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Commissioner Strommen asked about the expense side that includes income back to the HRA and City. Development Manager Lazan explained he set up the proforma as if it was a separate project/ development. Some of the income would flow back to the City so even if break even, there will be one -quarter of a million dollars of recovered land sales proceeds and one -quarter of a million dollars of development fees. City Engineer Himmer noted the cost for sewer and water laterals are offset. Development Manager Lazan explained the cost side is included and did not reduce the construction fees but reduced the development fees. Lateral fees will be assessed to a project and if water and sewer stubs to the property, that is the HRA's share of those costs. Development Manager Lazan indicated the HRA would have a zero profit proforma as a project but funds will flow to reimburse the HRA for land costs and utility and park fee reimbursements. Chairperson McGlone noted it will also get the most challenged pieces of land "off our back," which will be a benefit. Commissioner Wise asked if the HRA knows its costs per square foot plus holding and legal fees. Development Manager Lazan stated the basis today on the land is about $2/foot and the dashboard contains the costs for holding over time. He explained value was created in the deal structure and moving forward would close the gap. Development Manager Lazan advised the HRA received an offer and earnest money was placed in the form of a check. Staff issued a purchase agreement draft that is currently under due diligence process. Development Manager Lazan advised there was rumor that lots are selling for as low as $15,000 to $20,000 and discussion held to get to $35,000. He stated he wanted to present the proforma, what a zero net proceed delivers to the City, and impact of downward pressure on lot sale price. HRA Executive Director Ulrich noted another offset will be changing the land from tax exempt to taxable with value. He indicated the biggest risk is that the HRA puts up front costs into the project should the lots sell slower than anticipated in the proforma or have to be discounted to get them sold. Development Manager Lazan noted this property is outside the TIF District and the builder is interested in one to three lots this year and having a house open for the Parade of Homes. He agreed the pace in closing lots is the risk component in being the developer. Commissioner Ramsey asked about dropping the lot cost and having the developer take on construction commitments to forego some of the risk. Development Manager Lazan explained the idea is to pull some risk from the developer to bring the price to a break-even proforma. The HRA is taking on some of the risk and acting as the developer, would get the entitlement, file the plat, create the lots, and close on a lot -by -lot basis Housing and Redevelopment Authority / June 5, 2012 Page 3 of 10