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formula, a substantial deficit has emerged in the payments under the 111 Building N Revenue Note. In the current year, total increment available for payments on the Note will be approximately $47,000. This falls short, by approximately $100,000 per year, of the projected increment which was expected to be available to pay off the Revenue Note. As a result, the developer is not getting the benefit of the bargain that the parties anticipated when the development agreement was struck in 1999, and no principal of the Revenue Note is being paid. In reviewing the City's annual reports on its tax increment financing districts and projects, it appears there is a solution available to remedy this deficit situation through the application of "surplus" tax increment generated by the City's Tax Increment Financing District No. 1, where in excess of$1 Million of increment per year is generated by Mounds View Business Park. We understand that the tax increment bond obligation for the business park will be fully paid approximately one year from now, and that "interfund loans" of the City being repaid from District 1 tax increment will be paid off in one additional year, leaving approximately $1 Million per year of • increment available for other purposes. We have discussed the fact that despite active and ongoing marketing efforts from the top real estate professionals in the area, Building N remains approximately 60% vacant and unleased now, 4 years after shell completion. In addition, we have learned recently of Disetronic Medical Systems' intention to relocate to Indiana, vacating its leased space of approximately 30,000 SF sometime next year, potentially leaving the entire building vacant. The developer's profit potential in this project was and is the anticipated tax increment revenue under the Revenue Note. As a result of the substantial shortfall in the tax increment revenues, as described above, the task of completing the project with quality appropriate tenants/users is made substantially more difficult because funds from the increment needed to build out the interior to meet tenant requirements are not available. Anticipated tenant improvement costs to build out the 40,000 SF currently vacant range from about $18 to $30 per square foot, depending on the amount and nature of interior finish required. And, as you know, the more attractive and higher quality the tenant(s), typically the more extensive and expensive the buildout required. 2