Item 4: MUPTE for Student Housing Project

Home Browse Search

Tax Savings Calculation The MUPTE property tax savings shown above is calculated from the estimated value of the project: Assessed Value X Tax rate – Land Property Tax = MUPTE Savings Assessed Value = Value X Changed Property Ratio = $87,639,000 X 0.5938 = $52,039,100 Tax Rate = $18.18 per $1,000 in assessed value Land Property Tax = $100,000 The land property tax must be subtracted from the total because the MUPTE only applies to the value of the improvements. The estimated property tax for the land is $100,000 ($25.80/square foot, which is on the conservative side of land assessed values in the area). Disclaimers:  The current tax rate is used for the 10 year period, although the rate will likely change each year.  Assessed value increases annually by 3% for the 10 year period, which assumes there is no significant change in the way assessed value is calculated; also the property will be reassessed when the exemption expires. Capstone estimated the taxes in their application for year 1 at $1.6 million without the MUPTE and $147,000 for the land (a savings of $1,453,000 if the MUPTE is approved). For financing purposes, Capstone uses the full value of the project (instead of estimating the assessed value) to estimate property taxes. They did not include the changed property ratio. (As shown above in the Pro-forma With MUPTE, staff estimates the MUPTE savings for year 1 at $846,000.) Since submitting their application in January, Capstone’s due diligence on the project has led to fine tuning costs based on additional information and phasing construction of the east and west blocks. The impact is that the project cost increases to as much as $97 million. The additional costs are the result of replicated mobilization and design costs and the loss of materials and labor economies of scale associated with a larger project. The result of a higher cost, phased project is increased equity and additional debt, and, ultimately, a reduced Cash on Cash return. Staff used the original non-phased pro-forma for the analysis, as it is more conservative.