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Stuart Negotiations Update August 20, 2010 Page 3 Park Dedication Stuart has said that the City's park dedication fees are high. Staff has countered that New Brighton is one of the lowest in the metro area, according to a 2009 survey. Nonetheless, we recognize that park dedication fees are a significant cash outlay ($200,000) for the developer. Staff initially proposed spreading out the payments over ten years. Stuart agreed to this concept. Reaction: Because Stuart Companies is proposing to adjust the land price by $300,000 and still wants the park dedication deferral; this has the appearance of "double dipping". Staff would suggest either demanding the full park dedication fee payment up front or 50% at closing and deferring the balance over 10 years. Look Back Provisions The City is proposing a dual "look back" provision At completion of the construction of the building, the developer shall submit a complete list of costs for the project in accordance with generally accepted accounting principals. If the costs of the project are less than the project budget as submitted to the City, the first $200,000 would be repaid to cover the balance of unpaid park dedication fees. Any remaining project budget would be split between the City and the developer at a 50% (city) / 50% (developer) level. Stuart is suggesting a 25%/75% split instead. The second look back would only be invoked if the developer sells the building within 10 years. At the time of the sale, the developer would prepare a description of sales proceeds, equity invested, and annual cash flow (excluding depreciation). If such a calculation results in proceeds in excess of a 16% internal rate of return, the remainder is split between the City and the developer at a 50%/50% level. Stuart has agreed to this concept. Reaction: Staff suggests a couple options: 1) If the developer agrees to pay park dedication fees up front, then a 250/o175% split might be acceptable; or 2) holding firm on 50/50 split on project cost, but reducing the amount to $100,000. Development Fees The City is requesting that the developer pay $7,500 up front to cover the City's legal and public finance advisor costs. Stuart has agreed to this demand.