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City of Saint Anthony 98 July 28, 2000 Page 3 • There also are some risks associated with NOT doing this project, the primary one being that the building may remain in its current state for quite some time prior to redevelopment. It is important to note the likelihood that ANY redevelopment proposal for this site, given current economic conditions, will require the use of tax increment financing. This is an assumption that Mr. Haik opposes,in his memo dated August 1; 2000. Other issues to consider: • What are the lost opportunity costs associated with waiting for redevelopment to occur? • Does the mall, in its current state, have a negative affect on property values in the surrounding area? • Is there a higher and better use for the property than what is being proposed by Hillcrest? • Is the City willing to step in as developer on this project? ♦ Purchase the site? ♦ Deal with the"Herbergers" issue? ♦ Demolition? ♦ Market the site? The following is a response to questions about the TIF District term of 18 years (16 years of increment) and about how the project has been negotiated to this point: • 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 highest value of improvements 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. After this was presented to the Council for consensus and in turn proposed to the developer, it became apparent that 10 years of increment was not enough to keep them interested in the deal — We believe they would have walked away from the negotiating table. Based upon the fact that the Council still wanted to do this deal, an alternative was negotiated that seemed acceptable to all parties involved - 15 years of increment. An additional year of increment for a total of 16 years was later.discussed as a method of solving the storm water issue. This project structure, 16 years of increment, was presented to the Council in a memo dated June 7, 2000, and general consensus was reached in support of this structure. As a result of Springsteds' ongoing analysis and negotiation, we support that 16 .years is the minimum amount of increment it will take to induce the Hillcrest proposal. Additionally, it appeared from early Council discussions that the land use proposed by Hillcrest was generally acceptable and that a process had been started to address rezoning issues. It is our understanding.that the Planning Commission and Council are planning to change the current land use designation and zoning to allow a variety of uses in the building. We proceeded with our negotiations based upon the understanding these land use and rezoning issues were moving forward in conjunction with our financial analysis of the project. Springsted's recommendations do not necessarily represent a position on • the proposed land use as we were not directly involved in those discussions. If you have any questions please feel free to contact either Bob Thistle or myself.