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rillir Council Memo January 29, 1999 Page 2 more(and larger)groups than can presently be handled by the City's other privately and publicly owned facilities; 75-80 new jobs;"spin off'business from hotel and banquet center patrons; a significantly enhanced commercial tax base;visual and other aesthetic improvements to the "Gateway to Mounds View;"and new opportunities to improve the Highway 10 corridor and stormwater drainage/treatment in the vicinity of the redevelopment project 3. The EDC has concluded that the benefits listed above, and other actual or potential benefits,justify some level of City financial assistance if the project cannot or will not move forward in the absence of such assistance. 4. The IDC believes that the type and amount of any financial assistance provided by the City should be based upon several factors,including(but not limited to)the Developer's need for such assistance,the City's ability to provide the requested financing,the amount of risk involved(from the City's perspective), and the extent to which the language of the proposed Development Agreement eliminates or minimizes any such risks. 5. Based upon(among other things)the preliminary financial information provided by the Developer and the fact that no hotel or banquet facility construction has been initiated at the Mermaid to date (despite the fact that such improvements have been contemplated and discussed for several years), it appears to the EDC that the Developer needs city financial assistance to complete the redevelopment in question. 6. However,inasmuch as some of the assumptions underlying the Deveinper's original written Banquet Center/Hotel"Investment Analysis"have changed,the EDC recommends that at some point(to be determined by the EDA)in this process the Developer should be required to revise or update that Analysis to reflect more current facts,circumstances and assumptions. The EDC believes that the revisions and/or updates should include substantially more information and supporting documentation than has been received to date. The operating income/expense projections should be specific enough to enable a qualified financial consultant to conduct a meaningful investment return analysis. 7. The information initially provided by the Developer characterized owner equity as"cash. The Developer has now clarified that reference by indicating that the Developer will be pledging its equity in the existingfacility as equity for the redevelopment project,rather than investing additional cash. The contributed equity will be pledged as collateral for the Developer's other financing, and will provide assurance to the DeveIoper's lender(s)and to the EDA that the Developer has a significant investment at risk. Accordingly,the EDC recommends that the Development Agreement be revised by deleting the provisions requiring the Developer to invest "cash equity"as a prerequisite to receiving reimbursement from the City for project-related costs. 8. The Developer has estimated that the current owners' equity in the Mermaid facility is approximately$4 million(after deducting existing indebtedness of approximately$750,000.00). The Developer has indicated that a new appraisal is now underway,which will provide more • specific information regarding the value of the existing facility. The EDC believes that said value, along with the value created by the new construction(having projected construction costs of approximately$7.5 million), should provide a new market value in an amount significantly greater than the$5.9 million valuation that was previously used to calculate anticipated tax receipts and,