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lð- BS- Page 5 of 7 Redwood Shores Child Care Report 11/13/00 City's site is not subject to the Redwood Shores development agreement that established this fee. Benefits to the City 1. The City gets a childcare facility in Redwood Shores; 2. No substantial staff time required to manage development or ownership of the project; The City will have no liability for toxins remediation of a City-owned site with known contamination; The City will recoup its financial commitment to the project (an initial financial commitment is required to acquire the City's interest in the project) . No annual general fund appropriations are required. Potential exists for minor amounts of income over next 30 years (from the commercial square feet revenue sharing arrangement) and modest income from the full economic value of the site (but not improvements) thereafter (from the site lease payments changing to market value after the initial term), Benefits to the Developer 1. A financial commitment (equivalent to the City's acquisition costs of its interest in the project) from the City in the amount requested results in less equity than a bank would require; The city's financial participation results in better cash flow because the equivalent interest rate is about 150 basis points less than a bank loan; A nòminal site lease payment over the initial term results in a better cash flow during this period than could be obtained from a site leased at its full market value; 5,000 square feet of compatible office enhances the project cash flow; The terms of the deal create significant positive cash flow once the project is fully leased as well as surplus value, despite not owning the land. A draft of this report, including the terms described above, was shared with the Council Finance Committee. Unfortunately, a scheduling conflict arose on the day of the meeting that prevented the Committee from taking formal action on the recommendations contained in this report. The Council member in attendance agreed to the report being forwarded to the full Council in its present form. 3. 4. 5. 6. 2. 3. 4. 5. Fiscal Impacts There would be no direct expenditure of funds to develop this project, other than relatively minor consultant and/or legal fees. Nor is any future expenditure of funds expected during the term of the Loan. . "T-'-"""'~"T"'-""