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The secondary question is at what point is there not enough cash flow or tax increment to pay PNC the first mortgage. There was discussion that if they need a third source that it rather not be the City. Ms. Kvilvang continued with when they cannot pay the first mortgage to PNC, that issues a concern. That would mean revenues would have to be 35% less than what they are anticipating. That would mean the average rent would have to be .88 per square foot. This is not a realistic or possible scenario. Ms. Kvilvang reviewed that construction starts in 2012, first occupancy in 2013. Construction goes about 12-18 months, occupancy 18-24 months to full 93% occupied essentially. The COR apartments present value is at $2.4 million at 24 years of tax increments. The clock starts clicking on your TIF District in 2012. You take 15% of increment, generating first to go to the City, HRA. The annual net to the project is $220,000. Ms. Kvilvang stated the HRA has the choice that if you don't take the first 15%, you can use all of 100% to debt service; the $220,000 would increase to $260,000. These are all future decisions that need to be made. Ms. Kvilvang reviewed that the Allina and VA present value of tax increment is about $1.9 million. That's a value of $11.5 million property valuation for tax purposes. That's 25 years of TIF and taking the first 10% for administration. That would be about $181,000 available for service debt. If you choose not to take 10%, that number would increase to around $202,000. Ms. Kvilvang reviewed the revenue as presented. The years that you care about is years 2016 and 2017. Operating revenues as presented and NOI in 2016 of about $2.1 million, COR TIF, $220,000 total income of available for debt service of 2.3 million; first mortgage of $1.4 million TIF bond payments. The cash flow after fact is $330,000, based on $2.5 million of additional equity. Chairperson Elvig stated what was just reviewed was at the $1.25 per sq ft. Ms. Kvilvang discussed the next is at $1.06 per sq ft. This is 15% less than presented. Looking at 2016, the bottom line is $1.8 million for debt service. That cash flow is a negative. The first year you would have to draw on the Allina or VA. Of that $181,000 available, you would need $142,000 of it. Chairperson Elvig asked if we do a three and three opposed to 3 and 23, does that rate still jump up double to the 571. Ms. Kvilvang responded no, it is going to be interest only. Then the discussion would be what do we capitalize and what revenues are coming in. Elvig asked if it's three and three, what does the 571 come down to. Housing and Redevelopment Authority / July 19, 2011 Page 4 of 7