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a Based on current assumptions of projected tax increments for the C.G. Hill property, it is • projected that a remaining principal balance of $40,739.26 would remain on the Red Cent Management Note. It would not be paid off under the terms of the present Development Agreement. TIF Payment Considerations In a 6/13/02 letter to the City of Mounds View, the Everest Group has requested that the Development Agreement be amended to lengthen the time of payment. They have asked that the term be extended by 101/2 years—from 8/1/03 to 2/1/14. (The proposed date coincides with the expiration date for TIF District#1.) They have not requested a change in interest rate or in the percentage of tax increment available. It should be noted that with all "Pay-as-you-go"TIF Notes, developers are reimbursed for eligible development costs over time. They do so with the knowledge that they are "at risk" if increment does not materialize as expected. In Article III, Section 3.2 (c), of the Development Agreement, it is clearly stated that: "...All amounts of Tax Increments which are not Available Tax Increments are not subject to this Agreement, and the Authority retains full discretion as to any authorized application thereof, regardless of whether the Available Tax Increments are sufficient to reimburse the Developer in full for the above-described costs. To the extent that the Available • Tax Increments are insufficient,through the final Payment Date(August 1,2003),to pay all accrued and unpaid interest on and the principal of the EDA Note, said unpaid amounts shall cease to be any debt or obligation of the Authority whatsoever." (emphasis added) The Everest Group is making the argument that it should be made whole, and that it was the intent of the City to encourage this development by agreeing to defray $196,000 in costs (land acquisition, excavation, site utilities, paving, etc.). Possible Courses of Action The following are options that could be considered by the City Council relative to the Everest Group's request. Option 1: Approve the Everest request—Extend the length of the TIF Note by 10.5 years. The positives are that the principal on the TIF Note is paid off, the Developer is satisfied, and payments cease when the principal is paid off (most likely years before 2/1/14). The negatives include paying out an additional $44,814.71+ than what is required from a valid Development Agreement, an excessive extension that is longer than the original 9-year term (Should the City have 20-year notes?), and, by making the Developer whole for this project, may increase the likelihood that Everest will request similar treatment for Building N. 1110 2