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Kurt. The City dollars that are at risk is the $1.3 million loan to F & C, since it is paid from annual cash <br />flow from the project and sale proceeds. To protect the City in the event that cash flow was not <br />sufficient (or sale proceeds), we put in 2 layers: <br />1. Corporate guarantee from F & C Construction <br />2. Will be setting up an interfund loan from TIF district #1 to TIF district #14 (new COR district) <br />The latter item was put in place and to be utilized if for whatever reason the City was unable to collect <br />on the corporate guarantee. <br />Our risk review of the project was for performance on the corporate guarantee, hence F & C <br />Construction, not on F & C Development. For review of the construction company, we reviewed the last <br />2 years of audited financials and found no issues /concerns or lack of liquidity to pay the HRA loan, even <br />in light of the economic environment in those years. They have unrestricted cash balances from 2009 <br />that could be utilized for unforeseen issues and are expected to have cash balances at the end of 2010 <br />(they will forward audited financials when completed). <br />We requested a D & B report to further check to see if there were payment or performance issues that <br />we would not see in the financials and to see their ranking for likelihood of not being able to pay or have <br />financial stress in the next 12 months. D & B is not the primary source of our credit analysis, only a cross <br />reference. According to the D & B report, the likelihood of both was low. <br />The protection for the City with regards to F & C Development is that the City /HRA does not need to <br />close on the land, provide the loan, etc. until F & C provides proof of financing for 65% of the project. <br />Their current bankruptcy issue in NC may or may not be a factor to lenders in order for F & C to secure <br />financing, depends upon many factors (i.e. if all parties were made whole or not, was the debt recourse <br />or not, etc.). <br />Please call with any questions. <br />Stacie Kvilvang <br />Ehlers <br />3060 Centre Pointe Drive <br />Roseville, MN 55113 <br />Direct 651 - 697 -8506 <br />Fax 651 - 697 -8555 <br />www.ehlers - inc.com <br />EHLER <br />l!AUR%IN PU[]I,IC f1r4i5.%j l <br />This e -mail and any attachments may contain information which is <br />privileged or confidential. If you are not the intended recipient, note <br />