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Ryan -T ransoma Memo July 27, 2007 Page 2 The methodology for the option payment is described below. If the City were to negotiate for the development of the option parcel today, the project would not be completed until sometime in 2008, valued in 2009, with taxes payable after 2010. For comparative purposes, the option parcel can support a building of roughly 70,000 square feet with surface parking. Development beyond this threshold would require structured parking. A 70,000 building would likely be valued at $7.3 million and generate about $150,000 in tax annual tax increment. The increment would begin in 2010 and run through the end of the district. The real opportunity cost of securing the land until 2012, is the potential for tax increment in 2010 and 2011. Ryan has acknowledged this fact is willing to pay money for the option. Staff has made it clear that the City reserves the right to use the 2002 AUAR reimbursement ($200,000) as a credit toward the purchase price. The advantage of the second approach is that the City would not have to make an actual cash outlay to Ryan. A copy of the revised term sheet is attached. Costs and Funding: Attached is a financial analysis which shows the impacts of the project under two scenarios. The Phase 1 building as proposed would have a projected market value of $10.8M and annual taxes of $366,600. The project would generate $6,485,321 in total tax increment (present value of $2,761,474). The second column shows what would happen if Ryan exercised its option and built a 70,000 square foot building (maximum size without structured parking). This project would generate $3,422,693 in total tax increment (present value of $1,222,061). The last column shows the impacts with a 120,000 square foot building ($5,800,090; PV: $2,070,250). The key to this concept is that in order to get the increased development, the City would assist with the structured parking. Conclusion: Ryan and Transoma will be available on Tuesday night at the work session to answer any questions. Should the Council approve the term sheet, Ryan will submit their land use applications for the August 21" Planning Commission. Those items along with a Contract for Private Redevelopment would be ready for Council consideration on August 28`h. Ryan hopes to close and break ground in September in order to be ready for fall 2008 occupancy by Transoma. Grant 1 eli s Community evelopment Director •