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everything is paid back and it preserves that $1.3 million in cash in TIF District One, which is flexible dollars, and if it doesn't perform after three years you can bring back that $1.3 million to the table. Commissioner Ramsey asked where we are taking the TIF district from and how can we take money from a certified TIF district. Ms. Kvilvang responded because you have a plan that states how you can use tax increment funds as a specified use for a specific project. Ms. Kvilvang continued with the developer equity is approximately $2.5 million. One million dollars is put in at closing on the land for $750,000, the other $250,000 is used to pay for the architectural and engineering services. An additional $1.5 million would come at closing for a total of $2.5 million. The land purchase is the $750,000 that is closing this fall. Commissioner Tossey asked for the clarification on the 3 and 23-year terms on the bond. Ms. Kvilvang responded you still have that option to go to another three year temporary. Commissioner Ramsey asked to the point at the end of 36 months if they are not able to get permanent financing, there is no payroll and the other TIF doesn't kick in. Ms. Kvilvang responded you are always going to tax increment for your bond to protect you first. Chairperson Elvig stated that rather than paying it to them we are paying ourselves to cover the deficit that they are creating now for us. Ms. Kvilvang reviewed that the agreement says they are responsible to pay 105% of the debt service on the bond. Commissioner Ramsey asked if at the end of 36 months they are not able to take us out, is there enough TIF proceeds from the Flaherty project to service the debt on the bonds that we are going to issue. Ms. Kvilvang responded we will be getting to that discussion. Ms. Kvilvang started the discussion of development scenarios. The land purchase price $750,000, the average rent per square foot on the units is $1.25, this is where the sensitivity analysis say what happens if they don't reach that point? What would happen where there would not be enough cash flow from the project or tax increment for that project that you would have to go to a third source. Essentially, what the analysis shows is if there is a 15% reduction in revenues, you are going to have to have another cash call from another source. What that equates in a rent per square foot is $1.06. Is the reality in the market a $1.06 per square foot? Do you worry about a 15% reduction in revenues? Housing and Redevelopment Authority / July 19, 2011 Page 3 of 7