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Clay Wilfahrt <br /> Preferred Powder Coating <br /> June 12, 2013 <br /> Page 2 <br /> If the business paid for all proposed development costs, without any tax abatement <br /> assistance, the total development costs would be $6,822,695. Based upon the terms of <br /> financing for the first mortgage for the building and equipment and repayment of the <br /> City's $100,000 micro loan, the developer would not achieve a reasonable return on the <br /> equity they are proposing to invest. <br /> If the City sells the land to the developer for $1, then the total development costs <br /> decrease to $6,141,801. Based upon the same assumptions for financing terms for a <br /> lower mortgage, the developer is able to obtain a market return of just under 12%. <br /> Based upon our analysis, it would be appropriate to provide the developer with a land <br /> write down for the project. <br /> In order for the City to repay itself for the investment in the land ($680,895), we have <br /> run several options without inflation and up to the statutory maximum a City can charge <br /> in interest (4%). Based upon this, following is the payback period of the City's <br /> investment and the amount of interest paid to the City: <br /> Present Value of Future Value of <br /> Years for Land <br /> Repayment Abatement in Year Abatement in Final Total Interest <br /> Repayment <br /> Option of Final Land Year of Land Paid to City <br /> ($680,895) Payment Payment <br /> 0%Interest 8 $ 695,255 $ 695,255 $ - <br /> 1%Interest 8.5 $ 696,002 $ 738,709 $ 42,707 <br /> 2%Interest 9 $ 691,605 $ 782,162 $ 90,557 <br /> 3% Interest 9.5 $ 682,594 $ 825,616 $ 143,022 <br /> 4% Interest 10.E $ 696,561 $ 912,523 $ 215,962 <br /> It is at the City's discretion as to how much interest they want to charge, if at all. It <br /> should be noted that if the City desires to provide additional assistance to the <br /> development above and beyond a land write down, the amount should not exceed the <br /> maximum abatement estimated. <br /> If the City did provide additional assistance of $1,153,878, the numbers of years <br /> required to provide the assistance is as follows at varying interest rates: <br /> Repayment <br /> Years to Generate Fuil Request <br /> Option <br /> 0%Interest 13 to 14 <br /> 1%Interest 14 to 15 <br /> 2%Interest 16 to 17 <br /> 3%Interest 1St°19 <br /> 4%Interest More than Statutory maximum of 2)yea <br />