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Page 3 • What are the lost opportunity costs associated with waiting potentially another couple years for redevelopment to occur? • Will a "bigger and better" project be proposed in the future? ♦ Are the councils' expectations for a bigger and better project realistic? ♦ What amount of tax increment incentive will need to be provided to attract a bigger and better project? ♦ How long do we wait for a bigger and better project? • Is the City willing to step in as developer on this project? ♦ Purchase the site? ♦ Deal with the "Herbergers" issue? ♦ Demolition? ♦ Market the site? Lastly, the following is a response to questions about the TI District term of 18 years (16 years of increment) and about how the project has been negotiated. Negotiations were initiated with the developer based upon discussion and direction from Mike Mornson and the Council that the City wanted to "do this deal". The objective from the start was to achieve the best possible project for the least amount of public dollars. Initially, based upon an internal rate of return analysis, it was recommended to provide 10 years of increment from a District that would decertify in 2012. When this was proposed to the developer it was obviously not enough to keep them interested in the deal —they would have walked and the deal would have been over. Based upon the fact that the Council still wanted to do this deal, an alternative was negotiated which was for 15 years of increment. An additional year of increment, for a total of 16 years, was later agreed to be provided to the developer as a way to solve the storm water issue. The HRA dollars were to be provided to supplement the storm water costs and so that the City could avoid a much costlier LGA/HACA penalty. As a result of Springsteds' ongoing analysis and negotiation, we continue to support the position that 16 years is the minimum amount of increment it will take to incent the Hillcrest proposal. The current basic structure of the project is as follows: • 'Provide pay-as-you-go tax increment to the developer in the amount of approximately $4 million (9.5% present value) or approximately $10 million gross. • Provide additional pay-as-you-go tax increment to the developer for storm water improvements to cover the difference between the total cost and the amount the HRA pays up front. • Decertify the District at the end of year 2018. Our recommendation is to proceed with the project based on this current structure. If you have any questions please feel free to contact either Bob Thistle or myself.