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2. No other liens or mortgages shall be placed upon the Subject Property by either party, and Developer agrees not to use the Subject Property as collateral to secure any other loan or investment. Should Developer find it necessary to use the Subject Property as collateral for another mortgage or security, the new security shall be subordinate to the City's mortgage or shall include full reimbursement of the City's contributions to the issue date of the new security on the Subject Property. Such reimbursement, if made, will be an allowable cost of development for possible tax increment financing assistance, but only to the extent that the amounts reimbursed are not already included in the project accounting. 3. "Allowable Development Costs" which the parties expect to incur during the term of this Agreement and which are intended to be eligible for tax increment financing (TIF) assistance shall include: a. the initial land acquisition costs for 2966 Arcade Street; b. the subsequent acquisition of another parcel to provide adequate access to 2966 Arcade Street; c. the costs associated with the demolition of structures and improvements on the properties acquired; d. costs of platting the properties; e. costs associated with improvements made to the property to facilitate development of single family homes pursuant to the approved plat, including surveying and engineering; and f. interest carrying charges based on a 6.5% annual interest rate calculated from the date of the allowable expenditure until the issuance of a Tax Increment Financing Note to provide for the repayment of the allowable development costs less the lot sales proceeds. 4. Both parties' financial contributions to the overall development project shall accrue interest at an annual percentage rate of 6.5% from the date of payment. The parties shall be repaid their financial contributions to the project costs from the proceeds upon final accounting for sales of developed residences on the Subject Property. Any shortfall in the amount due to either party shall be reimbursed by revenues from a Tax Increment Financing district which the parties anticipate will be created encompassing the Subject Property. Any TIF revenue due to the parties will be on a "pay -as- you -go" basis, with the final allocations of payments between the parties to be set by the relative contributions of each party to the project, to be finalized in the anticipated formal Development Agreement following plat approval. 5. Final accounting shall be based upon the Developer's records of costs incurred in developing the project subject to the limitations below. The value of the lots will be determined by independent appraisal, with the appraiser selected by the City and approved by the Developer, approval of which shall not be unreasonably withheld. If, on final accounting, the final market value of the Subject Property exceeds the total development costs for the project by 15 %, then no TIF revenue shall be used, and the parties will recover their reimbursements solely from project proceeds. Preparation of Subject Property for Development 2