5.1. SR 08-15-2005 - Laserfiche WebLink

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. EHLERS &. /\SSOCI/\-ES II\C MEMORANDUM DATE: Aug 3,2005 TO: Heidi Steinmetz, City of Elk River Lori Johnson, City of Elk River FROM: Sid Inman, Ehlers and Associates Inc RE: But For Analysis For Industrial Park Abatement. You have asked us to review the abatement proposals that have been presented and comment on the need for the abatement. This is what is referred to as the "But For" analysis. In the past we have used two different methods of reviewing the need for various types of assistance. In some cases we have compared the purposed project to a similar project and review the returns on equity as the basis for the need for assistance. Since these projects are somewhat unique, we felt it would be better to use the second method of comparing cost of acquiring the site in the purposed locations with the cost in similar locations. The cities estimates and abatement assistance amounts are in "future dollars" and are designed to bring the cost of the site to zero dollars over a 12 to 14 year period. My calculations are based on the calculations that the staff prepared to determine the purchase price and the assistance. Attached is a summary chart that shows the impact in "future value dollars" bringing the purchase price to zero dollars per square foot. Another way to review the purchase price is to review it in "present value dollars" Since the buyers will receive the full amount ofthe abatement over 12 to 14 years to arrive at a value in today's dollars we must add a discount rate. The second portion of the chart shows the net price in present value dollars. Note the range from .58 to .89 if a function of the size of the lot verses the size of the building. In summary, if you assume that the major competition that the city has is still offering the land at from zero to $.25 a square foot, either analysis satisfies a needs requirement and could be deemed to be justifiable