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2. Code Deficiencies The next step in evaluating a building is to determine what code deficiencies exist with respect to such building. Code deficiencies are those conditions for a building which are not in compliance with current building codes applicable to new buildings in the State of Minnesota. Minnesota Statutes, Section 469.174, Subdivision 10(c), specifically provides that a building cannot be considered structurally substandard if its code deficiencies are not at least 15 percent of the replacement cost of the building. As a result, it was necessary to determine the extent of code deficiencies for each building in the proposed TIF District. The evaluation was made by reviewing all available information with respect to such building contained in City Building Inspection and Fire Department records, as well as County Health department records, and making interior (when permitted) and exterior inspections of the buildings. LHB utilized the 2002 Minnesota State Building Code as the official code for our evaluations. We chose not to count energy code deficiencies toward the thresholds required by Minnesota Statutes, Section 469.174, Subdivision 10(b) and 10(c), due to concerns expressed by the State of Minnesota Court of Appeals in the Walser Auto Sales, Inc. vs. City of Richfield case filed November 13,2001. After identifying the code deficiencies in each building, we used R.S. Means to determine the cost of correcting the identified deficiencies. We were than able to compare the correction costs with the replacement cost of each building to determine if the costs for correcting code deficiencies meet the required 15 percent threshold. Finding: 18 of the 25 buildings (72 percent) in the proposed TIF District contained code deficiencies exceeding the 15 percent threshold required by Minnesota Statutes, Section 469.174, Subdivision 10(c). A complete Building Code and Condition Deficiency report for each building in the proposed TIF District can be found in Appendix D of this report. 3. System Condition Deficiencies System condition deficiencies are a measurement of defects or substantial deterioration in site elements, structure, exterior envelope, mechanical and electrical components, fire protection and emergency systems (only items not covered in the code deficiencies)interior partitions,ceilings,floors and doors. The evaluation was made by reviewing all available information contained in City records, and making interior (when permitted) and exterior inspections of the buildings. Page 8