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based upon previous legal opinions, staff is not recommending non - payment as an option. There was previous concern that Landform was acting as a broker in receiving "incentive" fees, however the co- mingling of activities of development management and possible broker activity makes it impractical to pursue this approach. Site improvement costs were originally presented by Landform, as project engineer, to be representative of the costs of developing the parcel. These numbers appear to be greatly in excess of standard and actual development costs incurred by McDonald's in developing the site. The attorneys have advised that we could argue this calculation, or pay the previously agreed amount, while formally stating our objections in a transmittal letter. The calculation of any incentive fees that may be calculated between now and June 30, 2014 (the end of the Landform contract) would then be based upon City estimated costs. No additional Development Manager Fee Worksheets were approved other than for Super America, which has since dropped interest in any Ramsey property. Future sales for different projects would be subject to new incentive fee calculations. By paying the previously approved amount for the McDonald's project, the City is not establishing a precedent and additional legal fees would be avoided. The only change to the originally approved amount recommended at this time is to correct for an apparent mathematical error that was discovered in reviewing the Development Manager Worksheet. The Development Soft Costs, by contract and in accordance with the worksheet, cannot exceed 20% of the sum of the lands sales price, pro -forma building value, and site improvement costs. In the original calculation the Development Manager used $450,000, which is 21.2 percent. Adjusted to 20 %, the soft costs would be $424,411, resulting in a total development incentive fee of $50,929, or a reduction of $512. Funding Source: Funding for the incentive fee will be allocated from the proceeds of the recent land sale to McDonald's. Recommendation: It is recommended that the HRA approve a modified incentive fee calculation and make payment to Landform in the amount of $50,929 (original amount $51,441, less the mathematical error of $512), in accordance with the payment schedule outlined in the contract. The initial payment will be accompanied by a letter stating the City's objection to the fee calculation. Action: Motion to approved the payment of an incentive fee to Landform for the McDonald's project in the amount of $50,929, to be paid in accordance with the payment schedule outlined in the contract. McD Fee Wrksht Attachments Form Review Inbox Reviewed By Date Kurt Ulrich Kurt Ulrich 03/20/2014 02:35 PM Form Started By: Jo Thieling Started On: 03/17/2014 01 :03 PM Final Approval Date: 03/20/2014