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J!j QSA, Inc. ~ 861-2026 ~ 1::11 I ,j/~t) I...Y I 1;::10::; ""..., LJ ;;)/0 Rationale Any time a home is "reconstructed", there is a loss of value that occurs while portions of an existing saleable home are dismantled in preparation for its improvement. Because of this, the home as coHateral to a bank, actually diminishes in value dtuing construction before it improves. In addition, some portion of the dismantled structure has a value that must necessarily be discarded before an improvement that makes the home more marketable can occur. Particularly in an expensive construction market like the present one, it may not be possible for the homeowner to feel confident of an immediate increase in the home value equal to his or her initial home value plus the cost of improvements. Over the years, however, the home will appreciate more rapidly than it would have, had it been aHowed to become more and more market obsolete. From QSA's experience, a reconstructed home in a commlIDity with a program in place to encourage many reconstructed homes, does reach a value that recovers its investment, but this is a fact leamed from the experience of other commlU1ities, and not one readily apparent at first to the risk takers, the homeowners and the banks. For these reasons, public city involvement in making a home reconstntction more attractive and cot;npetitive with the cost of simply selling the home, abandoning the community and moving to an outlying.exm"b'(with-the homes that already have desired amenities), is critical for cities in the first ring. . This program is designed also to provide reasonable security and return for the city. Roseville has the opportunity to reserve approval of a project W1ti1 it is well enough planned to permit financing by traditi()nal commercial lenders. . It draws potential . participants from a broad field and permits the city to stay less involved in particular attempts until they appear likely to succeed. This program requires city capital at first, but an analysis of return on investment. ~hows that ~e . city will recover its investments in tax revenues and loan . .. repayments even if every participant stays in the home long enough, to have .half the loan forgiven'" It has the additional.advantage of encouraging residents to stay . jn ~osevil1e and develop th.eir commitments here. . ... . .. ~. . - ~. ~ .If ~he 'economy slows and RoseVille 'homes 'fail to appie~iate' 4%annually* ,'.~d / or ~th.e economi.c yalu~.of well-designed homes becomes more obvious, the loans can be made to' return more revenue by requiring a modest interest rate or greatel' r~payment. This could further enhance the city's ability to expand the program. .'.