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I MEMORANDUM DATE: June 21, 1988 TO: Pat Johnson Ann Berry Dean Maschka John Goedeke Jim Moeller Phillip stokes Jim DeBenedet FROM: craig A. Waldron SUBJECT: Financial Review, Twin Lakes Redevelopment Area. Attached is an analysis of a standard 4.1 acre site to the north that would have a purchase cost of $7.00 per sq. ft. I then analyzed the purchase cost versus what a developer could pay to make the project work thus ascertaining the subsidy that would be required. The subsidy, using the city's pay as you go approach, would be paid back to the developer at 8% interest per year. Therefore, the final number depicted relating to each analysis views the potential payout in total years. It has essentially been the city's policy that the payout should be completed in an 8 _ 14 year time frame. The analysis as it relates to housing points out that a 15 unit per acre development simply will not work financially as the computer can not even calculate a payout within reasonable mortgage terms based on the tax increment cash flow. with respect to a 25 per unit acre development, the feasibility seems quite workable in that the eventual payout is in the range of slightly over 7 years. A less intense development of 20 units per acre will work from a theoretical context, however, it stretches the payments out to a 20 year time frame that is not within the city's policy directive. Therefore, as it relates to housing, the more intensity that is eliminated, the less feasible the deal becomes. With respect to a large office in a 4.1 acre site, you will note the deal is very feasible and that payout is completed in a five year time frame. I also reviewed the potential of office/service or high- tech industrial from this same perspective and again, it doesn't work, based on the fact that the computer can not even calculate a mortgage payout based on the envisioned increment. It should be noted that the impact of high density housing and major office is quite similar and that a 5 - 7 year payout is envisioned. The housing works well in the context that the city does not lose 40% in fiscal disparities as it does in office and in other commercial developments. The additional increment, however, is offset by the land costs where it is assumed the developer would be willing to pay $5.00 per sq. ft. for a large office, versus $2.00 per sq. ft. for housing. Thus, the city's land buy-out subsidy is much less for office. I have also attacl\~d an I ! j I \ R-0002615