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Mike Morrison May 15, 2003 Page 2 Based upon the above referenced development program, following is a listing of the proposed business terms for the final Development Agreement: 1. Tax Increment. a. Fiscal Disparities. Currently all TIF calculations have included Fiscal Disparities being paid within the District, pursuant to policy discussions with City Staff and the City Council. The Developer continues to request that Fiscal Disparities be paid outside the District. However, the Developer has not yet made or met the argument that the Fiscal Disparities amount is needed to meet the financing needs of the redevelopment. The election to pay Fiscal Disparities outside the district will only be contemplated if and only if it is shown that the redevelopment will not commence without these additional dollars. b. Administration Expense Allocation. Currently all TIF calculations show 5% of available Tax Increment being available for administration. To the extent that the development will require more than 95%of the TIF for actual redevelopment costs or coverage of bonds, the City may elect to subordinate its 5% administration until the entire development comes on line. However, this election will be based upon review of the City's administrative costs and if they can be covered by only 5%of the TIF. c. TIF Notes. It is anticipated that the Development Team will sell their TIF Revenue note(s) as taxable to provide up-front cash for costs associated with the redevelopment. Ehlers recommends that if it is needed, the City consider multiple notes and inflation. Ehlers also recommends that that the City considers allowing the developer Tax Exempt take out after the development phases have been fully constructed and are paying taxes. 2. Public Improvements. a. Roadway and Storm Water Ponding. There has been a lot of discussion on how to pay for the new 39`l Avenue alignment, as well as the required storm water ponding. The City has aggressively sought roadway funding for this project and has been unsuccessful to date. However, they will continue to seek alternative funding sources. At this time, it is anticipated that assessment bonds will be sold for the roadway and storm water ponding and will be paid through special assessments and TIF proceeds (estimated at $6.5 million, including a large contingency). The City has asked WSB to review the roadway design selected by the Development Team for cost to construct and to determine which properties within the TIF District will be considered benefiting properties so an assessment amount can be assigned to them for the roadway. WSB will also review the plans to see if the improvements could be phased over a couple of years(as development comes"on line"). b. Cily Park. It has been determined by the Development Team that the park should be City- owned. They have requested an up front contribution of$750,000 to pay for the land on which the park will sit. Ehlers has requested that they provide a square footage calculation