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<br />e <br /> <br />e <br /> <br />e <br /> <br />2. Project risk relative to benefits <br /> <br />Mr. Hibschman said the project is predicated on State and County grants for <br />site improvements. If utilities are relocated but the project does not <br />proceed, Pankow will be asked to reimburse a portion of the costs. He added <br />that it is usual for the Renewal Agency to assume responsibility for site <br />preparation. As mentioned earlier in the meeting, the development agreement <br />will have provisions to ensure repayment of the construction loan regardless <br />of the developer's completion of the project. Cost of the City's tenant <br />improvements will be financed by tax increment funds, with higher costs <br />resulting in less space being improved. Ms. Ehrman pointed out that interior <br />improvements were identified as a potential area for fund raising. Mr. <br />Gleason observed that excess library space that was not improved would most <br />likely be leased for City use. <br /> <br />Mr. Hibschman said if the developer were to go bankrupt, the lender would <br />assume control of the project and find a buyer. The bUilding would continue <br />to function with all agreements and leases not being affected. Mr. Gleason <br />added that the development agreement would specify contingencies in a <br />survival clause and he would anticipate bankruptcy meaning only a reduction <br />in tax increment flow to the City. <br /> <br />Mr. Rutan maintained that there would always be a risk that the value of the <br />bUilding would be reduced, but Mr. Gleason replied that the value of the <br />building could drop to $17 million without the City being adversely affected. <br /> <br />Answering Mr. Boles' question, Mr. Gleason added that if the building's value <br />dropped below that level, the City would be at risk for the difference in tax <br />increment flow for that particular year. With a general obligation bond, <br />there would be a risk that a tax limitation freeze would not honor past <br />indebtedness, in which case the debt would be assumed within the operating <br />account. <br /> <br />Addressing a lack of sufficient tax increment generated by the Pankow taxable <br />portion of the project, Mr. Hibschman said a shortfall in the amount needed <br />to support the lease payments for the shell would require seeking increment <br />from other sources or examining the curtailment of other programs. <br /> <br />3. Other projects that will be affected <br /> <br />The Library project could require a delay in implementation of the following <br />streetscape and parking facility improvements: Willamette Street between 8th <br />and 10th avenues, pedestrian space improvements including the central plaza <br />and mall rest rooms, redevelopment of East Broadway, parking garages not <br />directly associated with development, and expansion area street improvements. <br /> <br />4. Impact of occupancy problems on tax increment revenue <br /> <br />Mr. Hibschman said the amount of increment flow needed to cover the Library <br />lease payments was approximately $763,200 per year. If the office tower <br />value was reduced by 33 percent as a response to severe occupancy problems, <br />there could be a shortfall of about $180,000 in annual increment flow. <br /> <br />MINUTES--Eugene City Council <br />Dinner/ Work Session <br /> <br />January 11, 1989 <br /> <br />Page 5 <br />