Always refer. Not referring is the same as pre-rejecting your kid. If you refer, your kid might get in. If you don't, your kid 100% won't.
Also, at many schools, the kids who were referred but got rejected are the first ones they consider for principal placement, level III, and advanced math.
It's also possible that you won't be able to avoid hurt feelings if your kid doesn't get in. Kids at school will probably talk about AAP and who got in.