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Kurt Ulrich COR Apartments - Development Proposal and Terms of Development Agreement and Other Obligations December 14, 2010 Page 4 h. Administration Expense Allocation. Currently all TIF calculations show the first 1 5 % of the tax increment being available to the City HRA to pciy for administration or other qualified expenditures within the TIF District (approximately S32, 600 annually). i. TIF Note. The Developer will finance the eligible reimbursement costs up front and will receive tax increment on a Pay -As -You -Go (PAYGO) basis. This means that as they pay their taxes, they will receive a portion of their tax dollars back (approximately S. 73 on the dollar). The TIF note is being paid at a 6.25% PAYGO rate, which is based upon their anticipated financing rate. The TIF Note will be issued to the Developer after certification of eligible reimbursement costs to the City HRA. 2. City Loan a. Loan Amount. The City is providing the Developer a loan for S1.3 million to assist in the financing of the development to assure it moves forward in a timely fashion. The fitnds will be advanced from the City 's TIF District #1. The Developer is not obligated to pay interest on this loan, but rather will pay the City a fee of S120, 000 (total repayment of S1, 420, 000). b. Loan Repayment. The loan will be repaid to the City from 20% of the annual cash flow generated from the project and or 20% of the proceeds received from a sale or refinancing of the development. Beginning on April 1, 2014, the Developer is required to have its accountants prepare operating financial statements to determine the amount of cash flow for the project. To the extent there is available cash flow, 20% will be paid to the City and applied to payment on the City Loan (the remaining 80% will be paid to the equity investors). Based upon current projections, it is estimated that the loan would be repaid within ten (10) years. If the loan is not paid prior to 2024 (10 years), simple interest at a rate of 6.25% will accrue on the unpaid balance from April 1 2024, until the loan is paid in fiill. If at any time the Developer defaults in timely payment of the loan and the City provides the Developer notice and the Developer does not cure the default within ten (10) days, the unpaid balance will accrue at a twelve (12) percent rate until such time the default is cured. c. Loan Guaranty. Flaherty & Collins Construction Inc. is providing a corporate guarantee for the loan. To the extent there is inadequate cash flow from the project to repay the loan, Flaherty & Collins Construction Inc. will be required to make the payments. d. Spending Plan. In order to provide the loan to the Developer, the City is required to develop a Spending Plan and hold a public hearing on the Plan in accordance with legislation that was approved in 2010. If the City does not hold the public hearing and or adopt the Spending Plan on or before February 1, 2011, the Developer may terminate the Development Agreement. If the City holds the public hearing and approves the Spending Plan after this date, but before the Developer exercises their termination right, they can no longer terminate the Development Agreement for this reason. The public hearing on the Spending Plan is scheduled for December 14, 2010. Kurt Ulrich COR Apartments - Development Proposal and Terms of Development Agreement and Other Obligations December 14, 2010 Page 5