
Description Amount % of Total
City of Bozeman Impact Fees $143,319 20%
City of Bozeman Cash In Lieu of Park Land $15,290 2%
City of Bozeman Cash In Lieu of Water Rights $22,058 3%
Service lines $98,000 13%
Northwestern Energy $45,000 6%
Demo $48,000 7%
Street Scape & Public Infrastructure $235,000 32%
Alley Behind Recompute $40,000 6%
Engineering fees $80,000 11%
TOTAL $726,667 100%
% of Total Project Cost 10.9%
Source: Development Team; Economic & Planning Systems
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TIF Request Review: City of Bozeman
12/3/2018
Table 3
Development Program
TIF Request Review: Ruh Building
Description Units Square Feet % of Total Revenue Assumptions
COMMERCIAL NNN ($/sf)
Office N/A N/A N/A N/A
Retail N/A N/A N/A N/A
Flex N/A N/A N/A N/A
Other N/A N/A N/A N/A
Subtotal N/A 11,000 36% $24.00
RESIDENTIAL
Ownership (Condos) Sale Price ($/unit)
1-Bed 0 0 0% N/A
2-Bed 0 0 0% N/A
3-Bed 0 0 0% N/A
4-Bed 0 0 0% N/A
Common Area 0 0 0% N/A
Subtotal 0 0 0% N/A
Rental (Apts.) Rental Revenue ($/sf)
1-Bed 4 3,200 (est.) 10% $1.50
2-Bed 12 13,200 (est.) 43% $1.64
3-Bed 0 0 0% N/A
4-Bed 0 0 0% N/A
Common Area 0 3,138 10% N/A
Subtotal 16 19,538 64% $1.61
TOTAL 16 30,538 100%
Source: Development Team; Economic & Planning Systems
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TIF Request Review: City of Bozeman
12/3/2018
Table 4
Development Costs
TIF Request Review: Ruh Building
Description Quantity per GBA Total % of Total
LAND COSTS
Land $ 950,000 14.2%
Land Costs $ 950,000 14.2%
TOTAL LAND COST $ 950,000 14.2%
Horizontal Development Costs
Site Improvement $ 48,000 0.7%
Demo, Excavation and Material Removal $ 48,000 0.7%
South Site $ - 0.0%
City Sidewalk $ - 0.0%
City Curb & Gutter $ - 0.0%
Street Patch $ - 0.0%
Alley Paving $ - 0.0%
Total Costs $ - 0.0%
TOTAL HORIZONTAL CONSTRUCTION COSTS $ 48,000 0.7%
Vertical Development Costs
Construction $159.19 per GBA $ 4,861,406 72.8%
New Construction direct cost $156.90 per GBA $ 4,791,406 71.8%
Extra Construction Costs (e.g. Alley behind recompute) $1.31 per GBA $ 40,000 0.6%
Permits $0.98 per GBA $ 30,000 0.4%
TOTAL VERTICAL CONSTRUCTION COSTS $159 per GBA $ 4,861,406 72.8%
Soft Costs
Professional fees $10.69 per GBA $ 326,594 4.9%
Architectural Fee $4.15 per GBA $ 126,594 1.9%
Property Manager Fee $2.29 per GBA $ 70,000 1.0%
Engineering Fees $2.62 per GBA $ 80,000 1.2%
Other/Misc. $1.64 per GBA $ 50,000 0.7%
Permits and Fees $10.17 per GBA $ 310,667 4.7%
CIL Fees $1.22 per GBA $ 37,348 0.6%
Impact Fees $4.69 per GBA $ 143,319 2.1%
Other Fees and Site improvements $4.26 per GBA $ 130,000 1.9%
Soft Costs $1.31 per GBA $ 40,000 0.6%
Estimated Property Tax for year 1 $1.31 per GBA $ 40,000 0.6%
Permits and Fees $4.58 per GBA $ 140,000 2.1%
Operating reserves $3.27 per GBA $ 100,000 1.5%
Other Misc. $1.31 per GBA $ 40,000 0.6%
TOTAL SOFT COSTS $27 per GBA $ 817,260.65 12.2%
TOTAL PROJECT COST $219 per GBA $ 6,676,667 100.0%
Source: Development Team; Economic & Planning Systems
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TIF Request Review: City of Bozeman
12/3/2018
Table 5
Operating Revenues and Expenditures
TIF Request Review: Ruh Building
Building Area Area % of Total
Net Rentable Area 27,400 sf 89.7%
Common Area 3,138 sf 10.3%
Total Building Area 30,538 sf 100.0%
Type Rentable SF Lease Rate Total Revenue % of Total
per year Annual
REVENUE
Rental Income 27,400 rentable sf $ 580,800 93.0% of PGI
All Retail and Office Space 11,000 rentable sf $ 24.00 per sf per year $ 264,000 42.3% of PGI
Apartment: 1-Bed 3,200 rentable sf $ 1.50 per sf per month $ 57,600 9.2% of PGI
Apartment: 2-Bed 13,200 rentable sf $ 1.64 per sf per month $ 259,200 41.5% of PGI
[Blank] 0 rentable sf $ - per year $ - 0.0% of PGI
[Blank] 0 rentable sf $ - per year $ - 0.0% of PGI
[Blank] 0 rentable sf $ - per year $ - 0.0% of PGI
[Blank] 0 rentable sf $ - per year $ - 0.0% of PGI
[Blank] 0 rentable sf $ - per year $ - 0.0% of PGI
[Blank] 0 rentable sf $ - per year $ - 0.0% of PGI
[Blank] 0 rentable sf $ - per year $ - 0.0% of PGI
Average N/A N/A
Other Income $ 44,000 7.0% of PGI
Tenant Contributions NNN 11,000 unit $ 4.00 per sf per year $ 44,000 7.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
[Blank] 0 unit $ - per sf per year $ - 0.0% of PGI
POTENTIAL GROSS INCOME (PGI) $ 624,800 100.0% of PGI
Less: Vacancy 7.0% per year $ (43,736) -7.0% of PGI
EFFECTIVE GROSS INCOME (EGI) $ 581,064 93.0% of PGI
EXPENDITURES
Operating Expenditures $ 5.17 per RBA Adjustment $ (158,000) 27.2% of EGI
Property Taxes $ 1.60 per RBA 100% % of total $ (49,000) 8.4% of EGI
Insurance $ - per RBA 100% % of total $ - 0.0% of EGI
Utilities $ - per RBA 100% % of total $ - 0.0% of EGI
CAM $ 1.09 per RBA 100% % of total $ (30,000) 5.2% of EGI
Advertise/Market $ 2,400.00 per unit 100% % of total $ (2,400) 0.4% of EGI
Legal $ 5,000.00 per unit 100% % of total $ (5,000) 0.9% of EGI
Trash $ 3,600.00 per unit 100% % of total $ (3,600) 0.6% of EGI
Grounds $ 5,000.00 per unit 100% % of total $ (5,000) 0.9% of EGI
Other $ 15,000.00 per unit 100% % of total $ (15,000) 2.6% of EGI
Property Management Fee (% of Gross Rev) 8.3% % of EGI 100% % of total $ (48,000) 8.3% of EGI
General Operating Expenses $ - per RBA 100% % of total $ - 0.0% of EGI
NET OPERATING INCOME (NOI) $ 13.85 per GSF $ 423,064 72.8% of EGI
Asset Management Fee (% of NOI) 0.0% % of NOI 100% % of total $ - 0.0% of EGI
NET CASH FLOW $ 13.85 per GSF $ 423,064 72.8% of EGI
PROJECT COST $ 218.63 per GSF $ 6,676,667
RETURN ON COST (ROC) 6.34%
Reserves (Annual/ unit) $ 2,500.00 per unit 100% % of total $ (40,000) 6.9% of EGI
PROJECT VALUE
ESTIMATED PROJECT VALUE 6.75% cap rate $ 6,267,615
PER NSF $ 228.75
TIF Request Review: City of Bozeman
12/3/2018
Table 6
Development Revenues and Expenditures
TIF Request Review: Ruh Building
KEY ASSUMPTIONS
Project Timing Project Disposition
Construction Period 12 months Building Year 10
Vacancy Commercial Residential
Year 1 30.0% 20.0%
Year 2 20.0% 15.0%
Year 3 10.0% 7.0%
Stabilization 10.0% 5.0%
Description Factor Escalation Total Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15
DEVELOPMENT COSTS
Construction Cost -$6,676,667 -$6,676,667 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Land $950,000 2.0% -$950,000 -$950,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Horizontal Development Costs $48,000 2.0% -$48,000 -$48,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Vertical Development Costs $4,861,406 2.0% -$4,861,406 -$4,861,406 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Soft Costs $817,261 2.0% -$817,261 -$817,261 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Commercial Costs -$6,676,667 -$6,676,667 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
NET OPERATING INCOME
Condo Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Gross Revenue $0 2.0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Condo Sales 0.0% N/A $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales Commissions 6.0% N/A $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Commercial Revenue
Potential Gross Income $308,000 1.5% $7,228,921 $0 $312,620 $317,309 $322,069 $326,900 $331,803 $336,781 $341,832 $346,960 $352,164 $357,447 $362,808 $368,250 $373,774 $379,381 $385,071
Vacancy Loss -$817,147 $0 -$93,786 -$63,462 -$32,207 -$32,690 -$33,180 -$33,678 -$34,183 -$34,696 -$35,216 -$35,745 -$36,281 -$36,825 -$37,377 -$37,938 -$38,507
Effective Gross Income $6,411,774 $0 $218,834 $253,847 $289,862 $294,210 $298,623 $303,102 $307,649 $312,264 $316,948 $321,702 $326,527 $331,425 $336,397 $341,443 $346,564
Multifamily Revenue
Potential Gross Income $316,800 1.5% $7,435,461 $0 $321,552 $326,375 $331,271 $336,240 $341,284 $346,403 $351,599 $356,873 $362,226 $367,659 $373,174 $378,772 $384,453 $390,220 $396,074
Vacancy Loss -$459,269 $0 -$64,310 -$48,956 -$23,189 -$16,812 -$17,064 -$17,320 -$17,580 -$17,844 -$18,111 -$18,383 -$18,659 -$18,939 -$19,223 -$19,511 -$19,804
Effective Gross Income $6,976,193 $0 $257,242 $277,419 $308,082 $319,428 $324,219 $329,083 $334,019 $339,029 $344,115 $349,276 $354,516 $359,833 $365,231 $370,709 $376,270
Total Operating Costs -$158,000 1.5% -$3,708,342 $0 -$160,370 -$162,776 -$165,217 -$167,695 -$170,211 -$172,764 -$175,355 -$177,986 -$180,656 -$183,365 -$186,116 -$188,908 -$191,741
-$194,617 -$197,537
Net Operating Income $9,679,624 $0 $315,706 $368,491 $432,727 $445,943 $452,632 $459,421 $466,312 $473,307 $480,407 $487,613 $494,927 $502,351 $509,886 $517,534 $525,298
DISPOSITION REVENUE
Gross Revenue $7,223,894 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,223,894 $0 $0 $0 $0 $0
Building (Commercial and Apts.) 6.8% cap rate $7,223,894 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,223,894 $0 $0 $0 $0 $0
Cost of Sale -$144,478 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 -$144,478 $0 $0 $0 $0 $0
Building (Commercial and Apts.) 2.0% -$144,478 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 -$144,478 $0 $0 $0 $0 $0
Building Net Sale Revenue $7,079,416 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,079,416 $0 $0 $0 $0 $0
PROJECT CASH FLOWS
Net Project Cash Flows $4,785,307 -$6,676,667 $315,706 $368,491 $432,727 $445,943 $452,632 $459,421 $466,312 $473,307 $480,407 $7,567,029 $0 $0 $0 $0 $0
Construction Costs -$6,676,667 -$6,676,667 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Condo Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Building Net Operating Income $4,382,558 $0 $315,706 $368,491 $432,727 $445,943 $452,632 $459,421 $466,312 $473,307 $480,407 $487,613 $0 $0 $0 $0 $0
Building Disposition Income $7,079,416 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,079,416 $0 $0 $0 $0 $0
Net Present Value 8.25% -$635,611 -$6,676,667 $291,645 $314,464 $341,138 $324,764 $304,513 $285,525 $267,721 $251,027 $235,374 $3,424,888 $0 $0 $0 $0 $0
Internal Rate of Return 6.87%
Source: Economic & Planning Systems
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Economic & Planning Systems 280 7 of 7
RESOLUTION NO. 4991
A RESOLUTION APPROVING A PROJECT IN THE BOZEMAN MIDTOWN URBAN
RENEWAL DISTRICT AS AN URBAN RENEWAL PROJECT, MAKING FINDINGS
WITH RESPECT THERETO AND APPROVING THE USE OF TAX INCREMENT
REVENUES OR TAX INCREMENT REVENUE BONDS TO PAY, REIMBURSE OR
FINANCE ELIGIBLE COSTS THEREOF; APPROVING A RELATED DEVELOPMENT
AGREEMENT; AND MAKING A REIMBURSEMENT DECLARATION; FOR THE RUH
BUILDING
BE IT RESOLVED by the City Commission (the “Commission”) of the City of Bozeman,
Montana (the “City”), as follows:
Section 1
Recitals.
1.01. Under the provisions of Montana Code Annotated, Title 7, Chapter 15, Parts 42 and
43 (the “Act”), the City is authorized to create an urban renewal area, prepare and adopt a
redevelopment plan therefor and amendments thereto, undertake urban renewal projects therein,
provide for the segregation and collection of tax increment with respect to taxes collected in such
area, issue its bonds to pay the costs of such projects and to refund bonds previously issued under
the Act and pledge to the repayment of the bonds the tax increment and other revenues derived
from projects undertaken within the urban renewal area.
1.02. Pursuant to the Act and Ordinance No. 1685, adopted on November 27, 2006, as
amended by Ordinance No. 1925, adopted by the Commission on December 16, 2015 (collectively,
the “Ordinance”), the City created the Bozeman Midtown Urban Renewal District (the “District”)
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as an urban renewal district and approved the Bozeman Midtown Urban Renewal District Plan
(the “Plan”) as an urban renewal plan, which Plan contains a tax increment financing provision in
accordance with the Act.
1.03. On January 7, 2019, the Commission adopted Resolution No. 4990, calling a public
hearing to approve the Ruh Building (the “Project”) as an urban renewal project under the Act and
the Plan and to approve using tax increment revenues or proceeds of tax increment revenue bonds
to pay or reimburse Life Style Solutions Real Estate, LLC, as the developer of the Project (the
“Developer”), for certain eligible costs thereof, including public infrastructure, service lines, gas
and electric infrastructure, demolition of structures, engineering and design fees for infrastructure
improvements, demolition of structures, impact fees, cash-in-lieu of water rights, and cash-in-lieu
of parkland (the “Eligible Costs”).
1.04. On February 11, 2019, a duly noticed public hearing was held on the question of
approving the Project as an urban renewal project and the use of tax increment revenues or
proceeds of tax increment bonds to pay or reimburse the Developer for the Eligible Costs, and all
persons appearing were given an opportunity to speak at the public hearing.
Section 2
Approval of the Project as an Urban Renewal Project.
The Commission hereby approves the Project as an urban renewal project under the Act
and the Plan. The Project, including the Eligible Costs, is contemplated by and within the scope of
the Plan, and the Eligible Costs are eligible for tax increment financing under the Act.
Section 3
Findings.
The Commission hereby finds with respect to the Project as follows:
a. no persons will be displaced from their housing by the Project;
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b. the Plan and the Project conform to the comprehensive plan or parts thereof
for the City as a whole;
c. the Plan and the Project will afford maximum opportunity, consistent with
the needs of the City as a whole, for the rehabilitation or redevelopment of
the District by private enterprise;
d. taking into account the use of tax increment revenues or the proceeds of tax
increment revenue bonds to pay or reimburse the Developer for all or a
portion of the Eligible Costs, there is expected to be a sound and adequate
financial program for the financing of the Project; and
e. the Project constitutes an urban renewal project within the meaning of the
Act and the Plan.
Section 4
Development Agreement; Use of Tax Increment.
4.01. The Midtown Urban Renewal Board (the “Board”) and the Developer have
negotiated a Development Agreement, the form of which is attached hereto as Exhibit A. The
Development Agreement is hereby approved in substantially the form attached. The Mayor, the
City Manager and the Assistant City Manager, or their designees, are hereby authorized and
directed to finalize, approve, execute and deliver to the Developer the Development Agreement,
substantially in the form attached as Exhibit A, with such changes as such officers shall deem
necessary or appropriate. In the event of the absence or disability of the Mayor, City Manager or
Assistant City Manager, the City Attorney or other designee of the City Manager shall make such
approvals and execute and deliver the Development Agreement. The execution and delivery by
two appropriate officers of the City of the Development Agreement shall be conclusive as to the
approval of such officers of the terms of the Development Agreement.
4.02. The Commission hereby approves the use of tax increment revenues or proceeds of
tax increment bonds to pay or reimburse the Developer for Eligible Costs of the Project, subject to
the terms and conditions of the Development Agreement. No further Commission action shall be
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required if the City’s obligations under the Development Agreement are to be paid or satisfied
with tax increment revenues then on hand and available therefor. If the City’s obligations under
the Development Agreement are to be financed with proceeds of tax increment revenue bonds, the
forms of such bonds and the terms and conditions thereof shall be prescribed by a subsequent
resolution or resolutions to be adopted by this Commission.
Section 5
Reimbursement Expenditures.
5.01. Regulations. The City may issue tax-exempt bonds in one or more series (the
“Bonds”) to finance all or a portion of the Eligible Costs and pay costs associated with the
financing. The United States Department of Treasury has promulgated regulations governing the
use of proceeds of tax-exempt bonds, all or a portion of which are to be used to reimburse the City
for project expenditures paid by the City prior to the date of issuance of such bonds. Those
regulations (Treasury Regulations, Section 1.150-2) (the “Regulations”) require that the City adopt
a statement of official intent to reimburse an original expenditure not later than 60 days after
payment of the original expenditure. The Regulations also generally require that the bonds be
issued and the reimbursement allocation made from the proceeds of the bonds within 18 months
(or three years, if the reimbursement bond issue qualifies for the “small issuer” exception from the
arbitrage rebate requirement) after the later of (i) the date the expenditure is paid or (ii) the date
the project is placed in service or abandoned, but (unless the issue qualifies for the “small issuer”
exception from the arbitrage rebate requirement) in no event more than three years after the date
the expenditure is paid. The Regulations generally permit reimbursement of capital expenditures
and costs of issuance of the bonds.
5.02. Prior Expenditures. Other than (i) expenditures to be paid or reimbursed from
sources other than the Bonds, (ii) expenditures constituting preliminary expenditures within the
meaning of Section 1.150-2(f)(2) of the Regulations, or (iii) expenditures in a “de minimus”
amount (as defined in Section 1.150-2(f)(1) of the Regulations), no expenditures for the Eligible
Costs of the Project have been paid by the City before the date 60 days before the date of adoption
of this Resolution.
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5.03. Declaration of Intent. The City reasonably expects that it may reimburse the
expenditures made for Eligible Costs of the Project out of the proceeds of Bonds in an estimated
maximum aggregate principal amount of $747,500 after the date of payment of all or a portion of
the Eligible Costs of the Project. All reimbursed expenditures shall be capital expenditures, a cost
of issuance of the bonds or other expenditures eligible for reimbursement under Section 1.150-
2(d)(3) of the Regulations.
5.04. Budgetary Matters. As of the date hereof, there are no City funds reserved, allocated
on a long-term basis or otherwise set aside (or reasonably expected to be reserved, allocated on a
long-term basis or otherwise set aside) to provide permanent financing for the expenditures related
to the Project, other than pursuant to the issuance of the Bonds. The statement of intent contained
in this Resolution, therefore, is determined to be consistent with the City’s budgetary and financial
circumstances as they exist or are reasonably foreseeable on the date hereof.
5.05. Reimbursement Allocations. The City’s Finance Director shall be responsible for
making the “reimbursement allocations” described in the Regulations, being generally the transfer
of the appropriate amount of proceeds of the bonds to reimburse the source of temporary financing
used by the City to make prior payment of the Eligible Costs of the Project. Each allocation shall
be evidenced by an entry on the official books and records of the City maintained for the Bonds
or the Project and shall specifically identify the actual original expenditure being reimbursed.
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PASSED, ADOPTED, AND APPROVED by the City Commission of the City of
Bozeman, Montana, at a regular session thereof held on the 11th
day of February, 2019.
___________________________________
CYNTHIA L. ANDRUS
Mayor
ATTEST:
____________________________________
ROBIN CROUGH
City Clerk
APPROVED AS TO FORM:
___________________________________
GREG SULLIVAN
City Attorney
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CERTIFICATE AS TO RESOLUTION AND ADOPTING VOTE
I, the undersigned, being the duly qualified and acting recording officer of the City of
Bozeman, Montana (the “City”), hereby certify that the attached resolution is a true copy of
Resolution No. 4991, entitled: “RESOLUTION APPROVING A PROJECT IN THE BOZEMAN
MIDTOWN URBAN RENEWAL DISTRICT AS AN URBAN RENEWAL PROJECT,
MAKING FINDINGS WITH RESPECT THERETO AND APPROVING THE USE OF TAX
INCREMENT REVENUES OR TAX INCREMENT REVENUE BONDS TO PAY,
REIMBURSE OR FINANCE ELIGIBLE COSTS THEREOF; APPROVING A RELATED
DEVELOPMENT AGREEMENT; AND MAKING A REIMBURSEMENT DECLARATION”
(the “Resolution”), on file in the original records of the City in my legal custody; that the
Resolution was duly adopted by the City Commission of the City at a regular meeting on February
11, 2019, and that the meeting was duly held by the City Commission and was attended throughout
by a quorum, pursuant to call and notice of such meeting given as required by law; and that the
Resolution has not as of the date hereof been amended or repealed.
I further certify that, upon vote being taken on the Resolution at said meeting, the
following Commissioners voted in favor thereof: ________________
; voted against
the same: ; abstained from voting
thereon: ; or were absent: .
WITNESS my hand officially this 12th
day of February, 2019.
Robin Crough
City Clerk
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EXHIBIT A
[Form of Development Agreement]
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DEVELOPMENT AGREEMENT
(Ruh Building)
This DEVELOPMENT AGREEMENT (this “Agreement”) is dated as of February 11,
2019 by and between LIFE STYLE SOLUTIONS REAL ESTATE, LLC (the “Developer”), and
the CITY OF BOZEMAN, MONTANA, 121 N. Rouse Ave., Bozeman, Montana 59771 (the
“City”). The Developer and the City are each individually referred to herein as a “Party” and
collectively as the “Parties.”
RECITALS:
WHEREAS, under the provisions of Montana Code Annotated, Title 7, Chapter 15, Parts
42 and 43, as amended (the “Act”), the City is authorized to create urban renewal areas, prepare
and adopt an urban renewal plan therefor and amendments thereto, undertake urban renewal
projects therein, provide for the segregation and collection of tax increment with respect to
property taxes collected in such areas, and apply tax increment revenues derived from projects
undertaken within the urban renewal area to pay eligible costs;
WHEREAS, pursuant to the Act and Ordinance No. 1685 adopted by the City
Commission of the City (the “City Commission”) on November 27, 2006, as amended by
Ordinance No. 1925, adopted by the City Commission on December 16, 2015 (collectively, the
“Ordinance”), the City has created the Bozeman Midtown Urban Renewal District (the
“District”) as an urban renewal district and has approved the Bozeman Midtown Urban Renewal
Plan (the “Plan”) as an urban renewal plan in accordance with the Act, which Plan provides for
the segregation and collection of tax increment revenues with respect to the District;
WHEREAS, the Developer proposes to undertake the construction of the Ruh Building,
as described more particularly on Exhibit A hereto (the “Project”), on land located in the District
at 605 N. 7th. Ave. Bozeman, MT 59715, Bozeman, Montana, which is legally described
on Exhibit B hereto (the “Land”);
WHEREAS, the Developer submitted to the Midtown Urban Renewal Board of the City
(the “Board”) an application for tax increment assistance with respect to certain eligible costs of
the Project;
WHEREAS, by resolution adopted on January 3, 2019, the Board approved and
recommended that the City Commission approve, subject to the terms and conditions of this
Agreement, the application of tax increment assistance in the amount of $650,000 with respect to
certain eligible costs of the Project, which amount was based on estimated Project costs available
at that time;
WHEREAS, the Parties recognize that costs of construction in the City continue to rise,
and the Parties expect that the actual costs of the Project, including such eligible costs, are likely
to continue to rise;
WHEREAS, the City Commission approved the application for tax increment assistance
with respect to certain eligible costs of the Project;
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WHEREAS, pursuant to Resolution No. 4991 adopted on February 11, 2019, after a duly
called and noticed public hearing, the City Commission approved the Project as an urban
renewal project under the Plan and the Act and authorized the use of tax increment revenue of
the District to reimburse the Developer for certain eligible costs of the Project described more
particularly on Exhibit C hereto (the “Eligible Costs”) in the maximum amount of $747,500
(reflecting $650,000 originally approved by the Board, plus a 15% contingency to take into
account rising construction prices), subject to the terms and conditions of this Agreement; and
WHEREAS, certain of the Eligible Costs are costs paid by the Developer in connection
with the design, engineering, work, construction, materials, equipment, and other improvements
eligible to be reimbursed by Tax Increment, which improvements are identified as such
on Exhibit C hereto (the “Infrastructure Improvements”), and certain of the Eligible Costs are
costs to be paid by the Developer as fees or charges pertaining to the Project, which fees and
charges are identified as such on Exhibit C hereto (the “Project Fees and Charges”); and
WHEREAS, the City Commission may determine in its sole discretion to issue tax
increment urban renewal revenue bonds in one or more series (the “Bonds”) to finance all or a
portion of the Eligible Costs to be reimbursed to the Developer in the maximum amount of
$747,500 and pay associated costs of the financing; and
WHEREAS, the Parties desire to enter into this Agreement which sets forth the
obligations and commitments of the Parties with respect to the Project, including the Eligible
Costs consisting of the costs of the Infrastructure Improvements and of the Project Fees and
Charges.
NOW, THEREFORE, the City and the Developer, pursuant to the Act, each in
consideration of the representations, covenants and agreements of the other, as set forth herein,
mutually represent, covenant and agree as follows:
Section 1. Definitions; Rules of Interpretation; Exhibits.
1.1. Definitions. For all purposes of this Agreement, except as otherwise expressly
provided or unless the context clearly requires otherwise, the following terms have the meanings
assigned to them, respectively:
“Act” means Montana Code Annotated, Title 7, Chapter 15, Parts 42 and 43, as amended
or supplemented.
“Agreement” means this Development Agreement, dated as of February 11, 2019, by
and between the City and the Developer, as it may be amended or supplemented from time to
time in accordance with the terms hereof.
“Bonds” has the meaning given in the Recitals above.
“City” means the City of Bozeman, Montana, or any successors to its functions under
this Agreement.
“City Commission” means the governing body of the City.
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“Costs of Issuance” means, if the City issues Bonds, the following costs but only to the
extent incurred in connection with, and allocable to the Bonds: underwriter’s spread, counsel
fees, financial advisor fees, rating agency fees, trustee fees, paying agent fees, bond registrar,
certificate, and authentication fees, accounting fees, printing costs for bonds and offering
documents, public approval process costs, feasibility study costs, guarantee fees, other than for
qualified guarantees; and similar costs.
“Developer” means Life Style Solutions Real Estate, LLC, a Montana limited liability
company, and its successors and assigns in accordance with and as permitted under this
Agreement.
“Developer Certificate” means the certificate attached hereto as Exhibit E.
“District” means the Bozeman Midtown Urban Renewal District, an urban renewal
district created by the Ordinance pursuant to the Act, as such may be enlarged or reduced from
time to time in accordance with the Act.
“DOR” means the State of Montana Department of Revenue.
“Eligible Costs” means the costs identified as such on the attached Exhibit C.
“Environmental Laws and Regulations” means and includes the Federal
Comprehensive Environmental Compensation Response and Liability Act (“CERCLA” or the
“Federal Superfund Act”) as amended by the Superfund Amendments and Reauthorization Act
of 1986 (“SARA”), 42 U.S.C. §§ 9601 et seq.; the Federal Resource Conservation and Recovery
Act of 1976 (“RCRA”), 42 U.S.C. §§ 6901 et seq.; the Clean Water Act, 33 U.S.C. § 1321 et
seq.; and the Clean Air Act, 42 U.S.C. §§ 7401 et seq., all as the same may be from time to time
amended, and any other federal, state, county, municipal, local or other statute, code, law,
ordinance, regulation, requirement or rule which may relate to or deal with human health or the
environment including without limitation all land use, zoning, and stormwater control
regulations as well as all regulations promulgated by a regulatory body pursuant to any statute,
code, law, ordinance, regulation, requirement or rule.
“Fiscal Year” means the period commencing on the first day of July of any year and
ending on the last day of June of the next calendar year, or any other twelve-month period
authorized by law and specified by the Commission as the City’s fiscal year.
“Indemnified Parties” has the meaning given to it in Section 7.1.
“Infrastructure Improvements” means the design, engineering, work, construction,
materials, equipment, and the other improvements, the costs of which form a part of the Eligible
Costs described as such in Exhibit C hereto, as the same may be amended or supplemented from
time to time, in accordance with the terms hereof.
“Land” has the meaning given to it in the recitals hereof.
“Land Use Regulations” means all federal, state and local laws, rules, regulations,
ordinances and plans relating to or governing the development or use of the Land or the Project.
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“Milestone” of “Milestones” has the meaning given in Section 3.4 hereof.
“Milestone Date” or “Milestone Dates” has the meaning given in Section 3.4 hereof.
“Ordinance” has the meaning given to it in the recitals hereof.
“Person” means any individual, corporation, limited liability company, partnership,
limited liability partnership, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
“Prevailing Wage Rates” means the Montana Prevailing Wage Rate for public works
projects as published from time to time by and available from the Montana Department of Labor
and Industry, Research and Analysis Bureau, P.O. Box 1728, Helena, Montana 59624, telephone
number (800) 541-3904.
“Project” means the facilities to be constructed by the Developer on the Land pursuant to
this Agreement, as described more particularly on the attached Exhibit A.
“Project Fees and Charges” means those fees and charges pertaining to the Project that
form a part of the Eligible Costs described as such in Exhibit C hereto, as the same may be
amended or supplemented from time to time, in accordance with the terms hereof.
“State” means the State of Montana.
“Tax Increment” means the amount received by the City pursuant to the Act from the
extension of levies of Taxes (expressed in mills) against the incremental taxable value (as
defined in the Act) of all Taxable Property, and shall include all payments in lieu of Taxes
attributable to the incremental taxable value and all payments received by the City designated as
replacement revenues for lost Tax Increment.
“Taxable Property” means all real and personal property located in the District and
subject to Taxes, including land, improvements and equipment.
“Taxes” means all taxes levied on an ad valorem basis by any Taxing Body against the
Taxable Property (exclusive of the six mill levy for university purposes levied by the State), and
shall include all payments in lieu of taxes received by the City with respect to Taxable Property.
“Taxing Body” means the City; the County of Gallatin, Montana; High School District
No. 7 (Bozeman), Gallatin County, Montana; Elementary School District No. 7 (Bozeman),
Gallatin County, Montana; the State; and any other political subdivision or governmental unit
that levies or may hereafter levy or cause to be levied Taxes against property within the District.
“Unavoidable Delay” means a delay resulting from a cause over which the Party
required to perform does not have control and which cannot or could not have been avoided by
the exercise of reasonable care, including but not limited to, acts of God, accidents, war, civil
unrest, embargoes, strikes, unavailability of raw materials or manufactured goods, litigation, and
the delays of the other Party or its contractors, agents or employees in the performance of their
duties under or incident to this Agreement.
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1.2. Rules of Interpretation.
(a) The words “herein,” “hereof” and words of similar import, without reference to
any particular section or subdivision, refer to this Agreement as a whole rather than to any of its
particular sections or subdivisions.
(b) References to any particular section or subdivision hereof are to the section or
subdivision of this Agreement in its original signed form, unless otherwise indicated.
(c) The word “or” is not exclusive but is intended to contemplate or encompass one,
more or all of the alternatives conjoined.
1.3. Exhibits. The following Exhibits are attached to and by reference made a part of
this Agreement:
Exhibit A: Project and Project Costs
Exhibit B: Description of the Land
Exhibit C: Eligible Costs; Infrastructure Improvements and Project Fees and
Charges
Exhibit D: Milestones
Exhibit E: Form of Developer Certificate
Exhibit F: City’s Statement of Non-Discrimination
Section 2. Representations.
2.1. City Representations. The City hereby represents as follows:
(a) Pursuant to the Act, and after a public hearing duly called and held, the City by
the Ordinance has duly created the District.
(b) Pursuant to Resolution No. 4991 of the City Commission, the City approved the
use of Tax Increment, if available, to reimburse or, as appropriate, pay the Eligible Costs in a
total amount not to exceed $747,500. Subject to the terms and conditions of this Agreement, the
City intends to reimburse the Developer for the Eligible Costs in an amount not to exceed
$747,500.
(c) The DOR has advised the City that, as of January 1, 2019, the base taxable value
(as defined in the Act) of the District is $3,507,723.
(d) Based on the representations of the Developer, beginning in the fiscal year ending
June 30, 2020, the completed Project is expected to have a market value of at least $5,643,334.
(e) The City Commission has duly authorized the execution and delivery of this
Agreement.
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2.2. Developer Representations. The Developer hereby represents as follows:
(a) The Developer is a Montana limited liability company, duly formed, validly
existing and in good standing under the laws of the State and is duly qualified to do business in
the State. The Developer has the power to enter into this Agreement and by all necessary
corporate action has duly authorized the execution and delivery of this Agreement.
(b) Life Style Solutions Real Estate, LLC has good marketable title to the Land, free
and clear of all liens, encumbrances and defects except such as do not materially affect the value
of the Land or materially interfere with the use made and proposed to be made of the Land by the
Developer.
(c) The Developer has the financial capability or commitments to complete the
Project at a cost not less than $6,676,666.90
(d) The Developer is not aware of any facts the existence of which would cause the
Developer to be in violation in any material respect of any Environmental Laws and Regulations
applicable to the Project or the Infrastructure Improvements. The Developer has not received
from any local, state or federal official any notice or communication indicating that the activities
of the Developer have been, may be or will be in violation of any Environmental Laws and
Regulations applicable to the Project or the Infrastructure Improvements.
(e) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions hereof is prohibited or limited by, conflicts with or results in a breach of the terms,
conditions or provisions of the certificate of formation, partnership agreement or operating
agreement of the Developer or any evidence of indebtedness, agreement or instrument of
whatever nature to which the Developer is now a party or by which it is bound, or constitutes a
default under any of the foregoing.
(f) There is no action, suit, investigation or proceeding now pending or, to the
knowledge of the Developer, threatened against or affecting the Developer or its business,
operations, properties or condition (financial or otherwise) before or by any governmental
department, commission, board, authority or agency, or any court, arbitrator, mediator or grand
jury, that could, individually or in the aggregate, materially and adversely affect the ability of the
Developer to complete the Project.
(g) The Developer acknowledges and agrees that the sole source of funds for
reimbursing the Developer under this Agreement is Tax Increment and/or proceeds of the Bonds,
which would be paid from Tax Increment. The Developer further acknowledges and agrees the
amount of Tax Increment is dependent upon a number of variables, including, without limitation,
the taxable value of the Project, the number of mills levied by Taxing Bodies, and then-
prevailing state laws regarding computation of Tax Increment. The Developer agrees that if Tax
Increment in the amount of $747,500 is not available to the City to reimburse the Developer
and/or, if the City, in its sole discretion, determines that it cannot reasonably sell the Bonds,
whether due to lack of Tax Increment, market conditions, or otherwise, the City shall have no
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obligation to pay to the Developer the amount of reimbursement described in Section 4. The
Developer agrees that such event shall not constitute a default by the City hereunder.
(h) The Developer acknowledges and agrees that the estimates of assessed (market)
and taxable values set forth in this Agreement (and any resulting estimates of Tax Increment) are
estimates only and are based on information provided by the Developer to the City and various
assumptions that the City believes are reasonable. Actual assessed (market) and taxable values
of the Project and actual Tax Increment generated by the Project or in the District may vary
significantly based on variables over which the City has no control.
(i) The Developer acknowledges and agrees that the Bonds, if authorized and issued,
are special, limited obligations of the City and shall not be paid from any funds of the City other
than Tax Increment. The Developer understands and agrees the Bonds, if authorized and issued,
will be subject to all the terms and conditions of the bond resolution authorizing their issuance
(the “Bond Resolution”), including, without limitation, if the City determines in its sole
discretion, a requirement that the Developer make up any shortfalls in the Tax Increment
available to pay the debt service on the Bonds, and that, if the Bonds are draw-down bonds, the
City may be prohibited from making future draws on the Bonds if all the conditions applicable to
a draw are not satisfied. The Developer acknowledges and agrees that an event of default or
default under the Bonds or the Bond Resolution does not constitute a default under this
Agreement, unless the event of default or default is a result of the failure by the Developer to
perform an obligation of the Developer identified in the Bond Resolution.
Section 3. Developer Undertakings.
3.1. Construction and Maintenance of Project. The Developer hereby agrees and
commits to the City that it will diligently prosecute to completion the construction of the Project
in accordance with this Agreement, the site plan submitted to the City and all applicable federal,
State and local laws, rules, regulations, ordinances and plans relating to or governing the
development or use of the Project, including applicable Land Use Regulations and
Environmental Laws and Regulations. The Developer agrees and commits to the City that
construction of the Project shall be complete and a certificate of occupancy issued no later than
September 1, 2020, subject to Unavoidable Delays. The total costs of the Project are shown on
Exhibit A hereto. The Developer has the financial capacity to complete the Project, and the
Developer agrees to pay all costs thereof. If there is an increase in the costs of the Project from
that shown on Exhibit A hereto that cannot be covered by the contingency amount, the
Developer shall notify the City of the increase and submit additional evidence in a form
acceptable to the City that the Developer has the financial capacity to cover such additional costs
and complete the Project. At all times during the term of this Agreement, the Developer will
operate and maintain, preserve and keep the Project or cause the Project to be operated,
maintained, preserved and kept for the purposes for which it was constructed, and with the
appurtenances and every part and parcel thereof, in good repair and condition. The Developer
agrees to permit the City and any of its officers, employees or agents access to the Land for the
purpose of inspection of all work being performed in connection with the Project; provided,
however, that the City shall have no obligation to inspect such work.
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3.2. Preparation, Review and Approval of Construction Plans. In connection with the
Project, the Developer, at its sole expense, shall prepare and submit construction plans, drawings,
and related documents for each portion of the Project to the appropriate City officials for
architectural, engineering or land use review and written approval or permits. The Developer
acknowledges that no review or approval by City officials hereunder may be in any way
construed by the Developer to replace, override or be in lieu of any required review, inspection,
or approval by the City or any other building construction official review or approvals required
by any State laws or local ordinances or regulations. Nothing contained in this Agreement
indicates or evidences that the City has approved or will approve the Project or any portion
thereof. This Agreement does not affect or limit the City’s regulatory powers with regard to the
Project, including, without limitation, those relating to building permits or other permits or the
payment of fees.
3.3. Construction of the Infrastructure Improvements. The Developer shall acquire,
install, construct or otherwise provide the Infrastructure Improvements. The Developer
acknowledges and agrees that the City is not responsible for acquiring, installing, constructing or
otherwise providing the Infrastructure Improvements. The estimated costs of the Infrastructure
Improvements, which form a part of the Eligible Costs, are shown on Exhibit C hereto.
Developer may not seek approval of an improvements agreement or seek to secure the
completion of any Infrastructure Improvements after certificate of occupancy.
3.4. Milestones of the Project. Certain steps in the development of the Project are
listed on Exhibit D attached hereto (collectively, the “Milestones”; each a “Milestone”),
together with the dates by which the Developer is obligated to complete the Milestones
(collectively, the “Milestone Dates”; each as it relates to a particular Milestone, the “Milestone
Date”). The Developer acknowledges and agrees that the City in reserving or offering to make
available Tax Increment to pay or reimburse the Eligible Costs necessarily means that certain
Tax Increment is not available to pay or reimburse other undertakings or costs for the benefit of
the District and that the City reasonably expects additional Tax Increment as a result of
completion of the Project. The Developer acknowledges and agrees that conditioning the
availability of Tax Increment or proceeds of Bonds to pay or reimburse the Eligible Costs on
completion or satisfaction of the Milestones by the corresponding Milestone Dates is reasonable.
If the Developer is unable to complete or satisfy a Milestone by the corresponding Milestone
Date, the Developer shall make a formal written request to the City Commission, with
appropriate supporting material, to extend the Milestone Date and, as appropriate, subsequent
Milestone Dates. The City Commission may, in its sole discretion, determine whether such
extension is appropriate and, if so, fix a new and superseding Milestone Date and also adjust
other subsequent Milestone Dates, along with any other terms or conditions, or it may, in its sole
discretion, elect to terminate this Agreement, in which case the City will have no obligation to
reimburse or pay the Developer hereunder.
3.5. Prevailing Wage Rates; Competitive Bidding. The Developer understands that
the City is obligated to follow certain laws with respect to the expenditure of public funds, which
includes Tax Increment. The Developer agrees to comply with laws that govern City contracting
obligations, including public procurement laws relating to all of the Infrastructure Improvements,
such as, without limitation, laws and rules regarding prevailing wage and solicitation of work on
a competitive basis.
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Without limitation of the foregoing, the Developer agrees that in the awarding of
contracts for the Infrastructure Improvements (i) it will, and it will cause its contractor to,
publicly bid competitively contracts for each component of the Infrastructure Improvements, and
(ii) through its contract with its contractor, it will, in addition to the requirements of Sections 3.9
and 3.10, require its contractor to, pay the Prevailing Wage Rates on such contracts related to the
Infrastructure Improvements. The Developer will provide to the City all documentation
requested to verify the compliance of the Developer and its contractor with the foregoing
requirements. Failure of the Developer or its contractor to bid competitively contracts for each
component of the Infrastructure Improvements or to require contracts entered into directly with
contractors or sub-contractors to include provisions requiring the contractor or sub-contractor to
pay the Prevailing Wage Rates on the work related to the Infrastructure Improvements will be
considered a breach of this Agreement and the City will be entitled, at its discretion and without
obligation, to exercise any and all measures to assure compliance and retroactive compensation
plus interest to workers not paid in accordance with this Agreement, and recovery of any penalty
or fine assessed by the State attributed to any failure to pay the Prevailing Wage Rates.
Additionally, the Developer acknowledges that a violation of these requirements may, in the
City’s sole discretion, cause the Infrastructure Improvements to be ineligible for the application
of Tax Increment, in which case the City will have no obligation to reimburse or pay the
Developer hereunder.
3.6. Utilities. The Developer shall not interfere with, or construct any improvements
over, any public street or utility easement without the prior written approval of the City. All
connections to public utility lines and facilities shall be subject to approval of the City and any
private utility company involved. The Developer at its own expense shall replace any public
facilities or utilities damaged during the Project by the Developer or its agents or by others acting
on behalf of or under their direction or control of the Developer.
3.7. Permits and Compliance With Laws. The Developer will obtain, in a timely
manner, all required permits, licenses and approvals, and will meet all requirements of all local,
state and federal laws, rules and regulations which must be obtained or met in connection with
the acquisition and construction of the Project, including the Infrastructure Improvements.
Without limiting the foregoing, the Developer will request and seek to obtain from the City or
other appropriate governmental authority all necessary land use, zoning, and building permits.
The Developer will comply in all material respects with all Environmental Laws and Regulations
applicable to the construction, acquisition, and operation of the Project, including the
Infrastructure Improvements, will obtain any and all necessary environmental reviews, licenses
or clearances under, and will comply in all material respects with, Environmental Laws and
Regulations. In addition, the Developer shall comply fully with all applicable state and federal
laws, regulations, and municipal ordinances related to worker safety including but not limited to
the Occupational Safety and Health Act (OSHA), the safety rules, codes, and provisions of the
Montana Safety Act in Title 50, Chapter 71, MCA, all applicable City, County, and State
building and electrical codes, and the Americans with Disabilities Act.
3.8. Easements. To the extent that the Infrastructure Improvements are to be located
on the Land, the Developer hereby agrees to grant to the City and applicable utility companies
from time to time such easements, rights-of-way and similar licenses in a form required by the
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City and as are reasonably necessary to permit the City to own, operate and maintain the
Infrastructure Improvements.
3.9. Non-Discrimination Statement. The Developer agrees to require its contractor(s)
to be in compliance with the City’s Statement of Non-Discrimination attached hereto as Exhibit
F, as well as Title 49, Montana Code Annotated, regarding activities related to the Project,
including the Infrastructure Improvements. The Developer agrees that in its contracts with its
contractors the Developer’s contractor will be required to require its subcontractors to comply
with the City’s Statement of Non-Discrimination attached hereto as Exhibit F, as well as Title
49, Montana Code Annotated, regarding activities related to the Project. The Developer agrees to
provide copies of all such contracts upon request by the City.
3.10. Worker’s Compensation Insurance. The Developer shall provide in its
construction contracts related to the Project with all of its respective contractors that such
contractors are to be covered by a Worker’s Compensation insurance program with the State, a
private insurance carrier, or an approved self-insurance plan in accordance with State law.
3.11. Cooperation with City and DOR. The Developer agrees to provide to the City
and, as requested, the DOR information that may be required by the City and/or the DOR to
determine, or make reasonable projections regarding, the amount and timing of receipt of Tax
Increment resulting from the Project. Such information may include, but is not limited to timing
of construction and estimated completion dates of all or portions of the Project, costs of
construction, materials used in construction, uses of the Project or any portion thereof,
allocations of uses to spaces and square feet of spaces included in the Project, and any other
information that may be relevant. The Developer understands and agrees that the City will rely
on such information from the Developer in making determinations regarding the amount of Tax
Increment resulting from the Project that may be available and the timing of the availability of
Tax Increment resulting from the Project, and that such information may be a critical factor in
the City’s determination regarding whether to issue and the sizing and other features of the
Bonds.
3.12. Project Fees and Charges. The Developer reasonably expects that it will
capitalize the Project Fees and Charges (other than Costs of Issuance, if any) into the costs of the
Project, and treat such fees and charges as capital expenditures.
Section 4. City Undertakings. Subject to satisfaction of all conditions in Section 5
below, and solely from Tax Increment on hand or proceeds of the Bonds, the City agrees to
reimburse the Developer for, or, as applicable, pay the Eligible Costs in an amount not to exceed
$747,500. The Parties acknowledge and agree that, subject to the terms and conditions of this
Agreement, (i) the actual sum of all Eligible Costs may exceed $747,500, but $747,500 is the
maximum amount that the City will reimburse the Developer for Eligible Costs; and (ii) if the
actual sum of all Eligible Costs exceeds $747,500, the City has discretion to allocate the
reimbursable amount among the Eligible Costs. The City may issue the Bonds in its sole
discretion to pay or reimburse all or a portion of the Eligible Costs to be paid or reimbursed. The
Bonds, if authorized and issued, will have such terms and conditions as are approved by the City
Commission. This Agreement does not require or imply that the City has any obligation to issue
the Bonds.
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Section 5. Payment of Reimbursement Amount for the Eligible Costs. Payment of
the amount of reimbursement described in Section 4 by the City to the Developer for Eligible
Costs paid by the Developer shall be subject to the following conditions and in accordance with
the following procedures:
5.1. Conditions to Payment or Reimbursement.
(a) (i) The Developer must have completed or satisfied each of the Milestones by the
applicable Milestone Date, as such date may have been extended by the City Commission
pursuant to Section 3.4 hereof, (ii) the City must have issued a certificate of occupancy for the
Project, (iii) the Infrastructure Improvements must have been completed in their entirety and the
City must have delivered to the Developer written acceptance of the Infrastructure Improvements
(which may be in the form of a Certificate of Completion or such other format as required by the
City), and (iv) the Developer must demonstrate to the City’s satisfaction, by a title report or other
means acceptable to the City, that the Infrastructure Improvements are free of financial liens and
any encumbrances affecting the Infrastructure Improvements must be acceptable to the City.
(b) Reimbursement by the City for costs of the Infrastructure Improvements must be
based on paid invoices for costs incurred by the Developer, its contractors and subcontractors or
utility companies, which the Developer must supply to the City. The City may reject, in its sole
discretion, any invoice related to the Infrastructure Improvements. The City will notify the
Developer of any rejected invoice and the reason it was rejected.
(c) The Parties agree that the City will have no obligation to pay or reimburse any of
the Eligible Costs unless at the time of such request (i) all of the Developer’s representations as
set forth in Section 2.2 are true and correct, (ii) the Developer is not in breach of any covenant or
undertaking as set forth in Section 3, and (iii) unless and to the extent the City issues the Bonds,
there shall be adequate Tax Increment on hand to pay the amount of the reimbursement or cost or
expense and satisfy all other financial obligations related to the District.
(d) If some or all of the Eligible Costs are to be paid with the proceeds of the Bonds,
the City shall have determined, in its sole discretion, but with the cooperation of the Developer,
that the Tax Increment is sufficient to pay the debt service on the Bonds as and when due and, as
applicable, to satisfy other requirements under the Bond Resolution, such as funding an adequate
reserve, meeting applicable debt service coverage requirements, and paying costs of issuance,
and to satisfy all other financial obligations related to the District. The Developer understands
and agrees the City shall have no obligation to and may not issue the Bonds if the City is unable
to find and determine that the Tax Increment is sufficient to pay the Bonds timely, to satisfy the
requirements of the Bond Resolution, and to satisfy all other financial obligations related to the
District.
If any of the above conditions are not satisfied in the determination of the City, the City
shall have no obligation to pay or reimburse any of the Eligible Costs and the City’s
determination to refrain from paying or reimbursing, or its inability to pay or reimburse, any of
the Eligible Costs shall not be or result in a default of this Agreement.
5.2. Process for Payment or Reimbursement.
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(a) By the date that is 90 days before the date the Developer estimates the Project will
be first placed in service, the Developer shall notify the City in writing of the components of the
Project remaining to be completed before it expects the City will issue the certificate of
occupancy for the Project. The Developer shall provide a further update to the City when it
reasonably expects that the Project will be placed in service in roughly 30 days.
(b) After receiving a certificate of occupancy for the Project, the Developer shall
provide to the City a signed request for reimbursement substantially in a form attached as Exhibit
E hereto and acceptable to the City, accompanied by the invoices and lien waivers from the
contractors or subcontractors performing or that have performed the work to be reimbursed. In
addition, the Developer agrees to provide to the City any additional information requested by the
City for the City to determine whether the Developer’s request for reimbursement complies with
this Agreement.
(c) By the date that is five months after the submission by the Developer of a
complete and acceptable request for reimbursement, as determined by the City, the City, subject
to the terms and conditions of this Agreement, shall reimburse to the Developer such Eligible
Costs, in an amount not to exceed $747,500, either directly from Tax Increment or from proceeds
of Tax Increment Bonds; provided, however, if the City shall earlier determine that the Tax
Increment is not sufficient to reimburse the Developer for the Eligible Costs it has paid, either
because there is insufficient Tax Increment then available or the City determines there is
insufficient Tax Increment to permit the issuance of Bonds, then the City shall so inform the
Developer in writing and this Agreement shall thereupon terminate and neither Party will have
any further rights or obligations hereunder, except as set forth in those provisions that expressly
survive termination of this Agreement.
Section 6. Sources of Repayment; Covenants to Pay Taxes.
6.1. Taxes. The Developer shall pay or cause to be paid when due and prior to the
imposition of penalty all Taxes and all installments of any special assessments payable with
respect to the Land and the Project and any improvements thereto or extension thereof.
6.2. Maintenance of Land and Project. The Developer agrees to use its commercially
reasonable best efforts to maintain and operate the Land and the Project so as to be able at all
times to pay promptly and when due all property taxes levied with respect to the Land and the
Project.
6.3. Injunction; Specific Performance. The Parties agree that, in the event of a breach
of this Section 6 by the Developer or its successors or assigns, the City would suffer irreparable
harm. Therefore, in the event the Developer or its successors or assigns fails to comply with the
provisions of this Section 6, the Developer agrees that the City may pursue any remedy at law or
in equity, including the remedies of injunction and specific performance.
Section 7. Indemnification and Insurance.
7.1. Indemnification. The Developer releases the City and all City Commission
members, board members, officers, agents, servants and employees of the City (the
“Indemnified Parties”) from, and covenants and agrees that the Indemnified Parties shall not be
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liable for, and agrees to indemnify, defend and hold harmless the Indemnified Parties against,
any loss, damage, cost (including reasonable attorneys’ fees), claim, demand, suit, action or other
proceeding whatsoever (i) arising or purportedly arising out of, or resulting or purportedly
resulting from, the acquisition and construction of the Project, including the Infrastructure
Improvements, any violation by the Developer of any agreement, condition or covenant of this
Agreement, the ownership, maintenance and operation of the Project, or the presence on any
portion of the Land, of any dangerous, toxic or hazardous pollutants, contaminants, chemicals,
waste, materials or substances; or (ii) which is proximately caused by the Developer or its
officers, agents, contractors, consultants or employees.
7.2. Insurance. Developer shall keep and maintain the Project at all times insured
against such risks and in such amounts, with such deductible provisions, as are customary in
connection with facilities of the type and size comparable to the Project, and the Developer shall
carry and maintain, or cause to be carried and maintained, and pay or cause to be paid timely the
premiums for direct damage insurance covering all risks of loss, including, but not limited to, the
following:
1. fire
2. extended coverage perils
3. vandalism and malicious mischief
4. boiler explosion (but only if steam boilers are present)
5. collapse
on a replacement cost basis in an amount equivalent to the Full Insurable Value thereof. “Full
Insurable Value” shall include the actual replacement cost of the Project, exclusive of
foundations and footings, without deduction for architectural, engineering, legal or
administrative fees or for depreciation. The policies required by this Section 7.2 shall be subject
to a no coinsurance clause or contain an agreed amount clause, and must contain a deductibility
provision not exceeding $100,000.
Subject to the terms of any mortgage relating to the Project, policies of insurance
required by this Section 7.2 shall insure and be payable to Developer, and shall provide for
release of insurance proceeds to Developer for restoration of loss. The City shall be furnished
certificates showing the existence of such insurance. In case of loss, Developer is hereby
authorized to adjust the loss and execute proof thereof in the name of all parties in interest.
During construction of the Project, any and all of the foregoing insurance policies may be
maintained by the Developer’s contractor; provided that once the Project is placed into service,
Developer shall maintain all of the foregoing insurance policies. In addition, as a condition to
placing the Project in service, the City may require that the Developer or owner of the Project
obtain additional insurance that would protect the City or the City’s interest in the Infrastructure
Improvements.
In addition to and independent of the above, the Developer shall at the Developer’s
expense secure liability insurance through an insurance company or companies duly licensed and
authorized to conduct insurance business in Montana. The insurance shall not contain any
exclusion for liabilities specifically assumed by the Developer in this Section. The insurance
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shall cover and apply to all claims, demands, suits, damages, losses, and expenses that may be
asserted or claimed against, recovered from, or suffered by the City in relation to construction of
the Project and the Infrastructure Improvements without limit and without regard to the cause
therefore. The Developer must furnish to the City an accompanying certificate of insurance and
accompanying endorsements in amounts not less than as follows:
Commercial General Liability - $1,000,000 per occurrence; $2,000,000 annual
aggregate
The above amounts shall be exclusive of defense costs. The City, its officers, agents, and
employees, shall be endorsed as an additional or named insured on a primary non-contributory
basis on the Commercial General Liability policy. The insurance and required endorsements
must be in a form suitable to City and shall include no less than a thirty (30) day notice of
cancellation or non-renewal. The City must approve all insurance coverage and endorsements
prior to the Developer commencing work on Project or Infrastructure Improvements. Developer
must notify the City within two (2) business days of Developer’s receipt of notice that any
required insurance coverage will be terminated or Developer’s decision to terminate any required
insurance coverage for any reason.
Section 8. General Provisions.
8.1. Conflicts of Interest; City’s Representatives Not Individually Liable. The
Developer represents that it does not employ, retain, or contract with an officer or employee of
the City and that no member, officer or employee of the City has a personal or financial interest,
direct or indirect, in this Agreement or in the Project, or a financial interest in the Infrastructure
Improvements. No member, officer or employee of the City shall be personally liable to
Developer in the event of any default under or breach of this Agreement by the City, or for any
amount that may become due to Developer for any obligation issued under or arising from the
terms of this Agreement.
8.2. Rights Cumulative. The rights and remedies of the Parties of this Agreement,
whether provided by law or by this Agreement, shall be cumulative, and the exercise by any
Party hereto of any one or more of such remedies shall not preclude the exercise by such Party,
at the same or different times, of any other remedy for the same default or breach or of any of its
remedies for any other default or breach of the Party subject to the limitation of remedies
provided herein. No waiver made by such Party with respect to the performance or the manner
or time thereof, of any obligation under this Agreement, shall be considered a waiver with
respect to the particular obligation of the other Party or a condition to its own obligation beyond
those expressly waived in writing and to the extent thereof, or a waiver in any respect in regard
to any other rights of the Party making the waiver of any obligations of the other Party. Delay by
a Party hereto instituting or prosecuting any cause of action or claim hereunder shall not be
deemed a waiver of any rights hereunder.
8.3. Term of Agreement. This Agreement shall remain in effect until the date that it
terminates or is terminated by the City, as follows:
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(a) If payment or reimbursement of Eligible Costs is made directly from Tax
Increment and not proceeds of Bonds, this Agreement will terminate on the date that is 10 days
after the date the City makes the final payment or reimbursement of Eligible Costs to the
Developer hereunder.
(b) If the City issues Bonds, this Agreement will remain in effect until the final
maturity or payment date of the Bonds or such earlier date that the Bonds are prepaid in full,
discharged, and no longer outstanding.
(c) This Agreement may be terminated by the City in its sole discretion on a date
earlier than described in (a) or (b) above at any time after failure by the Developer to complete or
satisfy a Milestone by the applicable Milestone Payment Date.
(d) If the City has determined Tax Increment is insufficient under Section 5.2(c)
above, this Agreement shall terminate in the manner and on the date described in Section 5.2(c)
above.
(e) Notwithstanding the foregoing provisions of this Section, Sections 6, 7, and 8 of
this Agreement shall in all events survive the termination of this Agreement.
8.4. Limitation on City Liability. No agreements or provisions contained in this
Agreement nor any agreement, covenant or undertaking by the City contained in any document
in connection with the Project, including the Infrastructure Improvements, or the Eligible Costs
shall give rise to any pecuniary liability of the City or a charge against its general credit or taxing
powers, or shall obligate the City financially in any way except with respect to then-available
Tax Increment. No failure of the City to comply with any term, condition, covenant or
agreement herein shall subject the City to liability for any claim for damages, costs or other
financial or pecuniary charge except to the extent that the same can be paid or recovered from
then-available Tax Increment; and no execution on any claim, demand, cause of action or
judgment shall be levied upon or collected from the general credit, general funds or taxing
powers of the City (except as such constitute then-available Tax Increment). Nothing herein
shall preclude a proper party in interest from seeking and obtaining specific performance against
the City for any failure to comply with any term, condition, covenant or agreement herein;
provided that no costs, expenses or other monetary relief shall be recoverable from the City
except as may be payable from the Tax Increment. This Agreement shall not constitute or be
construed to give rise to a debt of the City.
8.5. Assignment. This Agreement is unique between the City and Developer and no
Party may assign any rights or privileges, or delegate any duties or obligations under this
Agreement, without first obtaining the written consent of the other Party.
8.6. Successors Bound By Agreement; No Third Party Beneficiary; No Property
Interest. Subject to compliance with Section 8.5, this Agreement will inure to the benefit of and
be binding upon the Parties to this Agreement and their respective successors in interest and
permitted assignees. This Agreement is for the exclusive benefit of the Parties, does not
constitute a third-party beneficiary agreement, and may not be relied upon or enforced by a third
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party. This Agreement, by itself, does not create or give rise to a property interest in the Land or
the Project.
8.7. Prior Agreements. This Agreement supersedes, merges and voids any and all
prior discussions, negotiations, agreements and undertakings between the Parties with respect to
the subject matter of this Agreement. The Parties waive and release each other from any claims,
actions, or causes of action that relate in any manner to any prior discussions, negotiations,
agreements and undertakings between the Parties with respect to the subject matter of this
Agreement.
8.8. Entire Agreement. This Agreement, including any exhibits and attachments
hereto, embodies the entire agreement and understanding of the Parties with respect to its subject
matter. All Parties shall be prohibited from offering into evidence in any arbitration or civil
action any terms, conditions, understandings, warranties, statements or representations, whether
oral or written, with respect to the subject matter of this Agreement and that are not contained in
this Agreement.
8.9. Amendments, Changes and Modifications. This Agreement may be amended and
any of its terms may be modified only by written amendment authorized and signed by the
Parties hereto.
8.10. Headings. The headings of articles and sections in this Agreement are inserted for
convenience of reference only and do not limit or amplify the terms and provisions of the
Agreement in any manner. The headings will be ignored and will not affect the construction of
any provisions of this Agreement.
8.11. Notice. Any formal notice, demand or communication required or permitted by
the terms of this Agreement to be given to the City or Developer will be in writing and will be
delivered to such Party either: (i) by personal hand-delivery; or (ii) by depositing the same in the
United States mail, certified mail with return receipt requested, addressed to such Party at the
address named below, with postage prepaid thereon. Notice will be deemed complete upon
receipt of the notice pursuant to any of the foregoing methods of notice.
If to City:
City of Bozeman
Attention: Bozeman City Manager
121 N. Rouse Ave.
P.O. Box 1230
Bozeman, MT 59771
With a copy to:
Greg Sullivan, City Attorney
If to Developer:
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Life Style Solutions Real Estate, LLC
Attention: Colin Ruh
2415 San Ramon Valley Blvd., Suite 4200
San Ramon, California, 94583
The City and the Developer, by notice given hereunder, may designate different addresses to
which subsequent notices, certificates or other communications should be sent.
8.12. Severability. If any provision of this Agreement is declared void or held invalid,
such provision will be deemed severed from this Agreement and the remaining provisions of this
Agreement will otherwise remain in full force and effect.
8.13. Duplicate Originals or Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed to be an original copy of this Agreement and
all of which, when taken together, will be deemed to constitute one and the same agreement.
8.14. Place of Performance. The place of performance of this Agreement will be in the
City of Bozeman, Gallatin County, Montana.
8.15. Governing Law. This agreement and the legal relations between the Parties
hereto will be governed by and construed in accordance with the laws of the State of Montana,
without giving effect to any choice of law statutes, rules, or principles.
8.16. Dispute Resolution.
(a) Any claim, controversy, or dispute between the Parties, their agents, employees, or
representatives shall be resolved first by negotiation between senior-level personnel from each
Party duly authorized to execute settlement agreements. Upon mutual agreement of the Parties,
the Parties may invite an independent, disinterested mediator acceptable to the Parties to assist in
the negotiated settlement discussions.
(b) If the Parties are unable to resolve the dispute within thirty (30) days from the date
the dispute was first raised, then such dispute may only be resolved in a court of competent
jurisdiction in compliance with the applicable law and the provisions of this Agreement.
8.17. Further Assurances and Corrective Instruments. The Parties agree that they will,
from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements hereto and such further instruments as may reasonably be required
for correcting any inadequate or incorrect description of the Project, including the Infrastructure
Improvements, or the Eligible Costs or for carrying out the expressed intention of this
Agreement.
8.18. Reports/Accountability/Public Information. Developer agrees to develop and/or
provide documentation as requested by the City demonstrating the Developer’s compliance with
the requirements of this Agreement. Developer shall allow the City, its auditors, and other
persons authorized by the City to inspect and copy its books and records for the purpose of
verifying that the reimbursement of monies distributed to Developer pursuant to this Agreement
was used in compliance with this Agreement and all applicable provisions of federal, state, and
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local law. The Developer shall not issue any statements, releases or information for public
dissemination regarding this Agreement or the work contemplated hereunder without prior
written approval of the City.
[Balance of page intentionally left blank]
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IN WITNESS WHEREOF, the Parties hereto have caused this Development Agreement
to be executed as of the 11 day of February, 2019.
CITY OF BOZEMAN, MONTANA
By: _______________________________________
Printed Name: Andrea Surratt
Title: City Manager
[Signature Page to Development Agreement]
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LIFE STYLE SOLUTIONS REAL ESTATE, LLC
By:
Name:
Title:
[Signature Page to Development Agreement]
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A-1
EXHIBIT A
PROJECT AND PROJECT COSTS
SUMMARY DESCRIPTION OF PROJECT: The Ruh Building, a 3-story structure with a
restaurant/retail ground floor and residential units on floors 2 and 3.
PROJECT COSTS:
Land (Fair Market Value) ..........................................................................................$950,000.00
Soft Costs ...................................................................................................................$895,260.65
Hard Costs ...............................................................................................................$4,791,406.25
Extra Costs not in construction Estimate (e.g. alley behind recompute) .....................$40,000.00
Total Project Costs .......................................................................................$6,676,666.90
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B-1
EXHIBIT B
LEGAL DESCRIPTION OF THE LAND
DURSTON 2ND SUB, S01, T02 S, R05 E, BLOCK 1, LOT 1 – 2, ACRES .653, PLAT E‐ 33
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C-1
EXHIBIT C
The Parties acknowledge and agree that, subject to the terms and conditions of this
Agreement, (i) the actual sum of all Eligible Costs may exceed $747,500, but $747,500 is the
maximum amount that the City will reimburse the Developer for Eligible Costs; and (ii) if the
actual sum of all Eligible Costs exceeds $747,500, the City has discretion to allocate the
reimbursable amount among the Eligible Costs.
Summary Description of the Infrastructure Improvements:
Streetscape Improvements on N. 7th
Ave and Durston Rd., including
sidewalks, street trees and tree vaults, landscaping and street furniture
in the public right-of-way.
$235,000.00
Service lines, including the City of Bozeman fiber-optic conduit
installation, Northwestern Energy relocation of services, and a street
cutting to move the service lines as well as traffic management while
moving the lines.
$98,000.00
Northwestern Energy relocation of services, Northwestern Energy
primary, new transformer, and gas and electric services.
$45,000.00
Paving and stormwater facilities in the public alley
$40,000.00
Engineering and design fees for Infrastructure Improvements
$80,000.00
Demolition of structures
$48,000.00
Contingency
$20,833.10
Total Costs of Infrastructure Improvements
$566,833.10
Summary Description of the Project Fees and Charges:
City of Bozeman Impact Fees $143,319.34
City of Bozeman Cash In Lieu of Park Land $15,289.56
City of Bozeman Cash In Lieu of Water Rights $22,058.00
Total Project Fees and Charges $180,666.90
Total Eligible Costs $747,500.00
Total Reimbursable Value of Eligible Costs $747,500.00
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D-1
EXHIBIT D
MILESTONES
MILESTONE MILESTONE DATE
Site Plan Approval May 1, 2019
Infrastructure Plans Approved June 1, 2019
Building Permit Issued July 1, 2019
Foundation Inspection Complete
Issuance of Certificate of Occupancy
May 1, 2020
September 1, 2020
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E-1
EXHIBIT E
FORM OF DEVELOPER CERTIFICATE
TO: City of Bozeman, Montana
FROM: Life Style Solutions Real Estate, LLC (the “Developer”)
SUBJECT: Reimbursement for Eligible Costs
This Developer Certificate requests $_________ for reimbursement of Eligible Costs, as
defined in the Development Agreement between Life Style Solutions Real Estate, LLC and the
City of Bozeman, Montana, dated as of February 11, 2019 (the “Development Agreement”).
Capitalized terms used but not otherwise defined herein shall have the respective meanings given
such terms in the Development Agreement.
Pursuant to Section 5(d) of the Development Agreement, the undersigned hereby certifies
on behalf of the Developer that:
(a) the expenditures for which reimbursement is requested are listed in
summary form in the attached schedule headed “Project Expenditures;”
(b) invoices paid by the Developer corresponding to the expenditures set forth
on the attached Project Expenditures Schedule are appended to the attached schedule
headed “Project Invoices;”
(c) the amounts for which reimbursement is requested have been paid by the
Developer to the [City] for Project Fees and Charges or to contractors, subcontractors,
materialmen, engineers, architects or other persons who or that have performed necessary
or appropriate services or supplied necessary or appropriate materials for the acquisition,
construction, renovation, equipping, and installation of the Infrastructure Improvements;
(d) with respect to the Infrastructure Improvements, the contractor and
subcontractors were solicited and retained competitively and all persons performing work
on the Infrastructure Improvements were paid the Montana prevailing wage for such
work;
(e) no part of the several amounts requested to be paid, as stated in such
certificate, has been or is the basis for the payment of any money in any previous request;
(f) the reimbursement of the amounts requested will not result in a breach of
any of the covenants of the Developer contained in the Development Agreement; and
(g) no litigation has been instituted or is threatened with regard to any
amounts sought to be reimbursed, and binding and enforceable lien waivers have been
obtained from all contractors, subcontractors, materialmen, and others with regard to all
work related to any amounts for which reimbursement is requested.
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E-2
The Developer represents that all of the representations of the Developer in Section 2.2 of
the Development Agreement are true and correct as of the date hereof and the Developer is not in
default of the performance of any of its undertakings or obligations under Section 3 of the
Development Agreement as of the date hereof.
Dated: _____________, 20__ [__________________]
By:
Authorized Developer Representative
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F-1
EXHIBIT F
CITY’S STATEMENT OF NON-DISCRIMINATION
Statement of Non-Discrimination
____________________________________(name of entity submitting) hereby affirms it will
not discriminate on the basis of race, color, religion, creed, sex, age, marital status, national
origin, or because of actual or perceived sexual orientation, gender identity or disability and
acknowledges and understands the eventual contract will contain a provision prohibiting
discrimination as described above and this prohibition on discrimination shall apply to the hiring
and treatments or proposer’s employees and to all subcontracts.
______________________________________
Name and title of person authorized to sign on behalf of submitter
315
Lifestyle Solutions Real-estate
Bozeman
Midtown TIF
Assistance
Request
605 NORTH 7TH BOZEMAN MONTANA
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Page 1 of 49
Midtown Urban Renewal District TIF Assistance Revised
January 2017
PART 1
PROPERTY INFORMATION
•
APPLICANT INFORMATION
•
COMPANY PROFILE
•
PROJECT DETAIL
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Page 2 of 49
Midtown Urban Renewal District TIF Assistance Revised
January 2017
MIDTOWN TAX INCREMENT FINANCING (TIF) ASSISTANCE PROGRAM
INTRODUCTION
The Midtown Urban Renewal Plan (“Plan”), adopted by the Bozeman City Commission on
November 16, 2015, authorized the Midtown Urban Renewal Board (“Board”) to establish
monetary incentives in the Midtown Urban Renewal District (“District”) in support of the Plan’s
goal to promote economic development. The Board established and administers this Tax
Increment Financing (“TIF”) assistance program for the redevelopment and rehabilitation of
properties within the District.
TIF assistance applications are subject to program eligibility criteria and project guidelines listed
below. Applications will be accepted and processed in the order in which they are received and
approved based on the availability of funds for the program.
PURPOSE
The purpose of the TIF assistance program is to encourage desirable
development/redevelopment projects, as well as assist projects that would not otherwise occur
“but for” the assistance provided through tax increment financing. The purpose of this
document is to provide guidelines for the Board to offer monetary incentives for development
activities in the District in the form of TIF assistance funds.
This policy shall be used as a guide in processing and reviewing applications requesting TIF
assistance. The Board shall have the option of amending or waiving sections of this policy when
it determines, in its sole discretion, such an amendment or waiver is necessary or appropriate.
In amending or waiving any sections of this policy, the Board shall document the reason for the
deviation.
The provision of financial assistance is at the sole discretion of the Board. The Board reserves
the right to reject or approve applications on a case-by-case basis, taking into account
established policies, specific project criteria and the demand on District services in relation to
the potential benefits to be received from the proposed project. Meeting policy guidelines or
other criteria does not guarantee the award of TIF assistance. Furthermore, the approval or
denial of one application is not intended to set precedent for approval or denial of another
application.
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Page 3 of 49
Midtown Urban Renewal District TIF Assistance Revised
January 2017
PROGRAM OBJECTIVES
The primary objective of the TIF assistance program is to encourage investment in development
and redevelopment of commercial and mixed use property within the District in accordance
with the provisions of the Montana Urban Renewal Law (7-15-4209, 7-15-4233, and 7-15-4288,
M.C.A.). Additional District objectives are to:
• Encourage private investment in commercial property in the District through the use of
public incentives;
• Expand the property tax base in the District through private investment in income
producing properties;
• Stimulate economic and business development within the District; and
• Reduce blighting influences in the District
The grants are awarded at the discretion of the Board as authorized by the Bozeman City
Commission, based upon review of the Applicant's compliance with program objectives,
eligibility requirements, and eligible construction activities.
GENERAL POLICIES
1. TIF assistance priority will be given to projects that do not have the financial feasibility to
proceed without the benefit of the assistance.
2. The applicant shall provide any market and financial feasibility studies, appraisals or other
information provided to private lenders for the project as well as any other information or
data which the Board, or its financial consultants, may require in order to review the need
for TIF assistance.
3. TIF assistance will not be used for projects that place extraordinary demands on District
infrastructure or services.
4. The applicant must be able to demonstrate, to the Board’s satisfaction, an ability to
construct, operate and maintain the proposed project based upon past experience, general
reputation and credit history.
5. The applicant shall provide sufficient market, financial, environmental and other data
relative to the successful operation of the project.
6. The Applicant must retain ownership of the project long enough to complete it, to stabilize
its occupancy, to establish the project management, and to initiate payment of taxes based
on the increased project value. This application must be signed by both the applicant(s) and
the property owner(s) (if different).
7. Project plans and construction must comply with all applicable code and permit
requirements. Applicant is advised to consult with the City of Bozeman planning and
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building departments, licensed architects, engineers, or building contractors before
proceeding with final plans or construction.
8. The Applicant must demonstrate significant leverage of private investment through the use
of public dollars.
ELIGIBLE COSTS
TIF eligible expenses are defined by Montana Code Annotated, 7-15-4288 and further limited
by the Plan. The project seeking TIF assistance must be located within the boundary of the
District.
Costs related to the following are eligible for financial assistance:
1. Demolition and removal of structures
2. Construction and improvement of public improvements or infrastructure, including
streets, curbs, gutters, sidewalks, alleys, parking lots and off-street parking facilities,
sewer lines, storm sewers, waterlines, and impact fees
Requests for funding above $50,000 will require the ratification of the Bozeman City
Commission.
DISBURSEMENT OF ASSISTANCE FUNDS
The TIF assistance program is a reimbursement program. No funds will be disbursed until all
completion criteria have been satisfactorily met as determined by the Board in its sole
discretion. At the end of the project, the recipient will submit a Certificate of Completion and
required supporting documentation to the Board including itemized invoices and other
documentation as the Board may reasonably request.
USE OF ASSISTANCE FUNDS
The award of TIF assistance funds is subject to the Applicant entering into a grant agreement
with the District. The grant agreement will include requirements that the grantee comply with
(i) applicable City of Bozeman procurement regulations related to bidding, hiring, and prevailing
wages; (ii) the City’s nondiscrimination policy; and (iii) State of Montana public records laws.
The grant agreement will include such additional terms as the District in its sole discretion
determines are prudent or necessary to fulfill the goals of the TIF assistance program.
TIF assistance funds must be used within two years of the date of the Letter of Award. Any
funds not disbursed to the Applicant within that time will remain in the District fund. The
Board, in its sole discretion, may provide an extension of up to one year to the original two year
timeframe.
Use of TIF assistance funds must be in compliance with the terms of the grant agreement
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between the Applicant and the District.
REVOCATION OF AWARD
The grant agreement will include terms providing that an award of TIF assistance may be
revoked by the Board if the Board finds, in its sole discretion, that Applicant has failed to
comply with any of the terms of the assistance program or grant agreement, or has failed to
provide information or provided inaccurate information on the application. Upon such a
finding, the Board will provide Applicant with notice of the default and a 30-day opportunity to
cure before the award is revoked. The grantee will be required to return TIF assistance funds
already disbursed pursuant to the terms of the grant agreement.
DISCLAIMER: Neither the Board nor the City of Bozeman will be responsible for the planning,
design, or construction proposed by any work conducted as part of the TIF assistance
program. No warrantees or guarantees are expressed or implied by the description of,
application for, award of or participation in the TIF assistance program.
APPLICATION PROCESS AND PROCEDURE
Application for TIF assistance shall be made on the forms provided by the Board and submitted
to the Economic Development Department for review and comment. Deadlines for submittals
shall be as published and posted by the Board. Incomplete forms will be returned to the
applicant with an explanation on additional information as may be required.
For projects seeking TIF assistance for demolition or payment of impact fees, the City of
Bozeman Economic Development Department will review the application and provide a
recommendation to the Board and, if applicable, the Bozeman City Commission.
If approved by the Board, or City Commission, a “letter of intent” outlining the specific terms
and conditions of the TIF assistance will be provided to the applicant.
SUBMITTAL INFORMATION
There are two parts to the attached application. All applicants must complete Part 1. Applicants
requesting TIF assistance above $50,000 must complete and include information identified in
Part 2.
Part 1 – All Applications
Part 2 – Applications requesting funding over $50,000
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TAX INCREMENT FINANCING APPLICATION
PART 1
Property Information
Property Address: _________605 N 7th
St Bozeman MT, 59718________________________
Property Owner: __________Lifestyle Solutions Real-estate LLC_______________________
Legal Description: DURSTON 2ND SUB, S01, T02 S, R05 E, BLOCK 1, LOT 1 – 2, ACRES .653, PLAT E- 33_
Property Geo-Code: _____06-0798-01-3-08-01-0000________________________________
County Tax ID #: __________RGG5543___________________________________________
Applicant Information
Property Owner
Tenant
Developer
Other Property Manager
Applicant’s primary contact:
Name: ________Colin Ruh-Kirk___________________________________________
Business Name: ____Lifestyle Solutions Real-estate LLC________________________________
Business Phone: _____(406) 595-7959___________Cell Phone: _______(406) 595-7959___
Email: ______Colin.Ruh@LSSRE.com_____________________
Project Representative (if not applicant):
Name: ______Jesse Sobrepena__________________________________________________
Business Name: ______JDS Architects inc__________________________________________
Business Phone: ______(406)556-8080____________Cell Phone: _____(406)581-3939_______
Email: ______Jesse@JDSarchitectsbozeman.com____
Property Owner (if not applicant):
Name: _______Karen Ruh____________________________________________
Business Name: ______________ Lifestyle Solutions Real-estate LLC___________________
Business Phone: ______(925) 804-6279____________Cell Phone: ______(703) 919-9608__
Email: ______Karen.Ruh@LSSRE.com_______________
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Property Owner (if not applicant):
Name: _______William Ruh____________________________________________
Business Name: ______________ Lifestyle Solutions Real-estate LLC___________________
Business Phone: ______(925) 804-6279____________Cell Phone: ______(703) 850-8985__
Email: ______William.Ruh@LSSRE.com_______________
Please attach a list of all other property owners, business partners, developers and/or investors
associated with this project, with the above information provided for each.
This application must be signed by both the applicant(s) and the property owner(s) (if
different).
I (we), by signature below, certify that the information supplied in this application is, to the best
of my (our) knowledge, true, accurate, and complete, and is provided for the purpose of
obtaining approval to participate in the Midtown Urban Renewal District TIF assistance
program. I (we) understand that failure to comply with the terms of the TIF assistance program
may result in revocation of an award.
I (we) understand the work to be undertaken must be in accordance with all applicable
requirements of the Bozeman Municipal Code and any special conditions established by the
approval authority, and must receive all required approvals prior to commencing the work. I
(we) understand if approved for TIF assistance, the work to be performed must also be in
accordance with TIF assistance program procedures and the general design guidelines for the
District, as well as the specific plans approved for the project. I (we) acknowledge that the City
has an Impact Fee Program and impact fees may be assessed for my project. Further, I (we)
agree to grant City personnel and other review agency representative’s access to the subject
site during the course of the review process (Section 38.34.050, BMC).
Applicant (s) (Print Name)
Signature of Applicant Date
Property Owner(s) (Print Name)
Signature of Property Owner Date
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Company Profile
Business Location
New business establishing itself in Bozeman
Existing business
Expanding/remodeling at same location
Expanding to an additional location
Existing business relocating from (identify location):
Street Address: 605 N 7th
St
City: Bozeman, 59718 State: MT Zip: 59718
Other:
Year Business Established: 2018
Type of Business (Describe): Mixed-Use Commercial and Residential
Has a business plan been developed in relation to the proposed project?
No (Development of a business plan may be required as part of the application process.)
Yes (Include a copy with the application.)
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●
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Project Detail
Property Status:
Vacant land
Building on leased land – Describe:
Land and building(s) – Describe: Existing structure on .653-acre corner lot
Type of TIF Assistance Sought:
Requesting assistance for public infrastructure costs
Building demolition
Value of TIF Assistance Sought:
$ 726,666.90
Will this project proceed if TIF assistance is not granted?
No
In a limited fashion (explain): Without the TIF assistance there will be less or
cheaper exterior finishes and landscaping, little to no off-site improvement and a
reduction in parking.
Yes, but at a later date (explain):
Yes, as scheduled
Other:
1. Project Narrative
Provide an overview of the project in narrative format. The narrative must include a
description of the following aspects of the project:
Proposed use(s) or project (e.g. industrial, commercial, retail, office, mixed use,
residential for sale or for rental, etc.)
Construction information about the project including size of any existing structure to be
demolished or rehabbed; sized of any new construction; types of construction materials
(structural and finish); delineation of square foot allocation by use;
Total number and individual square footage of residential units; type of residential units
(e.g. for-sale, rental, condominium, single-family, etc.); number and type of parking
spaces provided; and construction phasing.
2. Site Maps and Building Plans
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The Applicant must submit a completed Conceptual Review Application to the Board and
concurrently to the Community Development Department. The Conceptual Review
application must include, at minimum:
Photographs of project site and/or building
Map showing the location of the site and its immediate surroundings
Proposed development plans including site plans, floor plans indicating square
footage and layout, building elevations
Description of parking accommodations for residential units and commercial uses
Estimated date of occupancy
Prior to Board action on the grant application, the Applicant must have obtained and provide
to the Board the Community Development Director’s written comments on the proposed
development from the Conceptual Review Application.
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CRITERIA FOR TIF ASSISTANCE
In reviewing the TIF assistance application the Board will evaluate each project utilizing the
following criteria and point system. Points can range from 0 to the maximum shown below in
each category. Please rate your project according to the following criteria. To receive points for
any given item, documentation demonstrating adherence to the criteria must be submitted
with the application. The Board will use this information to evaluate the project.
Overall District Relevance Points
1. Relevance to the Midtown Urban Renewal Plan – Documentation of the
project’s impact in relation to the goals and objectives of the Midtown Urban
Renewal Plan, particularly mixed-use development. Urban design elements
will also be considered, including pedestrian emphasis and quality of design.
5 /5
Promote Economic Development
2. Tax Generation: The project will increase the taxable value within the
District. The increase in taxable value due to new construction &
rehabilitation is estimated by the County Assessor’s office or State
Department of Revenue to determine tax increment generation. Submit
documentation of estimated tax projections to receive points for this criteria
4 /4
3. Elimination of Blight – The project’s direct and indirect impact on the physical
and fiscal deterioration within the Tax Increment Financing District and the
community. Submit information showing current conditions of property.
4 /4
4. Employment Generation – Total employment generated by the project
assessed in terms of new permanent and part-time jobs, and construction
jobs. Submit documentation of estimated new jobs to receive points for this
criterion.
3 /3
Improve Multi-Modal Transportation
5. Facilitates Public Health and Mobility: Project will construct or improve
sidewalks, including ADA access to buildings. Provide detailed information
demonstrating that the current condition inhibits public health and mobility.
1 /1
6. Reduces Resource Demand: Project promotes the use of transit, ride sharing,
or car sharing. Provide plans, agreements or other methods to demonstrate
reduction of resource demand.
1 /1
7. Promotes Active Transportation: Project promotes bicycling as an active
transportation option by constructing or improving bike lanes, providing
covered bike parking, and/or participating in a bike share program. Provide
plans, agreements or other methods to demonstrate reduction of resource
demand.
2 /2
Improve, Maintain and Support Innovation in Infrastructure
8. Infrastructure Improvements: Project promotes innovation in infrastructure
and/or reduces long term costs of maintenance. Provide plans and
descriptions of innovations proposed.
2 /2
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Promote Unified Human Scale Urban Design
9. The project improves the street frontage by eliminating parking between the
right-of-way and the building. Provide plans to demonstrate improvement in
street frontage.
2 /2
10.
The project reduces the number of vehicular access points to the property
and improves the pedestrian experience. Provide plans, agreements or other
methods to demonstrate reduction.
2 /2
11.
The project enhances the North 7th
Ave. entryway corridor by having
buildings oriented toward the street and designed to provide interest and
activity.
3 /3
12.
The project enhances the pedestrian experience with elements such as
façade transparency, building articulation, street furniture and/or
landscaping. Submit plans and details that address this criterion.
3 /3
13. The quality of development and overall aesthetics (architectural, site design,
landscaping, etc.) are beyond that which is minimally required by the UDC.
Submit documentation to demonstrate compliance with this criterion.
2 /2
Support Compatible Urban Density Mixed Land Uses
14. The project increases housing units within the District. Submit plans
demonstrating an increase in the number of housing units.
4 /4
15. The project has a mix of uses, including residential. Submit plans detailing the
proposed mix of uses within the project.
4 /4
16. The project shares parking among compatible uses. Provide details
demonstrating compliance with the UDC and as well as total number of
parking spaces reduced because of a shared arrangement.
2 /2
Total Points 44 /44
APPROVAL (For Official Use Only)
Approval Status:
Date Approved:
Date Letter of Award Sent:
Date Certificate of Completion:
Date of Payment Request:
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Criteria for TIF Assistance Explained
1.) We feel that the entire Ruh Building Project hits every point that is desired in the
Midtown District. We are increasing tax generation, housing, commercial space,
availability to walk, bike, ride share and car share, eliminating a current blight in the
Midtown area and increasing employment.
2.) We do expect the total value of the building and land to be 5,741,406.25. we also
expect to the square footage of the building to total roughly 34,066 Sq ft. and in turn
we expect the taxes for the building to be increased for this property, we also expect
that with the construction of this building it will increase the taxes of the property’s
around us. Finally, with new commercial areas opening up we also expect a tax
generation for the city from those businesses.
3.) Elimination of Blight – The current building that is on the lot is an old building that has
no character, is not in good condition and has no added value to the midtown area.
As you can see from photos on page 18 the current building once torn down and
rebuilt will eliminate a blight and replace it with a beautiful cornerstone to the
midtown district. The new Ruh building can be seen on page 20 and is a massive
improvement from the current building.
4.) Employment Generation – There will be an increase in jobs by the construction of this
building. Depending on what goes into the other half of the commercial area on the
North side we estimate that anywhere from 25-35 job can be created from this
project. 15-20 is estimated to be full time and the rest being part time. The South
side of the building will hold a brewery which in Bozeman average about 20
employees 10-15 being full time. The management of the building is also another 2 full
time jobs. The construction of this building will help sustain or increase the amount of
construction jobs in the area.
5.) Facilitates Public Health and Mobility: The new project will include many ADA
compliant amenities as well as better access for pedestrians in general, including new
sidewalks, ADA compliant access to the sidewalk and building. ADA compliant parking
spaces and an elevator in the building. The current project has crumbling sidewalks
and parking areas and has no ADA compliant access to the sidewalks or building.
6.) Reduces Resource Demand: There is a bus stop for the Streamline by Tamarack which
is only about .1 mile away. There is also the easy access to use a ride share in
Bozeman in a prominent easy to access point such as our project. Finally, we hope to
find a way to incentivize the commercial space leasers to promote both carpooling
and ride sharing.
7.) Promotes Active Transportation: The project has included a covered bike rack on the
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South West Corner of the Building.
8.) Infrastructure Improvements: We would improve the sidewalks in the public right of
way, we would introduce trees to add greenery, and also include benches and trash
cans so people can relax while keeping our public area clean.
9.) By placing the building as close to the road as possible, we are eliminating the parking
in front of the building and moving it to the back of the new building (West side).
There will now be a sidewalk, trees, benches, trashcans and lighting that will now line
the street instead of parking. You can now see what it will look like on page 21 and 23
10.) We have removed the entrance on 7th
to the property while moving the
entrance on Durston from the property to the alley way. This allows for sidewalks to
be placed with trees, benches and trashcans for a more pleasurable experience for
pedestrians. See page 22 labeled parking for example.
11.) Our project follows the guidelines for having the building oriented toward the
street on 7th
(about 12ft from the curb) and as close as we could get on Durston
without interfering with Public right of way. The first floor will be commercial space
drawing pedestrians to the area. See page 22 labeled parking for example.
12.) We plan on having large windows on the East and South side of the building
allowing people to investigate the building. We also plan on having benches on the
east and south side of the building by the side walk and trash cans, so litter is not
placed on the ground. Finally, we plan on adding trees to line the sidewalk and bushes
on the North side of the building to add to the landscaping of the grass spaces in
between other areas.
13.) We have met or gone above and beyond the architectural, site design,
landscaping, ADA, and quality of the entire project. You can see this in the site plan
designs.
14.) There was originally zero housing on the corner of 7th
and Durston. There will
now be a total of 16 apartments and 28 rooms available in those apartments in total.
See page 19 for the drawings. This fulfils the requirements for the increase in
residential areas.
15.) As you can see from page 19 we have one floor of commercial use on the base
floor and two floors of Residential use. This meets the requirements for a mixed-use
building.
16.) We plan on having as much parking as possible and are working to work with
our neighbors to share their parking in their off hours. We also plan to have
businesses that have separate high times than each other as well as the high times for
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the residential areas.
PROJECT INFO
PROJECT NAME
LSSRE Commercial and Residential mixed-use building
PROJECT DESCRIPTION
The Ruh building is a mixed-use commercial and residential structure located on a prominent
corner of Bozeman’s Midtown District. The ground level of the building will comprise two
commercial units with shared restrooms and a shared entrance as well as their own separate
entrances. There will be a total of 16 residential units between the second and third floors of,
with 12 units having two bedrooms and 4 being single-bedroom units. The roof will be split into
two outdoor patio areas, providing seating for the commercial spaces as well as a separate
space for the residential units.
PROPERTY INFO
Physical Address:
605 North 7th
St.
Bozeman, MT 59715
Legal Description:
DURSTON 2ND SUB, S01, T02 S, R05 E, BLOCK 1,
LOT 1 – 2, ACRES .653, PLAT E- 33
Property Geo-Code:
06-0798-01-3-08-01-0000
County Tax ID:
RGG5543
Property Owner:
Lifestyle solution Real-estate, LLC
PROJECT MANAGER
Colin Ruh-Kirk
Colin.ruh@lssre.com
406-595-7959
PROJECT ARCHITECT
Jesse Sobrepena
JDS Architects
(406) 556-8080
Jesse@JDSarchitectsbozeman.com
ESTIMATED DATE OF OCCUPANCY
Fall 2019
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PROJECT NARRATIVE
The 0.653 acre B-2M zoned property sits on the corner of 7th
and Durston, it resides on the
North side of Durston, and the West side of 7th
. The site currently has the old Intensive
car/Sinclair gas station building on the lot and a crumbling parking lot which will be demolished
with the approval of The Ruh building. The current building is 1008 Square feet and there is a
shed that is 78 Square feet.
The Ruh Building is a mixed-use commercial/residential building located in one of the most
prominent sections of 7th
street and the Bozeman Midtown District. This building will provide
2-3 commercial units with shared restrooms, one containing a ground floor patio and there
being access for one the commercial units to use a rooftop patio. The building will also contain
12 two-bedroom residential rental units and 4 one-bedroom residential rental unit.
The 30,538± gross square foot building will face 7th
street and be accessed by pedestrians in the
front as well as in the back of the building. The building parking will be behind the building on
the west side of the lot which may be accessed by an alley way off Durston Rd.
The timeless and contemporary design will provide much needed value to the area. The
structure is a steel and wood structure, the design shows large windows on the first floor for
view of the inside businesses. The rooftop patio accessed by all residents of the building allows
for the internal community to grow. The location and the amenities that could be in the
commercial area give the ability for tenants to use those as well as the public become a social
aspect to the whole Bozeman community. The whole design of the building allows for visual
interest while being functional with quality that is long lasting.
The materials that have been chosen are durable to ensure a long-lasting life to the building
while also having an aesthetical appeal. We want the building to be a valuable addition to the
Bozeman area for decades to come. We will use brick, stressed metal siding, stone, concrete
large windows, recessed entrances and metal coverings. Trees and brick sidewalk accents will
add pleasant finishing additions to the project.
We expect to dispose of the solid waste in a trash enclosure on the East side of the building
past the parking lot. Water and sewer services will be extended from Durston. The project will
be built with no interruptions until complete. The project is expected to be complete by fall
2019.
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First Floor
The first floor will be
commercial space with two
units and shared restroom
space. One unit has a patio
space and both units will have
large street-view windows,
high-speed internet and
separate main exterior
entrances as well as a shared
interior entrance.
Commercial unit 1
• 4,636 Gross Sq. Ft
• ~1,000 Sq. Ft patio
• Shared Restrooms
• Private Worker
Restroom
• High-Speed Internet
Commercial unit 2
• 3,113 Gross Sq. Ft
• Shared Restrooms
• High-Speed Internet
• Built to suit
Corridor
• 1,713 Gross Sq. Ft
• Elevator and stairs
• Shared Restrooms
Second and Third Floor
Both the second and third floor
are of the same design, each
comprising 6 two-bedroom
units and 2 one-bedroom units.
The floor plan includes large
windows, air conditioning, high-
speed internet, elevator use and
small balcony.
Two Bedroom units
• 982-1,109 Sq. Ft
• On floor storage unit
• 2 bed + 2 Bath
• High-end appliances
• Quartz Countertops
• Washer and Dryer
• Rooftop patio access
• Elevator access
One Bedroom Units
• 654-801 Sq. Ft
• On floor storage unit
• 1 bed + 1 Bath
• High-end appliances
• Quartz Countertops
• Washer and Dryer
• Rooftop patio access
• Elevator access
Rooftop Level
The building has two separate
rooftop patios; one set aside for
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Photos
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Maps
N.7th AVE
WEST PEACH
DURSTON
THE RUH
BUILDING
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Parking
23 Spaces Shown
(SHARED SPACE IN THE PROCESS)
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PART 2
PROJECT TIMELINE
•
PUBLIC BENEFITS
•
PROJECT FINANCIAL INFORMATION
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PART 2
FOR PROJECTS REQUESTING OVER $50,000 IN ASSISTANCE
1. Detailed Project Information
Submit the following information regarding the project requesting TIF assistance.
Project Timeline
A project timeline is required. Include anticipated dates for site acquisition, project start and
completion, as well as other project milestones. Multi-phase projects must include details for
each phase. The timeline should also identify any critical or time-sensitive dates as well as
any time constraints facing the applicant.
Public Benefits
Fully describe the public benefits that can be realized by the completion of this project.
Projects with a high degree of public benefits are typically more likely to receive TIF
assistance. Examples of public benefits include, but are not limited to the following:
Re-occupancy of a vacant building
Elimination of blight
Creation of new retail choices
Increased tax revenue
Job-training opportunities
This statement should include qualitative examples of public benefits as well as quantifiable
and measurable outcomes of the short-term and long-term benefits to the District. Include
documentation in support of estimates of public benefits.
2. Project Financial Information
In order for the Midtown Urban Renewal District Board to adequately review applications
seeking TIF assistance, the following information must be submitted with the application.
Sources & Uses of Funds
Identify the sources of funds used to finance the project. Typical sources include
equity, lender financing, mezzanine financing, other anticipated types of public
assistance, and any other types or methods of financing. Describe the sources of
equity and include a term sheet for lender financing, if available.
TIF assistance is available as a reimbursement after the project is complete. Thus, the
project budget must identify the up-front sources intended to finance the
development costs of the project. If determined, specify the specific line items of the
project budget that each source will finance.
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Summarize the uses of funds. General categories to be identified include: acquisition
and related site costs, hard construction costs, and a breakdown of soft costs.
Development Budget
Provide an accurate and detailed development budget for the project that includes a
detailed breakdown of significant line item costs consistent with the sample included
in the application packet. The budget should be arranged to identify acquisition and
site related costs, hard costs, and soft costs. Also, identify all line items that are
performed by the developer, owner, or related entities.
Budget of TIF Eligible Expenses
Identify which of the development budget costs are eligible for reimbursement as
allowed by 7-15-4288, MCA.
Financial Commitments
Submit commitment letters and/or term sheets from all lenders for proposed debt
(such as construction, mezzanine, permanent, and government financing) and all
other financial sources of the project (such as grants, and tax credits). Commitment
letters must clearly specify the nature and terms of the obligations.
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TIMELINE
Our project is expected to be complete by Fall 2019. We expect to complete the project in
one phase. The only thing that will cause a pause in work is winter. We are under a time
constraint to complete the project in an appropriate amount of time in the eyes of the bank
as per our bank loan.
JUN/JUL/AUG SEPT/OCT/NOV DEC/JAN/FEB MAR/APR/MAY JUN/JUL/AUG SEPT/OCT/NOV
CONCEPT & DESIGN
PLANNING AND REVIEW
DEMO/UTILITY RELOCATION
EXCAVATION/FOUNDATION
CONSTRUCTION
FINISHING WORK
COMPLET
WINTER
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PUBLIC BENEFITS
Re-occupancy of Vacant Land
605 North 7th
was the old home to the Sinclair gas station and then became a Subaru
auto body work shop for a few years. The Ruh Building will be a redevelopment project
that will help beautify the area while drawing the locals and visitors of Bozeman to the
area creating a better more active Bozeman Midtown District
Elimination of Blight
Currently 605 North 7th consists of an old gas station with no color or character with a parking
lot that is crumbling under your feet. The Ruh Buildings mix of timeless and contemporary
design will provide value and options for the community. The design shows large windows on
the first floor for view of the inside businesses. The rooftop patio accessed by all residents of
the building allows for the internal community to grow. The location and the amenities that
could be in the commercial area give the ability for tenants to use those as well as the public
become a social aspect to the whole Bozeman community. The whole design of the building
allows for visual interest while being functional with quality that is long lasting.
Creation of New Office/Retail Spaces
The Ruh Building, a mixed-use building, contains 2-3 spaces for commercial areas. The
spaces range in size from 4636- 1500 gross Square feet. Each unit has large windows on
the East and West side of the building. The unit to the South has a large porch area.
There is also the ability to use a commercial roof top patio for one of the commercial
units. These units will share a common parking area. New businesses in the area will
draw activity and provide new jobs.
Urban Living Options
There are Sixteen dwellings available on the second and third floor of the Ruh building.
There are 12 two-bedroom units and 4 one-Bedroom units. Each unit ranges from 654
to 1,109 square feet. Large windows in each apartment provide stunning views of the
Bridger Mountains, the Tobacco Root Mountains and the cityscape of Bozeman itself.
The proximity of The Ruh Building to much of the town allow you to have walking access
to downtown main, restaurants and school makes this an ideal place for a mixed-use
residential building.
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Increased Tax Revenue
The Ruh Building will create new commercial and residential spaces. These spaces will
bring in new jobs, and employees for expanding job markets, additional sales and
property taxes. All of these will increase Tax Revenue for the City of Bozeman while also
improving the Bozeman Midtown District.
New Jobs and Local Sales
The construction of The Ruh Building will immediately be using locally sourced jobs to
build the building but once completed will also add several jobs from the commercial
units. The maintenance of the building and land will help create or sustain jobs in the
area as well. Supporting local businesses builds strong communities by linking everyone
involved in a web of economic and social relationships that contribute the cities
economic success, enriching the whole community.
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SOURCES & USES OF FUNDS
This project has three primary sources. First is funding from William and Karen Ruh through their LLC -
Lifestyle Solutions Real Estate. We expect their funding to be 20-25% of the project. The total funding
will be a minimum of $1.5m through construction. This funding is for the establishing the LLC, property,
fees and permits as well as architectural and engineering services. It is also for hiring the Project
Manager and any other staff required. The business plan is attached for this LLC.
The second source is the Bank of a Montana. Bank of Montana is an investment-style business bank
in Missoula, Montana. Bank of Montana offers business and personal banking including online, mobile,
and other banking and financial services to clients across the United States. Previously Montana
Business Capital Corporation, Bank of Montana became a chartered bank by the State of Montana in
2007. Bank of Montana offers business banking, multifamily financing, and aviation financing. Originally
formed in 1998 under Montana Business Capital Corporation by Tom Swenson. Montana Business
Capital Corporation provided funding strategies and packages employing funding opportunities from the
likes of Montana Board of Investments and Small Business Association. We expect 70-75% if funding to
come from this source. The funding commitment is for $5m. This funding is exclusively for building the
project. These expenses are described in section on development budget.
The third source is through TIF assistance. One reason we chose this site for this project is the Midtown
Urban Renewal District TIF Assistance. The funding uses are described in section on Budget of TIF
Eligible Expenses.
USES OF FUNDS
Land (Fair Market Value) $950,000.00
Soft Costs $895,260.65
Hard Costs $4,791,406.25
Extra Costs not in construction Estimate (e.g. alley behind recompute) $40,000.00
Total Uses of Funds $6,676,666.90
SOURCES OF FUNDS
Land (Lifestyle Solutions Real-Estate, LLC) $950,000.00
• Free and Clear
Construction Loan $5,000,000.00
Potential Tif Funds $726,666.90
Total Sources of Funds $6,676,666.90
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DEVELOPMENT BUDGET
Document attached view exhibit 1
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TIF ELIGIBLE EXPENSES
City of Bozeman Impact Fees
$143,319.34
City of Bozeman Cash In Lieu of Park Land
$15,289.56
City of Bozeman Cash In Lieu of Water Rights
$22,058.00
Service lines
$98,000.00
The Service line item include the City of Bozeman Fiber/Conduit installation,
Northwestern Energy relocation of services. Also included in this is a street
cutting to move the service lines as well as traffic management while moving the
lines.
Northwestern Energy
$45,000.00
Northwestern Energy relocation of services, Northwestern Energy Primary, new
transformer, and gas and Electric services.
Demo
$48,000.00
This line item includes the demo of the existing building as well as removal of the
materials from the demo.
Street Scape & Public Infrastructure
$235,000.00
While this line item is large, it includes a lot of things that will allow the buildings
outside to become a beautiful pinnacle of the Midtown district. This includes the
sidewalks and curbs which is about a third of the cost. It also includes the
landscaping and trees along the sidewalk and the metal grates that go around
them. The grass and shrubs in the area that the city owns by right of way as well
as sprinklers to water the plants to keep them alive along the areas that the city
has public right of way. The second largest section of this portion is the prep for
the alley and sidewalks to ensure the public safety as well as the proper
placement of the alley. This also includes a small amount for trashcans and
benches on the sidewalk in the public right of way area.
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Alley Behind Recompute
$40,000.00
We will be extending the alley from our property boundary to the northern
boundary of the recompute property. This was something that the Bozeman Fire
and the City of Bozeman have asked to be done. This will include continuing the
asphalt of the Alley, adding a storm water reserve tank for run off and curbs.
Engineering fees
$80,000.00
This is for our Electrical, Civil, and Mechanical Engineers. This includes the
Boundary survey of the property, amended plat, subdivision exemption
application, subdivision exemption city review fee and Civil Engineering and land
surveying, Geotechnical Engineering, and Structural Engineering.
TOTAL
$726,666.90
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Exhibit 1
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Exibit 2
(Document marked proprietary removed)
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Exhibit 3
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Business Plan
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365
commercial space and the other
that is solely for the residents of
the building. The residential
patio will have improvements
such as a fireplace and
planter/garden boxes. The
commercial side will have a
small indoor section leading to
the outdoor patio.
Commercial side
• 1,008 Sq. ft
• Restroom access
• Stunning view of
Bridger Mountains
• Accessed by elevator
Residential side
• 2,570 Sq. Ft
• Restroom access
• Stunning view of
Bridger Mountains
• Gas Fire Pit
• Planters
• Trellis for shade
• Elevator access
333
PER GSF $ 205.24
Source: Development Team; Economic & Planning Systems
\\EPSDC02\Proj\183082-Bozeman MT P3 Development Analysis\Models\[183082-MODEL-Ruh Building-11-21-2018.xlsm]T-Operating $3,133,807
Economic & Planning Systems 279 6 of 7
Project Cap Rate
Project Discount Rate
$6,267,615
$7,079,416
Project Cap Rate
NNN
Project Cap Rate
6.75% Cap Rate
Market Range
Cost per sf 2-Bed Rate
-$635,611
-$409,052
NNN
Project Discount Rate
Project Discount Rate
Project Discount Rate
1-Bed Rate
2-Bed Rate
Project Cap Rate
Cost per sf
-$6,676,667
1-Bed Rate
Economic & Planning Systems 275 2 of 7