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Mike Morrison Development Agreement— Phase III Silver Lake Village Redevelopment August 30, 2010 Page 2 Based upon direction from the Council, we have added a provision that they have to provide proof of financing for the project, which is similar language we had in the prior agreements. The thought is that if they have formally obtained their bank financing, they intend to move forward with the project. Staff is comfortable with leaving the remaining definition of commence construction as pulling a building permit, as long as the developer has also provided adequate proof of financing. The reason being is that by the time a developer pulls a building permit, they have expended hundreds of thousands of dollars, if not over a million on purchase of the land, architect and engineer fees (to provide city full plans for review to obtain the permit), and paid park dedication and SAC /WAC fees to the City. For example, to move forward with Phase IIIA with a 100 -unit apartment complex, the developer would have paid approximately the following in fees: Land Acquisition $1,000,000 Architect /Engineer $300,000 Park Dedication $150,000 SAC /WAC $353.100 TOTAL $1,803,100 Staff also recommends adding language to the Agreement stating that the developer must have closed on the purchase of the land, to make sure that is understood by all parties (secondary developers other than Pratt). Priority of repayment to City for the Fannie Mae loan with regards to the Phase IA make up note The prior agreement had the following priority of repayment of the City's $2.6 million investment in land acquisition (repayment of Fannie Mae loan): I . Land sale proceeds from the purchase of the vacant portion of land in Phase IIIA 2. All increment generated by the commercial development that isn't needed to pay debt service on the commercial TIF Revenue bonds 3. All increment generated from non developed parcels (i.e. Equinox, etc) 4. All increment generated from Phase IIIA, Phase IIIB and Phase IIIC not needed by the development The Council raised concerns with the developer receiving their profit make up note from Phase IA (the 2 condominium buildings) when the City may not yet be reimbursed for its capital outlay for Fannie Mae. Based upon discussions with the developer they propose that the City and the developer split any tax increment not needed to pay debt service on the Phase IA TIF revenue bonds 50150 until the City is reimbursed 100 percent. It should be noted that the reason for the 50/50 split is that the developer had concerns that due to the Phase IA partnership being made up of multiple entities (another developer and a bank), they didn't think all parties would agree to allow the City to have priority of 100 percent of the increment until they are repaid. If agreeable to the City, following is the break down of how the City may be potentially repaid the $2.6 million investment: Repayment of Interfund Loan InterfundLoan Amount $2,630,000 Balance $2,630,000 Future Unobligated Commercial TIF (No inflation) ($600,000) $2,030,000 Land (Sale) Citys Parcel - 100 Sr. Apt Units (Phase IIIA) ($450,000) $1,580,000 50% of Phase IA TIF Not Needed for TIF Bonds (No inflation) ($500,000) $1,080,000 Unobligated TIF (Non developed panels) ($1,080,000) $0