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OCT 06 '95 12 :S1PM EHLERS & ASSOCIRTES P.3 /5 <br />City of Little Canada <br />October 6, 1995 <br />Finance <br />Developer RFP <br />Page 2 <br />There is also a financial aspect of acquiring a site. Will the development project produce <br />enough revenue to finance the acquisition? There are several options for financing land <br />acquisition: <br />• The sale of the property to the developer covers the cost of acquisition. <br />• Revenue from the sale of the properly combined with tax increment revenue from <br />the development pays for the acquisition. <br />• Tax increment revenue covers the entire acquisition cost. <br />Before soliciting proposals, it is important to understand the financial parameters. The <br />table below illustrates financial issues associated with the acquisition of land for <br />redevelopment For the sake of this illustration, the estimated market value of the Guerin <br />and Budget Power parcels have been increased by a factor of 1.25. This amount represents <br />the estimated cost of acquisition. <br />Pries d Land $570,000 <br />Aron (square feet 92,000 <br />PdceISF $6.20 <br />Interest Rate 7,50% <br />Capitalized Interest (months) 24 <br />Tenor (Years) 15 <br />Tax Rata 146% <br />City Debt Required $ 700,000 $520,000 $365,000 $260,000 <br />Sale b Developer Fon $1.00 $1.60 /SF $3.00/SF $4.00 /SF <br />New Development Required <br />Estimated MarketValue $1, 215,561 $928,800 $650,474 $473,357 <br />Tax Capacity $64,316 $41,125 $28,322 $20,174 <br />The purpose of this table is to show the amount of new development (producing tax <br />increment revenue) that is needed to support various resale options. <br />For preliminary purposes, this site would support 20,000 to 25,000 square feet of <br />development. Current development provides a frame of reference. The following table <br />contains the development and property values for two recent projects. <br />PAGE 33 <br />