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HomeMy WebLinkAboutOrdinance 4663ORDINANCE NO. 4663 AN ORDINANCE ADOPTING THE PROJECT PLAN FOR THE HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT NUMBER ONE, FINDING THE PLAN IS ECONOMICALLY FEASIBLE, REPEALING ORDINANCE 4646 AND DECLARING AN EMERGENCY WHEREAS, on July 27, 2004, the Fayetteville City Council held a Public Hearing concerning the creation of the Highway 71 East Square Redevelopment District; and WHEREAS, on August 17, 2004, the City Council passed Ordinance No. 4608 creating the Highway 71 East Square Redevelopment District and authorized preparation of a Redevelopment Project Plan; and WHEREAS, the City with input from the proposed redevelopers of a Twenty - Two Million Dollar hotel project to be constructed after removal of the blighted Mountain Inn has prepared a proposed Project Plan attached as Exhibit "A'; and WHEREAS, on November 30, 2004, the City held a Public Hearing on the Project Plan proposed for the Redevelopment District; and WHEREAS, on December 7, 2004, the City had a further public hearing on.the Project Plan and passed Ordinance 4646 adopting the Project Plan; and WHEREAS, because of a minor, technical notification discrepancy, the City determined the need to renotify all statutorily required officials and republish notice of the public hearings for the Redevelopment District. WHEREAS, the City Council after 15 day published notice has held another public hearing at which all interested parties were given the opportunity to express their views on the proposed adoption of the Project Plan for the Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas; and WHEREAS, prior to publication, a copy of said notice was sent by first-class mail to the chief executive officer of all local governmental and taxing entities having the power to levy taxes on property located within the proposed Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas, and to the school board of any school district which includes property located within the proposed Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas; and WHEREAS, the Project Plan includes: ti iJ- of real property, demolition of blighted/vacant.buildings, and sale of the cleared land to the redevelopers; (b) an economic feasibility study; (c) a detailed list of estimated project costs; (d) a description of financing including tax increment bonds; (e) a certification of the county tax assessor of the base value, ad valorem rate, debt service ad valorem rate, and ad valorem rate for the redevelopment district; (f) no other funds are expected to be deposited into the special funds; (g) a map showing existing uses and conditions of real property in the district; (h) a map of proposed improvements and uses in the district; (i) no zoning changes are anticipated; 0) reference to the Downtown Master Plan; (k) non -project costs include financial advice, bond costs, economic forecasting; (1) no persons are anticipated to be displaced; (m) the amount of TIF indebtedness; (n) the amount of tax increment estimated to be generated by the project; (o) no other revenues are anticipated to be used to secure the tax increment financing. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby finds that the Project Plan for the Highway 71 East Square Redevelopment District (attached as Exhibit A) is economically feasible. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby adopts the Project Plan for the Highway 71 East Square Redevelopment District and determines it has complied with all requirements set forth in A.C.A. §14-168-306. Section 3: That upon the effective date of this ordinance, Ordinance No. 4646 originally adopting the Project Plan for this Redevelopment District is hereby repealed. Section 4: Emergency Clause. If this ordinance is not immediately effective, the goal of the Redevelopment District and its Project Plan to remove a dangerous, dilapidated firetrap could fail due to lack of time -sensitive funding. The City Council, therefore, determines and declares an emergency exists which would imperil the public peace, health or safety, and consequently this ordinance shall be in full force and effect from the date of its passage and approval. PASSED and APPROVED this 28`h day of December, 2004. By: COODY, Mayor ATTEST: /� r���'.•G�S Y •O c • GF SONDRA SMITH, City Clerk c ;FAYETfEVILLE; a Cd Si. nnFOa N(rr1M14 4)11! 4 a B B 4 v n L • L R • M I' N • • �'1 �. "The Mountain Inn Reborn' i 4:B.B 4e• 1\ RECEIVED DEC 2 2 2004 CITY OF FAYETTEVILLE MAYOR'S OFFICE RECEIVED DEC 2 3 M CITY OF FAYETTEVILLE CITY CLERK'S OFFICE Riellgrd a�mlLtcx Phm 479-521-9198 jaul NO& Phm :479-s3a6799 TO: STEPHEN DAVIS, FINANCE & INTERNAL SERVICES DIRECTOR DATE: DECEMBER 21, 2004 SUBJECT: HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PER YOUR REQUEST PLEASE FIND ENCLOSED: 1. FEASIBILITY STUDY PREPARED BY INTERNATIONAL HOSRTAIJTY ADVISORS, INC. AND SUBSEQUENT UPDATE LETTERS FOR THE DEVELOPMENT OF THE HOTEL PROJECT AT THE CURRENT MOUNTAIN INN SITE. 2. HEARTLAND RENAISSANCE COMMITMENT LETTER ounDaNG $8,000,000 NEW MARKET TAX CREDIT AuDcATION FOR THE HOTEL PORTION OF THE PROJECT TO THE BANK OF FAYETTEVILLE. 3. ANALYSIS OF POTENTIAL TAXES GENERATED BY THE DEVELOPMENT OF THE MOUNTAIN INN PROJECT. AS WE DISCUSSED IN OUR MEETING THIS MORNING THE BANK OF FAYETTEVILLE WILL ACTUALLY FUND THE PROJECT BY FIRST FUNDING HEARTLAND RENAISSANCE FUND SUB U. LLC — QUALIFIED EQUITY INVESTMENT. IT IS THIS CDE (COMMUNITY DEVELOPMENT ENTERPRISE) THAT ACTS AS THE CONDUIT FOR THE FINANCING FOR THE HOTEL PORTION OF THE PROJECT. ALSO, PURSUANT TO THEIR COMMITMENT TO HRF, BOF IS REQUIRED TO POND $4 MILLION OF THE NEW MARKET TAX CREDIT ALLOCATION PRIOR TO DECEMBER 31, 2004 OR THE PROJECT WILL LOSE THE SAID TAX CREDIT ALLOCATION. AS A PRACTICAL MATTER ANY DELAY IN RE -PASSAGE OF THE PROJECT PLAN PAST DECEMBER 28m WILL SERIOUSLY JEPARDEZE THE FUNDING FOR THE PROJECT. DEVELOPERS ALSO HAVE PRELIMINARY FINANCING COMMTMENTS FROM TWO AREA BANKS FOR THE CONDOMINIUMS, PARKING DECK AND MEETING/CONVENTION PORTIONS OF THE PROJECT. THESE COMMITMENTS ARE SPECIFICALLY SUBJECT TO THE PASSAGE OF THE HIGHWAY 71 EAST SQUARE REDEVP.I.ORdENT DISTRICT PROJECT PLAN, THE ISSUANCE OF BONDS AS OUIUNED IN THE PROJECT PLAN AND THE SALE OF THE SUBJECT PROPERTY BACK TO THE DEVELOPERS. ADDITIONALLY, DEVELOPERS HAVE THE NECBASSARY CASH EQUITY FOR ANY REMAINING PORTION OF THE FINANCING FROM QUALIFIED EQUITY INVESTORS. PURSUANT WTTIVOUR MEETING WITH THE CITY ATTORNEY IT WAS THE DEVELOPERS UNDERSTANDING THAT SUBSEQUENT TO THE PROJECT PLAN , THE CITY AND THE DEVELOPERS WOULD ENTER INTO AN AGREEMENT WHEREBY THE CITY WOULD SELL THE SBJECT PROPERTY TO THE DEVELOPERS AT AN AGREED PRICE AND THAT AT THE TIME OF THE SALE AND AS A CONDITION OF ANY SAIL', THE DEVELOPERS WOULD DEMONSTRATE TO THE CITY IN A FORM SATISFACTORY TO THE CITY THAT THE DEVELOPERS WILL BE ABLE TO COMMENCE AND COMPLETE THE PROJECTAS OUMNED IN THE PROJECT PLAN. IT IS IMPORTANT TO NOTE THAT THE PROJECT RAN AS PREVIOUSLY PASSED SPECIFICALLY DID NOT RELY ON ANY INCREMENTAL GROWTH IN TAX COLLECTIONS FROM THE MOUNTAIN INN REDEVELOPMENT PROJECT OR ANY OTHER KNOWN DEVELOPMENT PROJECTS PLANNED IN THE DISTRICT. HOWEVER, THE ATTACHED ANALYSIS OF POTENTIAL TAXES OEN TED LISTS A RETURN TO TAXPAYERS OF OVER $35 MILLION DOLLARS. IF WE MAY PROVIDE ADDMO L INFORMATION PLEASE DO NOT HESITATE TO REQUEST IT. SINCERELY, THE 11 November 16, 2004 Mr. Fred Shefte Bank of Fayetteville Fayetteville, AR Re: Heartland Renaissance Fund Sub II, LLC - Qualified Equity Investment Dear Fred: We are pleased to inform you that, subject to the terms and conditions set forth in this letter of interest, the Governing Board of Heartland Renaissance Fund, LLC, ("HRF") has approved Bank of Fayetteville ("BOF") to acquire an ownership interest in Heartland Renaissance Fund Sub II, LLC ("Sub II"), a subsidiary allocatee of HRF, up to but not more than $8,000,000 ("QEI"). This ownership interest will be deemed a Qualified Equity Investment if all requirements are met in accordance with Section 45D of the Internal Revenue Code ("Code"). HRF has received a $15 million allocation of New Markets Tax Credits ("NMTC") from the Community Development Financial Institutions Fund ("CDFI Fund") pursuant to an Allocation Agreement between HRF and CDFI Fund. Sub 11 has been certified as a "Subsidiary Allocatee" of HRF by the CDFI Fund. Pursuant to the terms and conditions proposed herein, HRF would agree to suballocate up to $8,000,000 of its allocation of New Markets Tax Credit ("NMTC") to Sub 11 in accordance with the Allocation Agreement. This letter is based on certain assumptions and information that is material to and has been relied upon by HRF in connection with the issuance of this letter of interest. The suballocation is conditioned upon final approval of this letter of interest by the Governing Board, satisfactory conclusion of HRF's due diligence review process and successful documentation and closing of the transaction. At closing, HRF Management, LLC, an affiliate of HRF, will enter into the Sub II Operating Agreement and related agreements that will incorporate the terms and conditions set forth below and include other customary or necessary terms, subject to HRF's review and approval. Material Assumptions: Membership Interests Heartland Renaissance Fund Sub II, LLC HRF Management, LLC Bank of Fayetteville Heartland Renaissance Fund, LLC (CDE) HRF Management, LLC Arkansas Capital Corporation Y c 06• : M. . a = a - 1 00.01% Managing Member 99.99% Non -Managing Member 1% Managing Member 99% Non -Managing Member The total Qualified Equity Investment for NMTC purposes is estimated to be $8,000,000 ("QEI"). This QEI is projected to generate $3,120,000 of NMTC. HRF makes no representations concerning the ability of BOF to use the NMTC. BOF should consult with its legal and/or tax counsel to determine the qualification of the investment for NMTC and its ability to benefit from the NMTC. The final suballocation amount is subject to determination by HRF upon a review of the investment proposal to be provided by BOF. Subject to final approval by HRF, Sub II will be capitalized with an equity contribution of up to $8,000,000 from BOF with a closing to occur on or before December 15, 2004. Due to NMTC requirements that the investments in the project are made within 12 months of issuance of the QEI, it may be determined by HRF that BOF's contribution will be made in two installments with approximately $3 million contributed at closing on or before December 15, 2004 for acquisition costs, and up to $5 million at the commencement of construction. The timing of the QEI(s) will be determined upon review by HRF of the investment proposal. Subject to compliance with NMTC requirements, the equity contributions will be designated as one or more QEIs. The equity contributions will be made under terms and conditions acceptable to HRF and in compliance with Section 45D of the Internal Revenue Code. BOF would commit pursuant to the Sub II Operating Agreement to make the full amount of the QEIs within six (6) months of closing. Prior to disbursement to the project, the QEIs shall be held at an account in the name of Sub II. Interest earned thereon until disbursement of the QLICI shall be used as a credit towards Sub ll's reasonable operating expenses. Proceeds of the equity contribution will be used to make a loan to and/or an equity investment in East Square Redevelopment Project ("ESRP") located in downtown Fayetteville, Arkansas, and to pay fees to HRF Management, LLC as described below. ESRP must meet the requirements to be defined as a Qualified Low -Income Community Investment ("QLICB") under Section 45D of the Code. The expected proposed general terms of the loan and/or investment shall be presented by BOF to HRF within fourteen (14) days of the execution of this Letter of Interest and shall be subject to HRF's Page 2 of 7 approval in its sole discretion and must constitute a Qualified Low -Income Community Investment ("QLICI") as defined under Section 45D of the Code. Such proposal shall include a statement of the proposed sources and uses of the project, the terms of the proposed QLICIs (equity and/or debt), commitment letters from other financing sources, a construction schedule, and projected cash flows from the project during the 7-year NMTC recapture period. The documentation of the actual loan and/or investment shall also be subject to HRF's review and approval in its sole discretion. The party responsible for documentation of the QLICIs shall be determined, provided that the reasonable legal costs incurred may be funded out of the QEI, and the documents shall include such provisions as HRF shall require in order to comply with the NMTC program. The terms of the loan and/or investment shall include flexible, non -conventional or nonconforming terms with reference to standard practice in the applicable market as required by HRF's Allocation Agreement. The loan and/or investment must meet the requirement of being located in one of the target areas listed in Section 3.2(h) of HRF's Allocation Agreement. The terms of the loan and/or investment shall also require ESRP to provide such information as is reasonably required by HRF for purposes of compliance with HRF's NMTC reporting requirements and to monitor performance. A cash penalty may be imposed by HRF upon ESRP for failure to provide information in a timely and satisfactory manner. BOF acknowledges that pursuant to Section 45D of the Code, the QLICIs have to be issued within 12 months of the issuance of the QEI(s) for BOF to be eligible to claim the NMTC. BOF represents to HRF that it is reasonably anticipated that the QLICI with respect to acquisition costs shall be made within two (2) months of issuance of the QEI of approximately $3 million. Contingent upon HRF's review of the investment proposal, HRF may determine that approximately $5 million of the estimated $8 million to be contributed shall be funded pursuant to the Sub II Operating Agreement at the commencement of construction, with disbursement to occur pursuant to construction draws during a 12-month period. BOF agrees that any portion of the construction QLICI not disbursed within 12 months of issuance of the QEI may be placed in a reserve in the borrower's name and withdrawn subject to approval by BOF and HRF. HRF anticipates that BOF will exercise construction oversight, inspection and disbursement responsibilities. The second installment of up to $5 million may be subject to certain conditions relating to the feasibility of the project at the time of commencement of construction. If the second installment of the QEI is not made, BOF and HRF may negotiate the right to withdraw the initial investment from the project, provided the parties agree to reinvest in a qualified investment in the appropriate time period to avoid NMTC recapture. These terms are subject to HRF review of the investment proposal and its due diligence investigation. BOF agrees to facilitate issuance of the QLICIs within 12 months of the applicable QEI to the project or to another qualified project within the applicable time period to prevent a recapture of NMTC. BOF accepts full responsibility for the timely closing of the QLICIs and any recapture of NMTC that occurs as a result of a delay in closing the QLICIs unless caused by the gross negligence, willful misconduct or fraud of HRF. HRF agrees to cooperate with BOF to facilitate timely closings of the QLICI. BOF shall not expect HRF to perform any due diligence investigation of the QLICI and shall not rely on any due diligence investigation conducted by HRF. HRF's role shall be limited to providing a suballocation of NMTC and performing management and NMTC compliance responsibilities. HRF is Page 3 of 7 40 not responsible for and will not make any representations regarding the operational results, commercial viability or financial performance of the QLICI and BOF shall have no recourse against HRF or its affiliates for any failure by the QLICI to achieve projections or provide any investment return. The QLICI documents shall provide that HRF shall have a role in the administration of the QLICI including compliance with the NMTC program and the exercise of remedies in the event of default, workout or foreclosure. HRF Fees HRF shall be entitled to the fees set forth below as compensation for its role in the QEI and its provision of services in support of the transaction: Closing Fee: Concurrent with the closing of the QEI in Sub II, HRF shall be entitled to a closing fee equal to 5% of the QEI to be funded by the QEI. Administration and Compliance Fee: On or prior to the first day of each calendar quarter following the closing of the QEI, an administration and compliance fee equal to .1071% of the QEI ($8,571) shall be payable to HRF in consideration for NMTC administration and compliance services to be rendered by HRF. This fee shall be funded by cash flow from the project and shall accrue to the extent unpaid. HRF shall perform such services as may be required to maintain compliance with the NMTC requirements. HRF shall be responsible for maintaining the status of HRF and Sub II as Community Development Entities, including maintaining accountability to residents of low-income communities and the submission of certifications, notices and reports to the CDFI Fund. HRF shall provide BOF with copies of all such submissions. HRF shall provide to BOF a semi-annual calculation regarding satisfaction of the requirement that substantially all of the QEI remains invested in the QLICI. BOF agrees to cooperate with HRF to assure ongoing compliance with this requirement. Based upon recommendations provided by HRF, HRF and BOF shall reach a mutual agreement regarding permissible distributions by Sub II to BOF as may be required to comply with the NMTC program. Termination Fee: A termination fee shall be payable to HRF in cash equal to 2.0% of the QEI upon the withdrawal of BOF from Sub II which shall occur as soon as it is feasible after the seven-year anniversary of the closing of the QEI. ESRP shall guarantee payment of this fee. In addition, Sub II's audit and accounting expenses, as well as expenses incurred in connection with extraordinary events, including the pursuit of remedies relating to the QLICI, shall be recoverable. The terms of the QLICI will be structured to cover Sub 11's reasonable annual operating expenses, including third party audit, compliance and accounting expenses. These fees are estimated at $13,500-$15,000/year. BOF shall agree to reimburse Sub II for its reasonable expenses incurred in connection with extraordinary events, including the exercise of remedies with respect to the QLICI and legal action taken by Sub II at the request of BOF. Page 4 of 7 • BOF agrees to comply with HRF's Allocation Agreement with the CDFI Fund by signing this Letter of Interest • Execution of the Sub II Operating Agreement in a form satisfactory to HRF and issuance of QEI in an amount of up to $8,000,000 by December 15, 2004 • Receipt of an investment proposal from BOF within fourteen (14) days of the date hereof. • Satisfactory due diligence is conducted by HRF of the proposed QLICI. HRF shall have fourteen (14) days to review the proposed terms of the QLICI and underlying due diligence documents provided by BOF to HRF regarding the proposed QLICI. If the foregoing requirements are not met, HRF shall have the right to terminate this letter of interest, or to request modifications. Termination shall be deemed effective three (3) business days after mailing of written notice by first class mail, the first day following placement with an overnight delivery service, or the day of facsimile transmission by HRF. HRF shall have no liability to BOF with respect to any NMTC recapture event attributable to the actions or inactions of BOF or ESRP. Pursuant to the Sub If Operating Agreement, BOF will have approval rights regarding distributions from Sub II and reinvestment of any principal payments received from the QLICI in order to minimize risk of potential recapture events. HRF and BOF will reasonably cooperate to reinvest the proceeds in a manner that will not result in NMTC recapture in the event of a default or foreclosure. The QLICI loan/investment documents shall include an obligation of ESRP to maintain compliance with the QLICI requirements and if required by BOF, an obligation to indemnify BOF for any recapture of NMTC, with interest, that results from the actions or inactions of ESRP. Distributions, if any, shall be made by Sub II to BOF on a monthly or quarterly basis, after payment of Sub II's reasonable operating expenses and any fees due to HRF, in amounts to be determined based upon the investment proposal. For a twelve (12) month period after the 7th anniversary of the QEI, BOF shall have the right to put its interest in Sub 11 to HRF for a nominal amount. After expiration of the put period, HRF shall have a call option for a period of twelve (12) months to purchase BOF's interest in Sub II for an amount equal to the fair market value of its interest. XT, , = re)u -rac r- a MMN The Sub II Operating Agreement shall provide BOF with the right to remove the managing member of Sub II for gross negligence or willful misconduct likely to have a material adverse effect on BOF; provided that if such removal would result in a violation of the Allocation Agreement or a NMTC Page 5 of 7 recapture event, BOF shall not have a removal right, but shall have the right to appoint a second manager to cure the default HRF shall have thirty (30) days within which to cure a default, provided that if such default is incapable of cure during that period, HRF shall have such longer period as may be required provided that HRF is diligently pursuing a cure. Any fees earned prior to removal shall be paid as a result of the removal. Legal and Consuting Fees BOF shall be responsible for payment of its own legal and consulting fees and out-of-pocket expenses incurred in connection with the closing of the QEI and each separate QLICI; provided that such fees up to a fixed amount may be paid out of the QEls subject to HRF review of the investment proposal. In the event that BOF accepts the terms set forth herein and HRF is prepared to suballocate NMTC to Sub 11, if BOF chooses not to proceed or fails to close with HRF by December 15, 2004, BOF shall be responsible for HRF's actual out-of-pocket third party fees and expenses, including but not limited to attorneys' and consultants' fees and expenses, incurred in connection with evaluating and closing the QEI; provided however such reimbursement shall not exceed $15,000 in the aggregate. Tax Opinion Garvey Schubert Barer, counsel to HRF shall provide the tax opinion to BOF satisfactory to BOF which shall be delivered at closing. Tax opinion fees shall be paid at closing of the QEI, to be funded by BOF. Reporting Requirements HRF shall provide such reports as BOF and HRF mutually agree which shall include provision on an annual basis of all necessary tax reporting information; copies of Sub It's tax returns, audited financial statements and reports submitted to the CDFI Fund. In addition to the above, BOF and HRF acknowledge that the transactions will be structured to comply with the NMTC program and all related rules and regulations. Furthermore, BOF reserves its rights to monitor ongoing compliance and reporting with respect to the NMTC Program. You agree and understand that HRF has spent substantial time on the proposed investment from BOF. Accordingly, you agree that with respect to the specific investment in ESRP as submitted to HRF for review, BOF shall not make such investment directly to ESRP without HRF's consent for a period of ninety (90) days from the date of your acceptance of this Letter of Interest unless we mutually agree to discontinue our efforts to complete the investment. You acknowledge that this letter of Interest contains confidential information and agree not to disclose either orally or in writing its contents to any third party other than your accountant(s) and/or attorney(s), without the express written consent of HRF and you further agree to advise your Page 6 of 7 representative that such representatives shall not disclose either orally or in writing the contents of this letter of interest. If the terms and conditions outlined herein are agreeable, please countersign this letter where indicated below. We look forward to working you. This offer is valid for ten (10) days from the date or this letter. Sincerely, Todd Brogdon Chief Operating Officer 0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ANALYSIS OF POTENTIAL TAXES GENERATED BY THE REDEVELOPMENT PROJECT x z lIX94 7S35.000.00 r. x x z x s S 110.882.00 S 218,5S4.00 ,0 00.00 S 27,S00.00 f 8 55,936.00 $ 436,360.00 S 226,193.00 $ 212,430.00 f 38,325.00 S 30,112.50 f 943,420.50 S 475,221.00 $ 234,110.00 f 232,610.85 $ 41,965.88 S 32,973.19 f 1,016,880.91 $ 489,656.00 $ 242,303.00 S 2S4,708.88 $ 45,952.63 S 36,105.64 $ 1,068,726.15 S 504,090.00 $ 2S0,784.00 f 278,906.22 $ 50,318.13 f 39,535.68 S 1,123,634.03 f 518,524.00 S 250,266.00 $ 305,402.32 S 55,098.36 $ 43,291.57 $ 1,180,582.24 f S34,069.00 S 265,996.00 $ 334,415.64 $ 60,332.70 S 47,404.26 $ 1,242,217.50 S 554,724.00 S 273,984.00 $ 366,185.01 $ 66,064.31 $ 51,907.67 $ 1,312,864.99 $ 567,379.00 S 282,239.00 $ 400,972.59 S 72,340.42 S 56,838.90 $ 1,379,769.90 $ 584,034.00 S 290,768.00 $ 439,064.98 $ 79,212.75 $ 62,238.59 $ 1,455,318.33 S 598,634.65 S 298,037.20 S 480,776.16 $ 86,737.97 $ 68,151.26 $ 1,532,337.43 $ 613,600.72 $ 305,488.13 f 526,449.89 $ 94,978.07 $ 74,625.63 $ 1,615,142.45 $ 628,940.74 $ 313,125.33 $ 576,462.63 S 104,000.99 $ 81,715.06 $ 1,704,244.76 $ 644,664.26 f 320,953.47 $ 631,226.58 $ 113,881.08 $ 89,477.99 $ 1,800,203.39 $ 660,780.86 S 328,977.30 $ 691,193.11 $ 124,699.79 $ 97,978.40 $ 1,903,629,47 f 677.300.39 $ 337,201.74 S 756,856.45 $ 136,546.27 $ 107,286.35 $ 2,015,191.19 $ 694,232.90 S 345,631.78 $ 828,757.82 $ 149,518.16 $ 117,478.66 $ 2,135,619.21 S 711,588.72 $ 354,272.57 S 907,489.81 $ 163,722.39 f 128,639.02 $ 2,265,712.51 $ 729,370.44 S 363,129.39 $ 993,701.34 $ 179,276.01 $ 140,859.73 $ 2,406,344.90 $ 747,612.90 $ 372,207.62 f 1,088,102.97 $ 196,307.24 $ 154,241.40 $ 2,558,472.12 $ 766,303.22 $ 381,512.81 $ 1,191,472.75 $ 214,956.42 $ 168,894.33 f 2,723,139.54 $ 785,460.80 $ 391,050.63 f 1,304,662.66 $ 235,377.28 $ 184,939.29 f 2,901,490.67 f 805,097.32 f 400,826.90 S 1,428,605.61 f 257,738.13 $ 202,508.S3 f 3,094,776.48 TIF Proceeds Land Appraised Proposed Return to Value Purchase Taxpayers E 3,500,000.00 $ 213,000.00 $ 300,000.00 $ 37,065,654.67 Note: All numbers are preliminary and based upon assumptions that may or may not actually occur 1 2 3 6 e 7 . 0 Y 10 11 12 1E 1� 16 18 17 18 19 2D 21 22 27 zo 28 ANALYSIS OF POTENTIAL TAXES GENERATED BY THE REDEVELOPMENT PROJECT Total Room Taxes Food8 Beverage Ta.es Property Tan Increases (Hotel � Property Tax Ineases (Courts u Building) Property Tat Increases Parking Deck Tax Tool Newns Collections S 14,138,535.10 5 7.055.611.88 S 14424454.16 5 2.602.349.98 5 2,044,703.55 5 40.265.654.67 ® ®l® T-. — 0 i NAME OF FILE: Ordinance No. 4663 w/exhibits CROSS REFERENCE Item # Date Document 1 12/16/04 Staff Review Form 2 memo to Steve Davis 3 letter to Fred Shefte 4 analysis of potential taxes generated 5 faxed letter to Stephen L. Goodman 6 letter to Ms. Shanna Moline 7 copy of International Hospitality Advisors overview 8 memo to Kit Williams 9 Affidavit of Publication (ordinance) 10 Affidavit of Publication (public hearing) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NOTES: Tft a e evi le ARKA NSAS DEPARTMENTAL CORRESPONDENCE To: Kit Williams City Attorney From: Clarice Buffalohead-Pearman4k City Clerk Division Date: January 7, 2005 Re: Ord. No. 4663 City Clerk Division 113 West Mountain Fayetteville, AR 72701 Telephone: (479) 575-8323 Fax: (479) 718-7695 city—clerk@ci.fayetteville.ar.us The City Council approved the above ordinance on December 28, 2004. Attached is a copy of the ordinance adopting the project plan for the East Square TIF District. I don't have an original project plan to attach to this ordinance. Please see that the city clerk's office gets one to attach for record. I'm sorry for the delay in returning this earlier, I've been out of the office and trying to play catch up. If anything else is needed please let the clerk's office know. Thanks. /cbp attachments 6-dep CITY AARNEY AGENDA REQUESTIPORM /Z p r 16 �Ry -7/ Pro)., J ) FOR: COUNCIL MEETING OF DECEMBER 28, 2004 FROM: KIT WILLIAMS, CITY ATTORNEY ORDINANCE OR RESOLUTION TITLE AND SUBJECT: An Ordinance Adopting The Project Plan For The Highway 71 East Square Redevelopment District, Finding The Plan Is Economically Feasible, Repealing Ordinance 4646 And Declaring An Emergency APPROVED FOR AGENDA: Attomey Date i Z' Date • rI :ir"n tCl �'� u A tl. 11� r i n WltlSltll �M1 • • MM L • • N, ,• ,.�M NT �' P �Ym y ootl ••N �L••tl Q.A �:mTheMountain• • • 9 tl tl.ib :; Y 3 TO: STEPHEN DAVIS, FINANCE $ INTERNAL SERVICES DIRECTOR DATE: DECEMBER 21,2004 SUWECr HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PER YOUR REQUEST PLEAs6 FIND ENCLOSED: 1. FEASIBILITY STUDY PREPARED BY INTERNATIONAL HOSPITALITY ADVISORS, INC. AND SUBSEQUENT UPDATE LETTERS FOR THE DEVELOPMENT OF THE HOTEL. PROJECT AT THE CURRENT MOUNTAIN INN SITE. 2. HEARTLAND RENAISSANCE COMMITMENT LETTER OUTLNING $8,000,000 NEW MARKET TAX CREDIT ALLOCATION FOR THE HOTEL PORTION OF THE PROJECT TO THE BANK OF FAYETTEVILLE. 3. ANALYSIS OF POTENTIAL TAXES GENERATED BY THE DEVELOPMENT OF THE MOUNTAIN INN PROJECT. AS WE DISCUSSED IN OUR MEETING THIS MORNING THE BANK OF FAYETTEVILLE WILL ACTUALLY FUND THE PROJECT BY FIRST FUNDING HEARTLAND RENAISSANCE FUND SUB U. LLC — QUALIFIED EQUITY INVESTMENT. IT is THIS CDE (COMMUNITY DEVELOPMENT ENTERPRISE) THAT ACTS AS THE CONDUIT FOR THE FINANCING FOR THE HOTEL PORTION OF THE PROJECT. ALSO, PURSUANT TO THEIR COMMTPMENT TO HRF, BOF IS REQUIRED TO FUND $4 MILLION OF THE NEW MARKET TAX CREDIT ALLOCATION PRIOR TO DECEMBER 31, 2004 OR THE PROJECT WILL LOSE THE SAID TAX CREDIT ALLOCATION. AS A PRACTICAL MATTER ANY DELAY IN RE -PASSAGE OF THE PROJECT• PLAN PAST DECEMBER 28m WILL SERIOUSLY JEPARDIZE THE FUNDING FOR THE PROJECT•. DEvELk)PERs ALSO HAVE PRELIMINARY FINANCING commrrmENTs FROM1 ATHE REA BANKS FOR YI 11 1 DFxx AND MEurmo/comvwnow PORTIONS OF THE PRcuEcT. THESE COMMITMENTS ARE SPECIFICALLYTo THE PASSAGE OF THE IhGHWAY 71 FAST SQUARE 1 THE SALE OF THE SUBJECT PROPERTYY 1 THE DEVELOPERS.11 1 DEVELOPERS i1 t' '< •1' • 1 1 I f •1 1 I I .Ili-y V :r PURSUANT WITH OUR MEETING WIIH THE CITY ATTORNEY IT WAS THE DEVELOPERS UNDERSTANDING THAT SUBSEQUENT TO THE PROJECT• RAN , THE CITY AND THE DEVELOPERS WOULD ENTER INTO AN AGREEM ENT WHEREBY THE CITY WOULD SELL THE S9IECT PROPERTY TO THE DEVELOPERS AT AN AGREED PRICE AND THAT AT THE TIME OF THE SALE AND AS A CONDITION OF ANY SME, THE DEVELOPERS WOULD DEMONSTRATE TO THE CITY IN A FORM SATISFACTORY TO THE CITY THAT THE DEVELOPERS WILL BE ABLE TO COMMENCE AND COMPLETE THE PROJECT As OUTLINED IN THE PROJECT RAN. IT IS IMPORTANT TO NOTE THAT THE PROJECT PLAN AS PREVIOUSLY PASSED SPECIFICALLY DID NOT RELY ON ANY INCREMENTAL GROWTH IN TAX COLLECTIONS FROM THE MOUNTAIN INN REDEVELOPMENT PROJECT OR ANY OTHER KNOWN DEVELOPMENT PROJECTS PLANNED IN THE DISITICr. HOWEVER, THE ATTACHED ANALYSIS OF POTENTIAL TAXES GgmPJPTED LISTS A RETURN TO TAXPAYERS OF OVER $W MELON DOLLARS. IF WE MAY PROVIDE ADDMO*L INFORMATION PLEASE DO NOT HESITATE TO REQUEST IT. SINCERELY, THE k(' YL(IAId -AIf:SmKila Pho .479.531.9188 )CAMAIo: Pbm :479-530-6799 November 16, 2004 Mr. Fred Shefte Bank of Fayetteville Fayetteville, AR Re: Heartland Renaissance Fund Sub II, LLC - Qualified Equity Investment Dear Fred: We are pleased to inform you that, subject to the terms and conditions set forth in this letter of interest, the Governing Board of Heartland Renaissance Fund, LLC, ("HRF") has approved Bank of Fayetteville ("BOF") to acquire an ownership interest in Heartland Renaissance Fund Sub II, LLC ("Sub II"), a subsidiary allocatee of HRF, up to but not more than $8,000,000 ("QEI"). This ownership interest will be deemed a Qualified Equity Investment if all requirements are met in accordance with Section 45D of the Internal Revenue Code ("Code"). HRF has received a $15 million allocation of New Markets Tax Credits ("NMTC") from the Community Development Financial Institutions Fund ("CDFI Fund") pursuant to an Allocation Agreement between HRF and CDFI Fund. Sub II has been certified as a "Subsidiary Allocatee" of HRF by the CDFI Fund. Pursuant to the terms and conditions proposed herein, HRF would agree to suballocate up to $8,000,000 of its allocation of New Markets Tax Credit ("NMTC") to Sub 11 in accordance with the Allocation Agreement. This letter is based on certain assumptions and information that is material to and has been relied upon by HRF in connection with the issuance of this letter of interest The suballocation is conditioned upon final approval of this letter of interest by the Governing Board, satisfactory conclusion of HRF's due diligence review process and successful documentation and closing of the transaction. At closing, HRF Management, LLC, an affiliate of HRF, will enter into the Sub II Operating Agreement and related agreements that will incorporate the terms and conditions set forth below and include other customary or necessary terms, subject to HRF's review and approval. Material Assumptions: Membership Interests Heartland Renaissance Fund Sub II, LLC HRF Management, LLC Bank of Fayetteville Heartland Renaissance Fund, LLC (CDE) HRF Management, LLC Arkansas Capital Corporation 00.01% Managing Member 99.99% Non -Managing Member 1% Managing Member 99% Non -Managing Member The total Qualified Equity Investment for NMTC purposes is estimated to be $8,000,000 ("QEI"). This QEI is projected to generate $3,120,000 of NMTC. HRF makes no representations concerning the ability of BOF to use the NMTC. BOF should consult with its legal and/or tax counsel to determine the qualification of the investment for NMTC and its ability to benefit from the NMTC. The final suballocation amount is subject to determination by HRF upon a review of the investment proposal to be provided by BOF. Subject to final approval by HRF, Sub II will be capitalized with an equity contribution of up to $8,000,000 from BOF with a closing to occur on or before December 15, 2004. Due to NMTC requirements that the investments in the project are made within 12 months of issuance of the QEI, it may be determined by HRF that BOF's contribution will be made in two installments with approximately $3 million contributed at closing on or before December 15, 2004 for acquisition costs, and up to $5 million at the commencement of construction. The timing of the QEI(s) will be determined upon review by HRF of the investment proposal. Subject to compliance with NMTC requirements, the equity contributions will be designated as one or more QEIs. The equity contributions will be made under terms and conditions acceptable to HRF and in compliance with Section 45D of the Internal Revenue Code. BOF would commit pursuant to the Sub II Operating Agreement to make the full amount of the QEIs within six (6) months of closing. Prior to disbursement to the project, the QEIs shall be held at an account in the name of Sub It. Interest earned thereon until disbursement of the QLICI shall be used as a credit towards Sub II's reasonable operating expenses. Proceeds of the equity contribution will be used to make a loan to and/or an equity investment in East Square Redevelopment Project ("ESRP") located in downtown Fayetteville, Arkansas, and to pay fees to HRF Management, LLC as described below. ESRP must meet the requirements to be defined as a Qualified Low-income Community Investment ("QLICB") under Section 45D of the Code. The expected proposed general terms of the loan and/or investment shall be presented by BOF to HRF within fourteen (14) days of the execution of this Letter of Interest and shall be subject to HRF's Page 2 of 7 approval in its sole discretion and must constitute a Qualified Low -Income Community Investment ("QLICI") as defined under Section 45D of the Code. Such proposal shall include a statement of the proposed sources and uses of the project, the terms of the proposed QLICIs (equity and/or debt), commitment letters from other financing sources, a construction schedule, and projected cash flows from the project during the 7-year NMTC recapture period. The documentation of the actual loan and/or investment shall also be subject to HRF's review and approval in its sole discretion. The party responsible for documentation of the QLICIs shall be determined, provided that the reasonable legal costs incurred may be funded out of the QEI, and the documents shall include such provisions as HRF shall require in order to comply with the NMTC program. The terms of the loan and/or investment shall include flexible, non -conventional or nonconforming terms with reference to standard practice in the applicable market as required by HRF's Allocation Agreement. The loan and/or investment must meet the requirement of being located in one of the target areas listed in Section 3.2(h) of HRF's Allocation Agreement. The terms of the loan and/or Investment shall also require ESRP to provide such information as is reasonably required by HRF for purposes of compliance with HRF's NMTC reporting requirements and to monitor performance. A cash penalty may be imposed by HRF upon ESRP for failure to provide information in a timely and satisfactory manner. BOF acknowledges that pursuant to Section 45D of the Code, the QLICIs have to be issued within 12 months of the issuance of the QEI(s) for BOF to be eligible to claim the NMTC. BOF represents to HRF that it is reasonably anticipated that the QLICI with respect to acquisition costs shall be made within two (2) months of issuance of the QEI of approximately $3 million. Contingent upon HRF's review of the investment proposal, HRF may determine that approximately $5 million of the estimated $8 million to be contributed shall be funded pursuant to the Sub 11 Operating Agreement at the commencement of construction, with disbursement to occur pursuant to construction draws during a 12-month period. BOF agrees that any portion of the construction QLICI not disbursed within 12 months of issuance of the QEI may be placed in a reserve in the borrower's name and withdrawn subject to approval by BOF and HRF. HRF anticipates that BOF will exercise construction oversight, inspection and disbursement responsibilities. The second installment of up to $5 million may be subject to certain conditions relating to the feasibility of the project at the time of commencement of construction. If the second installment of the QEI is not made, BOF and HRF may negotiate the right to withdraw the initial investment from the project, provided the parties agree to reinvest in a qualified investment in the appropriate time period to avoid NMTC recapture. These terms are subject to HRF review of the investment proposal and its due diligence investigation. BOF agrees to facilitate issuance of the QLICIs within 12 months of the applicable QEI to the project or to another qualified project within the applicable time period to prevent a recapture of NMTC. BOF accepts full responsibility for the timely closing of the QLICIs and any recapture of NMTC that occurs as a result of a delay in closing the QLICIs unless caused by the gross negligence, willful misconduct or fraud of HRF. HRF agrees to cooperate with BOF to facilitate timely closings of the QLICI. BOF shall not expect HRF to perform any due diligence investigation of the QLICI and shall not rely on any due diligence investigation conducted by HRF. HRF's role shall be limited to providing a suballocation of NMTC and performing management and NMTC compliance responsibilities. HRF is Page 3 of 7 not responsible for and will not make any representations regarding the operational results, commercial viability or financial performance of the QLICI and BOF shall have no recourse against HRF or its affiliates for any failure by the QLICI to achieve projections or provide any investment return. The QLICI documents shall provide that HRF shall have a role in the administration of the QLICI including compliance with the NMTC program and the exercise of remedies in the event of default, workout or foreclosure. HRF shall be entitled to the fees set forth below as compensation for its role in the QEI and its provision of services in support of the transaction: Closing Fee: Concurrent with the closing of the QEI in Sub II, HRF shall be entitled to a closing fee equal to 5% of the QEI to be funded by the QEI. Administration and Compliance Fee: On or prior to the first day of each calendar quarter following the closing of the QEI, an administration and compliance fee equal to .1071% of the QEI ($8,571) shall be payable to HRF in consideration for NMTC administration and compliance services to be rendered by HRF. This fee shall be funded by cash flow from the project and shall accrue to the extent unpaid. HRF shall perform such services as may be required to maintain compliance with the NMTC requirements. HRF shall be responsible for maintaining the status of HRF and Sub II as Community Development Entities, including maintaining accountability to residents of low-income communities and the submission of certifications, notices and reports to the CDFI Fund. HRF shall provide BOF with copies of all such submissions. HRF shall provide to BOF a semi-annual calculation regarding satisfaction of the requirement that substantially all of the QEI remains invested in the QLICI. BOF agrees to cooperate with HRF to assure ongoing compliance with this requirement. Based upon recommendations provided by HRF, HRF and BOF shall reach a mutual agreement regarding permissible distributions by Sub II to BOF as may be required to comply with the NMTC program. Termination Fee: A termination fee shall be payable to HRF in cash equal to 2.0% of the QEI upon the withdrawal of BOF from Sub II which shall occur as soon as it is feasible after the seven-year anniversary of the closing of the QEI. ESRP shall guarantee payment of this fee. In addition, Sub II's audit and accounting expenses, as well as expenses incurred in connection with extraordinary events, including the pursuit of remedies relating to the QLICI, shall be recoverable. The terms of the QLICI will be structured to cover Sub II's reasonable annual operating expenses, including third party audit, compliance and accounting expenses. These fees are estimated at $13,500-$15,000/year. BOF shall agree to reimburse Sub II for its reasonable expenses incurred in connection with extraordinary events, including the exercise of remedies with respect to the QLICI and legal action taken by Sub II at the request of BOF. I0-M-Int! Requirements: • BOF agrees to comply with HRF's Allocation Agreement with the CDFI Fund by signing this Letter of Interest • Execution of the Sub II Operating Agreement in a form satisfactory to HRF and issuance of QEI in an amount of up to $8,000,000 by December 15, 2004 • Receipt of an investment proposal from BOF within fourteen (14) days of the date hereof. • Satisfactory due diligence is conducted by HRF of the proposed QLICI. HRF shall have fourteen (14) days to review the proposed terms of the QLICI and underlying due diligence documents provided by BOF to HRF regarding the proposed QLICI. If the foregoing requirements are not met, HRF shall have the right to terminate this letter of interest, or to request modifications. Termination shall. be deemed effective three (3) business days after mailing of written notice by first class mail, the first day following placement with an overnight delivery service, or the day of facsimile transmission by HRF. HRF shall have no liability to BOF with respect to any NMTC recapture event attributable to the actions or inactions of BOF or ESRP. Pursuant to the Sub II Operating Agreement, BOF will have approval rights regarding distributions from Sub II and reinvestment of any principal payments received from the QLICI in order to minimize risk of potential recapture events. HRF and BOF will reasonably cooperate to reinvest the proceeds in a manner that will not result in NMTC recapture in the event of a default or foreclosure. The QLICI loan/investment documents shall include an obligation of ESRP to maintain compliance with the QLICI requirements and if required by BOF, an obligation to indemnify BOF for any recapture of NMTC, with interest, that results from the actions or inactions of ESRP. Distributions, if any, shall be made by Sub II to BOF on a monthly or quarterly basis, after payment of Sub II's reasonable operating expenses and any fees due to HRF, in amounts to be determined based upon the investment proposal. 0 For a twelve (12) month period after the 7th anniversary of the QEI, BOF shall have the right to put its interest in Sub II to HRF for a nominal amount. After expiration of the put period, HRF shall have a call option for a period of twelve (12) months' to purchase BOF's interest in Sub 11 for an amount equal to the fair market value of its interest The Sub II Operating Agreement shall provide BOF with the right to remove the managing member of Sub II for gross negligence or willful misconduct likely to have a material adverse effect on BOF; provided that if such removal would result in a violation of the Allocation Agreement or a NMTC Page 5 of 7 recapture event, BOF shall not have a removal right, but shall have the right to appoint a second manager to cure the default HRF shall have thirty (30) days within which to cure a default, provided that if such default is incapable of cure during that period, HRF shall have such longer period as may be required provided that HRF is diligently pursuing a cure. Any fees earned prior to removal shall be paid as a result of the removal. Legal and Consultin BOF shall be responsible for payment of its own legal and consulting fees and out-of-pocket expenses incurred in connection with the closing of the QEI and each separate QLICI; provided that such fees up to a fixed amount may be paid out of the QEls subject to HRF review of the investment proposal. In the event that BOF accepts the terms set forth herein and HRF is prepared to suballocate NMTC to Sub ll, if BOF chooses not to proceed or fails to close with HRF by December 15, 2004, BOF shall be responsible for HRF's actual out-of-pocket third party fees and expenses, including but not limited to attorneys' and consultants' fees and expenses, incurred in connection with evaluating and closing the QEI; provided however such reimbursement shall not exceed $15,000 in the aggregate. Tax Opinion Garvey Schubert Barer, counsel to HRF shall provide the tax opinion to BOF satisfactory to BOF which shall be delivered at closing. Tax opinion fees shall be paid at closing of the QEI, to be funded by BOF. Reoo�g Requirements HRF shall provide such reports as BOF and HRF mutually agree which shall include provision on an annual basis of all necessary tax reporting information; copies of Sub II's tax returns, audited financial statements and reports submitted to the CDFI Fund. In addition to the above, BOF and HRF acknowledge that the transactions will be structured to comply with the NMTC program and all related rules and regulations. Furthermore, BOF reserves its rights to monitor ongoing compliance and reporting with respect to the NMTC Program. You agree and understand that HRF has spent substantial time on the proposed investment from BOF. Accordingly, you agree that with respect to the specific investment in ESRP as submitted to HRF for review, BOF shall not make such investment directly to ESRP without HRF's consent for a period of ninety (90) days from the date of your acceptance of this Letter of Interest unless we mutually agree to discontinue our efforts to complete the investment. You acknowledge that this letter of interest contains confidential information and agree not to disclose either orally or in writing its contents to any third party other than your accountant(s) and/or attorney(s), without the express written consent of HRF and you further agree to advise your Page 6 of 7 representative that such representatives shall not disclose either orally or in writing the contents of this letter of interest. If the terms and conditions outlined herein are agreeable, please countersign this letter where indicated below. We look forward to working you. This offer is valid for ten (10) days from the date or this letter. Sincerely, <"U , Todd Brogdon Chief Operating Officer E ANALYSIS OF POTENTIAL TAXES GENERATED BY THE REDEVELOPMENT PROJECT Total Now Tax Collections 7�3�5,000.00 x x X. x- . x x x a $ 110,882.00 $ 118,554.00 $ 194,000.00' $27y500:00 ':$ 885,936.00 $ 436,360.00 $ 226,193.00 $ 212,430.00 f 38,325.00 $ 30,112.50 $ 943,420.50 $ 475,221.00 $ 234,110.00 $ 232,610.85 $ 41,965.88 $ 32,973.19 $ 1,016,880.91 S 489,656.00 $ 242,303.00 $ 254,708.88 $ 45,952.63 S 36,105.64 $ 1,068,726.15 $ 504,090.00 $ 250,784.00 $ 278,906.22 $ 50,318.13 S 39,535.68 $ 1,123,634.03 $ 518,524.00 $ 258,266.00 $ 305,402.32 S 55,098.36 $ 43,291.57 S 1,180,582.24 S 534,069.00 S 265,996.00 $ 334,415.54 $ 60,332.70 $ 47,404.26 $ 1,242,217.50 $ 554,724.00 $ 273,984.00 $ 366,185.01 $ 66,064.31 $ 51,907.67 $ 1,312,864.99 $ 567,379.00 $ 282,239.00 $ - 400,972.59 $ 72,340.42 $ 56,838.9.0 S . .1,379,769.90 $ 584,034.00 $ 290,768.00 $ 439,064.98 f 79,212.75 $ 62,238.59 $ 1,455,318.33 $ 598,634.85 $ 298,037.20 $ 480,776.16 $ 86,737.97 $ 68,151.26 $ 1,532,337.43 $ 613,600.72 S 305,488.13 $ 526,449.89 $ 94,978.07 It 74,625.63 9 1,615,142.45 $ 628,940.74 $ 313,125.33 $ 576,462.63 $ 104,000.99 $ 81,715.06 $ 1,704,244.76 S 644,664.26 $ 320,953.47 $ 631,226.58 $ 113,881.08 $ 89,477.99 $ - 1,800,203.39 S 660,780.86 $ 328,977.30 $ 691,193.11 $ 124,699.79 $ 97,978.40 $ 1,903,629.47 $ 677,3D0.39 $ 337,201.74 $ 756,856.45 $ 136,546.27. '$ 107,286.35 S 2,015,191.19 $ 694.232.90 $ 345,631.78 $ 828,757.82, $ 149,518.16 $ 117,478.56 $ 2,135,619.21 S 711,588.72 f 354,272.57 $ 907,489.81 �$ 163,722.39 $ '�128,639.02" $ 2,265,712.51 $_ 729,378.44 $ 363,129.39 $. 993,701.34 $ 179,276.01 $ 140,859.73 $ 2,406,344.90. $ 747,612.90 $ 372,207.62 -$ . 1,088;102.97'. S 196;307,.24 S 154,241.40 S 2,558,472.12 $ 766,303.22 $ 381,512.81 It 1,191,472.75 S " 214,956.42 '$' 168;894.33 S 2,723,139.54 S 785,460.80- $ 39'1,050.63' $ 1;304X62.66 S" 235,377.281 $ 184,939.29 $.. 2,901,490.67- S 805,097.32 S 400 826 90 $ 142860561 $ ',. 25773811 S 202,508.53 S 1,094,776:46 1 1 .1 1• 1 1 TIFroceedsV , a7a°d Appraised Proposed Return toy, .a•:�s®: Value Purchase lax a ors � f 3,500,000.00 $ 213,000.00 $ 300,000.00 $ 37,065,654.67 Note: AN numbers are preleninary and based upon mumptions Out may w may not actually occur Via Facsimile Transmission March 7, 2002 Mr. Stephen L. Goodman RiskPRO 4695 Chabot, Suite 114 Pleasanton, CA 94588 Re: Proposed 125-Room Crowne Plaza Hotel - Fayetteville, Arkansas Dear Mr. Goodman: In accordance with the terms of our proposal agreement and subsequent conversations, this letter provides you with the findings of our primary market research conducted during the week of February 11, 2002, in connection with the abovementioned project. The purpose of the update was to determine if current market conditions had changed materially since the completion of our "Study of Potential Market Demand and Statements of Estimated Operating Results for the Re -Development of the Closed Mountain Inn Located in Fayetteville, Arkansas to an 105-Unit Crowne Plaza -Affiliated Boutique Hotel" that was issued in August 2000. In addition, given the increase in room inventory to 125 units we have prepared revised statements of estimated annual operating results. This letter should be read in conjunction with our August 2000 report. As per your request, we further prepared a valuation of the proposed hotel based on current market factors, the revised estimates of potential operating results and an income approach to value analysis. Salient Observations Following are our observations that are salient to the overall market and the proposed project based on our primary research. • The proposed site and its conditions as described in our market study remain unchanged. Stephen L. Goodman 2 February 26, 2002 • Opened in November of 1998, Northwest Arkansas Regional Airport (NWARA) is the principal commercial airport in the region. The airport is served by American Eagle, Atlantic Southeast Airlines (Delta Connection), TransWorld Express, Northwest Airlines and US Airways Express. Plans call for the expansion of the terminal building in early 2003 with should increase the number of carriers servicing the airport. In 2001, passenger enplanements and deplanements totaled 735,822 as compared to 702,568 representing a growth of 4.7 percent despite a significant decrease in September 2001. • Established in 1871, the University of Arkansas is situated in downtown Fayetteville approximately two miles from the subject site. Of particular significance to the lodging market dynamics is the recent renovation completed in 2001 of the football stadium. With an investment of $200.0 million, the stadium's capacity has been increased from 62,000 to 78,000 spectators. As a result, many of the university's home football games for the year 2002 and onward have been relocated from Little Rock to the Fayetteville stadium. Five home games are slated to be played in Fayetteville in 2002, which should generate additional lodging demand during those respective weekends. • In July 2001, the new, "state-of-the-art" Town Center convention facility was opened and is located approximately two blocks from the subject site. The facility offers 14,000 square feet of column -free space on one level, 10,000 square feet of show offices, and extensive pre -function and support services. The facility should be an important generator of additional hotel room nights for hotels in the downtown Fayetteville area. In 2001, the facility hosted 89 events with a total of 22,800 attendees. Based on conversations with management, these events typically last for two days, thus generating one room night. In 2002, the facility already has 89 scheduled events with a goal of 180 for the entire year. Examples of such events include a Coaches' Clinic (three nights) for 2,000 persons in June and a Gospel Choir Show in July for 8,000 visitors (Wednesday through Saturday). • Fayetteville is slated to be the site of the Arkansas Business and Technology Park. The first phase of this project is scheduled for 2003 and will cost approximately $5.8 million and generate 1,500 jobs. • In April 2002, a new scenic highway (71/I540) is slated to commence construction. This highway will link the surrounding counties with Fayetteville further improving overall road networks and access. • Business travel to the area is largely fueled by the presence of the headquarters of Walmart in Bentonville, Tyson Foods in Springdale and J.B. Hunt in Lowell, all of which are located in close proximity to NWARA. INTERNATIONAL HOSPITALITY ADVISORS, INC. Mr. Stephen L. Goodman 3 February 26, 2002 • There are three primary competitors to the proposed Crowne Plaza: the Radisson Hotel (formerly Hilton Hotel), the Ramada and the Clarion. In 2000, these properties achieved an aggregate occupancy of 51.0 percent at an average daily room rate of $72.00 for a Revenue per Available Room (RevPAR) of $37.00. The Hilton (now the Radisson) was the front-runner with an occupancy of 55.0 percent at an average daily rate of $89.00. In 2001, as with most hotel markets due to the terrorist incidents of September which resulted in a severe cutback of business travelers and related hotel occupancies during the last four months of the year, the Fayetteville market was negatively affected. However, the effects were not as dramatic as in other parts of the nation with the three hotels finishing the year at an aggregate occupancy level of 47.0 percent at an average daily rate of $66.00. Based on our interviews with the hotels, it appears that the market is recovering quickly with forecasts for 2002 to match the results achieved in 2000. • As with most lodging markets, hotels in Fayetteville are subject to seasonal fluctuations in demand. The off-season corresponds to the months of January and December when students at the University of Arkansas are away on break and most business travelers are also on vacation. Differences between weekday and weekend demand tends to be less pronounced for hotels in Fayetteville due to positive impact of major sporting events at the University which are usually held on weekends. This is particularly true during the football and basketball season. In addition, with the addition of the convention facility, the city is now a host to many events held over off-season and weekend periods. Conclusion Based on our research and an evaluation of the primary lodging competition, it appears that Fayetteville is recovering more rapidly from the September 11, 2001 incidents as compared to other destinations throughout the country. hi addition, the contribution of room nights to be derived from the expansion of the football stadium and resulting home games and the opening of the convention facility will be extremely beneficial to the downtown Fayetteville hotels due to their proximate locations to both facilities. As reflected in the aggregate occupancies and average daily room rates forecasted for 2002, the market should return to previous levels of growth starting in 2003. As such, the effect of September 11, 2001 is expected to be short-term in nature with growth being fully restored to pre-2001 levels in 2004, the first full year of operations for the subject hotel. As such, we are of the opinion that the market findings presented in our original market study remain valid and the resulting estimates of occupancy and rate are still achievable. INTERNATIONAL HOSPITALITY ADVISORS, INC. • • Mr. Stephen L. Goodman 4 February 26, 2002 However, due to the increase in inventory to 125-keys, an adjustment has been made to the overall occupancy curve to reflect a stabilized occupancy at 65 percent. Projected Operating Performance Based on our evaluation of the local lodging market, the envisioned project concept as recommended and local market dynamics, we have estimated the following patterns of occupancy and average daily room rates for the subject hotel over the defined projection period. stimated Per o manc )rJo ed 5-uni C«ro a ' ote o town a, et eville, ran a Uninflated Cumulative Inflated Estimated Average Inflation Average Year Occupancy Room Rate Factor Room Rate 2004* 58% $80.00 1.061 $84.75 2005 62 90.00 1.093 98.25 2006 65 95.00 1.126 107.00 2007 65 95.00 1.159 110.25 2008 65 95.00 1.194 113.50 2009 65 95.00 1.230 116.75 2010 65 95.00 1.267 120.25 2011 65 95.00 1.305 124.00 2012 65 95.00 1.344 127.75 2013 65 95.00 1.384 131.50 First full year of operations [source: International Hospitality Advisors Estimated Operating Results We have utilized the same parameters for other departmental revenues and overall expenses as indicated in our original market study. The revised 10-year estimates of potential operating results are attached. INTERNATIONAL HOSPITALITY ADVISORS, INC. Mr. Stephen L. Goodman 5 February 26, 2002 Income Approach to Value As requested, we have further prepared a valuation of the hotel based on an income approach to value as is typical for hotel operations given the fact that they are "going concerns". Our valuation methodology utilizes the discounted cash flow and reversion analysis approach to value. The discounted cash flow analysis is based on our revised ten-year projection of operating results. Current Capitalization Rates The capitalization rate is a mathematical relationship which exists between the net income derived by a property and the value or price which an investor would pay for the right to receive that net income stream. Influences most affecting value are quality, quantity and probable duration of the net income expectancy. Based on a recent survey (Winter 2001/2002 USRC Hotel Investment Survey) of 29 major investors who are active in the lodging industry throughout the country, capitalization and discount rates for full -service hotels have increased since 2000. The increase has occurred despite the decline in interest rates and the prime rate. The increases are due to the higher risk associated with hotel investments particularly since the September 11, 2001 attacks which have caused a short-term decline in travel and related hotel usage. The survey indicated that investors are utilizing a direct capitalization rate for full -service hotels of 11.6 percent which is 90 basis points higher than the average for 2000/2001 survey of 10.7 percent. The capitalization rate has two components: equity and debt. With interest rates declining, and the overall rates showing an increase for full service properties, this indicates that the equity capitalization rates have risen strongly. Weighing the subject hotel's proposed location and market niche, orientation and positioning and overall room inventory, an overall capitalization rate of 11.5 percent would be appropriate. Due to the increase in risk associated with the passing of time, forecasting a reversionary capitalization rate usually requires a premium of 50 to 100 basis points over overall rates. In determining a terminal capitalization rate for the proposed hotel, a 50 basis point spread over the overall rate is considered appropriate. This equates to a terminal capitalization rate of 12.0 percent. Discount Rates The discount rate reflects the overall rate of return expected by an investor, weighing the relative risk of the investment in relation to other investment vehicles and the perceived risk of each component in the operation of the facility. The projected net operating income for each of the subsequent ten years needs to be discounted to reflect the risk inherent in receiving future cash flows. The deferred return of the initial investment (reversion) when the property is estimated to be sold ten years in the future is also discounted. INTERNATIONAL HOSPITALITY ADVISORS, INC. Mr. Stephen L. Goodman 6 February 26, 2002 According to recent investor surveys, discount rates currently range between 9.0 and 20.0 percent with an average of approximately 14.6 percent. This suggests that a spread of 100 to 250 basis points between the terminal capitalization and discount rate is appropriate. Thus, due to the factors discussed previously, a discount rate of 14.0 percent was deemed appropriate for the subject property. Discounted Cash Flow and Reversion Analysis The Discounted Cash Flow and Reversion Analysis takes into account the array of market factors and external variables that influence the proposed property. This technique converts the annual cash flow and sale proceeds over a typical holding period into a value estimate using current market -derived yield rates. Taking into consideration the revised 10-year estimates and the following assumptions, a discounted cash flow analysis has been prepared including the calculation of the hypothetical sale at the end of the ten-year holding period and the discounting procedure used to estimate the opinion of value for the subject hotel. Assumptions: First Year of Operation: 2004 Estimated Stabilized Occupancy: 65.0% Average Daily Room Rate (2002) Dollars: $95.00 Inflation: 3.0% Terminal Capitalization Rate: 12.0% Sales Cost: 2.0% Discount Rate: 14.0% A table showing the Discounted Cash Flow and Reversion Analysis is included after the revised ten-year estimates of potential operating results. Opinion -of Value Conclusion Based on the assumptions detailed previously and the future positioning of the subject hotel, it is our opinion that the value of the 125-room Crowne Plaza hotel would be: $12,682,000 (Twelve Million six hundred eighty two thousand U.S. dollars). INTERNATIONAL HOSPITALITY ADVISORS, INC. Mr. Stephen L. Goodman 7 February 26, 2002 We thank you for the cooperation extended to us during the overall assignment. Should you have any questions or comments, please do not hesitate to contact us. Sincerely, Sincerely, Desmond Pinto Derek J. Pinto Director Managing Director attachments INTERNATIONAL HOSPITALITY ADVISORS, INC. February 1, 2002 ('Via Electronic Moil) Ms. Shanna Moline Rish,PRO 4695 Chabot , Suite 114 Pleasanton, CA 94588 Re: Update and Assessement of Capitalization Rate and Valuation of the proposed 105,unit Crowns Plaza hotel — Fayetteville, Arkansas Dew Ms. Moline: As per. our telephone conversation, the following confirms the scope of work in connection with the abovementioned project. The scope of our work will entail an update of the "Study of Market Demand and Statements of Estimated Annual Operating Resuds for the Re -Development of the Closed Mountain Inn Located in Fayeteville, Arkansas to a 105-Unit Crowne Plaza -Affiliated Boutique Hotel". Scope of Work The purpose of the update is to determine if current market conditions have changed materially since the completion of the study dated August 2000 and whether the projections contained in the report are still valid and achievable. In addition, based on. current investment and valuation parameters, we will provide you with an indication of capitalization rates that are typically used in the assessment of value of assets such as the type under consideration. Our findings will be presented in a brief letter report that should be read in conjunction with the original market study. ]nternatlonal Hospitality Advisors e 2625 Ponce do Leon Boulevard • Suite 280 • Coral Gables, FL 33134 Telephone; 305.444.4491 • Facsimile; 305.444.4510 • Email: dpinto®lbaglobal.com .Plent by: Cooper and Cook 925 463 3784; 02/01/02 14:43; Page Two February 1.2002 Limitations of the Engagement Our reports would be subject to the following standard limitations: JetEm p32; Page 2/3 We are not obligated to update our findings regarding changes in market conditions which occur subsequent to the completion of our primary research. 2. Our report and the material submitted may not be including as part of a prospectus or in printed material or advertising used in connection with the sale of securities or participation interest to the public. 3. Drafts or preliminary information communicated to you during the course of the assignment are for your internal management use only and may no be disclosed to outside parties without our prior written consent. 4. The report will be based on estimates, assumptions and other data developed from our knowledge of the industry and information provided by others. The sources of the information and the bases of our findings will be stated within the reports. All information provided by others will be accepted without audit or verification and will be assumed to be correct. S. Some assumptions inevitably will not materialize, and unanticipated events and circumstances may occur, therefore, actual results achieved will vary from the analyses, and the variations may be material. 6. We cannot be held liable in any cause of action resulting in litigation for any dollar amount which exceeds the total fees collected from this individual engagement. Any legal expenses incurred in defending or representing ourselves concerning this assignment will be the responsibility of the client. Based on our schedule, we would comme= primary research within one week of receiving authori2ation to proceed. We would plan to issue the letter report approximately one week after the completion of our primary research. Our professional fees for the assignment described herein would be $10,000. International Hospitality Advisors . 2625 Ponce de Leon Boulevard • Suite 2Eo . Coral Gables, FL 33134 Telephone: 305.444.4491 • Facsimile: 305.444.4510 9 Email: dpinto®thaglabal.com 'Sent by: Cooper and Cook • 925 463 3784; 02/01/02 1�; JgffvA p32; Page 3/3 Page Three February 1, 2002 In addition to our professional fees, we would be reimbursed for any out-of-pocket expenses incurred by our professionals during the course of the assignment such as airfare, meals and lodging, communication costs, postage and report production. As is typical in assignments of this nature, we require a retainer of $6,000 prior to scheduling the engagement. Final payment will be due at the time we issue the letter report. If the proposal colr Wy states the nature of the work to be done at this time and if the arrangements are satisfactory, please sign below and return an�copy to us along with the requested retainer as our authorization to proceed. If you have any questions or require revisions to this proposal, please call us. We appreciate the opportunity to submit this proposal and look forward to working with you. DJP/mnc Sincerely`, Derek J, Pinto Managing Director APPROVED ANDACCEPTED:„� ` DATE: 9, — '*- — o •-t-. COMPANY: R.3�2C-o aJ� International Hospitality Advisors . 2625 Ponce de Leon Boulevard e Suite 280 . Coral Gables, FL 33134 Telephone: 305.444,4491 . Facsimile: $05.444.4510 4 Email: dolnto»thaalobal.com 0 0 I E STUDY OF POTENTIAL MARKET DEMAND AND STATEMENT OF ESTIMATED ANNUAL OPERATING RESULTS FOR THE RE -DEVELOPMENT OF THE CLOSED MOUNTAIN INN LOCATED IN FAYETTEVILLE, ARKANSAS TO AN 105-UNIT CROWNE PLAZA -AFFILIATED BOUTIQUE HOTEL Prepared by: International Hospitality Advisors, Inc. 8390 Northwest 53rd Street, Suite 312 Miami, Florida 33166 AUGUST 2000 TABLE OF CONTENTS PAGE NUMBERS SECTION I INTRODUCTION Scopeof the Study............................................................................................ . ProjectConcept.................................................................................................. Study Approach and Methodology..................................................................... SECTION II EXECUTIVE SUMMARY MarketFeasibility............................................................................................ Summary of Conclusions................................................................0......0......... SECTION III SITE EVALUATION Property Location and Description.................................................................... Salient Characteristics of the Site ..:........... ............ .... ..... ....6... ........................... Conclusion......................................................................................................... SECTION IV AREA OVERVIEW OF FAYETTEVILLE Introduction........................................................................................................ Population.......................................................................................................... Employment...........................................................................................0........... University of Arkansas.................................................................0.0......0............ Arkansas Research and Technology Park.......................................................... Town Center Convention Facility...................................................................... Infrastructure.........................................................................................0....0....... Conclusion............................................................................0............................ TABLE OF CONTENTS (Continued) I, PAGE NUMBER j SECTION V 1 ' HOTEL MARKET SUPPLY AND DEMAND Introduction........................................................................................................ V -1 Comparable Lodging Supply............................................................................. V -1 r Additions to the Lodging Supply....................................................................... V -4 Lodging Demand Analysis .......... !,.v................................................................... V -5 Conclusion......................................................................................................... V -8 r SECTION VI ESTIMATED MARKET POSITION MarketPosition.................................................................................................. VI- 1 Subject Property Performance............................................................................ VI- 3 Average Daily Room Rate................................................................................. VI- 4 Conclusion......................................................................................................... VI- 5 �. ]r SECTION VII ` ESTIMATED OPERATING RESULTS Introduction........................................................................................................ VII -1 I, Methodology...................................................................................................... VII-1 Inflation.............................................................................................................. VII -2 Income and Expense Projections.;.,................................................................... VII -2 �r i I • • I. r� i° I, I: 1r T STELLA BELLA PLAZA, LLC FAYETTEVILLE, ARKANSAS 1 . SECTION I INTRODUCTION 1, (. AUGUST 2000 i� Ii IT t Ir �r ,1 r i t r t INTERNATIONAL HOSPITALITY ADVISORS, INC. I � r INTRODUCTION SCOPE OF THE STUDY 1-1 International Hospitality Advisors, Inc. (IHA) has been engaged by Stella Bella Plaza, LLC of Fayetteville, Arkansas, to assess potential market demand for the redevelopment and repositioning of the closed Mountain Inn Hotel located in downtown Fayetteville to a 105-unit, Crowne Plaza - affiliated boutique hotel. The engagement objectives were to determine current and potential future demand for the development based on our current knowledge of existing and potentially competitive facilities; to evaluate the market share that could reasonably be attained by the subject development; and to make recommendations regarding the extent and type of facilities which we believe would be most appropriate within the context of the current project concept and plans. The engagement further called for the preparation of statements of estimated annual operating results for the redeveloped hotel over the first ten years of operation. PROJECT CONCEPT Built in the 1920's and later expanded with a new hotel section in 1968, the seven -story Mountain Inn Hotel has remained closed for several years. The hotel was recently purchased by Ms. Stella Moga, the project developer, with the intention of redeveloping it as a downtown hotel property. As envisioned, the redeveloped hotel is to be positioned as a full -service, boutique -oriented, Crowne Plaza -affiliated hotel targeted at the upper end of the corporate and leisure segment currently visiting Fayetteville. When completed, the redeveloped hotel will contain the following elements: ❑ 105 well-appointed guestrooms and suites; ❑ Approximately 15 one-, two- and three -bedroom condominium units ranging in size between 1,400 to 1,800 square feet that will sold or leased to the public. Unit owners would have access to the hotel's facilities and services; ❑ A multi -purpose restaurant containing approximately 75 seats. This room could also be utilized for banquets or meetings, as needed; ❑ A lobby area lounge containing approximately 40 seats; ❑ Flexible meeting space totaling 4,500 square feet. It should be noted that a former lounge located in the basement, could be used for additional banquet and meeting space; ❑ A well-equipped fitness center totaling approximately 1,200 square feet; INTERNATIONAL HOSPITALITY ADVISORS, INC. t, INTRODUCTION I-2 ❑ A well-equipped business center; ❑ A swimming pool on the third level of the building; ❑ Selected retail outlets with direct public access totaling approximately 13,000 square feet; ❑ A six -story parking structure with parking for 98 cars. Two additional levels of parking could be added bringing the total parking capacity to 141 spaces. STUDY APPROACH AND METHODOLOGY Our approach to the engagement was as follows: ❑ A review of the project concept and discussions with the developer; ❑ A physical evaluation of the subject site and an economic evaluation of Fayetteville and Northwest Arkansas. The potential for the project was evaluated on the basis of accessibility, convenience to major demand generators and area attractions. The relative economic stability and growth of the area was evaluated by compiling and analyzing economic indicators for the region, and by analyzing pertinent statistical data and by interviewing local officials; ❑ Research of the primary market. Information on potential markets was obtained by inspections and evaluation of competitive operations, conversations with industry representatives, and discussions about the current market situation with individuals familiar with the area's lodging and tourism industry; ❑ Preparation of supply and demand estimates. Demand estimates were prepared on the basis of the foregoing research and analysis of historical growth trends in demand sources. Estimates of performance were based on the experience of comparable facilities, as well as, the configuration attributes unique to the subject development; ❑ Project recommendations. Based on the project concept and prevailing market conditions we developed opinions regarding the subject development and provided recommendations concerning services and amenities which we believe best meet market demand; ❑ Preparation of estimated annual operating results for the first ten year's of operation. These statements were prepared for each defined component based on the operating experience of comparable level facilities in the United States, resulting in a "bottom line" of income before depreciation, amortization, interest on debt financing and taxes. , INTERNATIONAL HOSPITALITY ADVISORS, INC. E w z L � 7 d== w o o 0 o 4 h V a tz N t 3 o � a 3 - t � J W e P m e J _ z O J _ w F N a. a w r • o W 2 - � i duo u h � t 4 i0 4h, V a r t x N c t .L b a s o t e a W c � 2CO C x t J � LL] F N j a 4 STELLA BELLA PLAZA, LLC FAYETTEVILLE, ARKANSAS SECTION II EXECUTIVE SUMMARY AUGUST 2000 INTERNATIONAL HOSPITALITY ADVISORS, INC. EXECUTIVE SUMMARY MARKET FEASIBILITY Our analysis of potential market demand and estimates of operating results indicate that the development of an 105-unit, Crowng Plaza -affiliated, boutique hotel that ideally combines reasonable room rates, high -quality accommodations, focused services and excellent value is feasible from a marketability standpoint. In the following paragraphs, we present the major conclusions of the study. SUMMARY OF CONCLUSIONS Site Location ❑ The subject seven -story property is located at the intersection of College Avenue and Mountain Street in Downtown Fayetteville, Arkansas overlooking the landmark Old Courthouse Building and the John Paul Hammerschmidt Federal Building. The site is rectangular shaped with approximately 102.6 feet of frontage on College Avenue and 200 feet of frontage on Mountain Street. ❑ Location in the heart of historic downtown Fayetteville, which is undergoing a major renaissance characterized by the renovation and re -development of numerous buildings, road improvements and significant investment in retail, dining, residential condominiums and recreational facilities; o Proximity to the University of Arkansas campus, the principal demand generator for hotel accommodations in Fayetteville. The University is situated less than two miles from the subject site; ❑ Proximity to Dickson Street, the premier dining and entertainment thoroughfare in Fayetteville and the surrounding two -county area. Dickson Street, located within walking distance of the subject property is part of a major redevelopment effort designed to make the street more pedestrian -friendly and entertainment -oriented; ❑ Excellent frontage on both College Avenue and Mountain Street, two principal streets in downtown Fayetteville; o Easy access to all points within the city and to the Interstate highway system; ❑ Excellent visibility from College Avenue, Mountain Street and Center Street providing for maximum exposure to the public; INTERNATIONAL HOSPITALITY ADVISORS, INC. EXECUTIVE SUMMARY 1 II-2 ❑ Within walking distance of the 14,000-square foot Town Center convention facility which is currently under construction and scheduled for completion in mid-2001. The Center is expected to serve as a catalyst for new room night demand into the downtown Fayetteville lodging market; ❑ Proximity to other area demand generators including the Federal Building, the County Courthouse and area companies; r o Availability of all utilities to the site including water, electricity, sewerage and telephone hook-up; w ❑ Adequate parking in a six -story parking garage facility located adjacent to the hotel; Area Review ❑ Northwest Arkansas is one of the wealthiest regions of state with a stable, diversified, economy and low unemployment. The region's economic stability is fueled by the presence of the University of Arkansas, the headquarters of several major companies including Wa1Mart, Tyson Foods and J.B. Hunt, as well as, thriving manufacturing and retail sectors; ❑ The recent opening of the Northwest Arkansas Regional Airport and Interstate-540 through Ithe area is expected to serve as a further catalyst to the economic development of the region; 1 r ❑ The seat of Washington County, Fayetteville is nestled against the Boston Mountains (foothills to the Ozark Mountains) in northwest Arkansas approximately 25 miles from the Missouri state line and 15 miles from Oklahoma; r ❑ Fayetteville is the largest city within the two -county Metropolitan Statistical Area (MSA) which comprises Washington and neighboring Benton county. The city's population has i increased from 42,099 persons in 1990 to an estimated 58,200 persons in 1999, representing a compound annual growth rate of 3.6 percent. By comparison, the population for the MSA has increased from 210,908 persons in 1990 to an estimated 275,300 persons in 1999 i representing an annual increase of 3.0 percent; l ❑ The MSA enjoys the lowest unemployment of any region in the State of Arkansas. In May r 2000, the unemployment rate in the MSA stood at 2.0 percent. Lodging Supply in the Fayetteville Area i ❑ The total lodging supply in two -county area comprising Washington and Benton counties at ' the end of June 2000, consisted of 55 lodging facilities with a total of approximately 4,154 available rooms. Fayetteville accounts for approximately 1,522 of the available rooms or 37 percent of the total. INTERNATIONAL HOSPITALITY ADVISORS, INC. r EXECUTIVE SUMMARY a II-3 , ❑ The vast majority of the local lodging market is comprised of chain -affiliated, or non- affiliated limited -service properties of less than 100 rooms. Most of these hotels are located at major intersections along Interstate-540; ' ❑ Hotel chains currently represented in market include Baymont Inns, Best Western, Comfort Inn, Clarion Inn, Courtyard by Marriott, Days Inn. Econolodge, Fairfield Inn & Suites, Hampton Inn, Hilton, Hilton Garden Inn, Holiday Inn, Holiday Inn Express, Motel 6, Park Inn, Quality Inn, Ramada Inn, Red Roof Inns, Scottish Inns, Sleep Inn, SpringHill Suites and Super 8; o Prior to the opening of the Northwest Arkansas regional Airport (NWARA) in late 1998, Drake Field located south of Fayetteville served as the principal commercial airport in the region. Following the opening of the new airport in Benton County, there has been a marked increase in the number of new hotels. Much of this new hotel development has occurred in the cities Bentonville and Rogers both of which are located in Benton County; ❑ Despite a reasonably well-deateloped critical mass of lodging inventory in the area, there is a distinct lack of high -quality hotel accommodations in Downtown Fayetteville of the caliber envisioned for the subject hotel. The most closely comparable property to the envisioned subject hotel is the 235-unit Hilton Hotel which appears dated despite recent renovations. Demand for Lodging Accommodations o Business travelers and demand generated through the various programs at the University of Arkansas, account for the majority of lodging demand. The remaining demand is comprised of leisure travel, SMERF demand, convention groups and airline crews; i ❑ Business travel to the area is largely fueled by the presence of the headquarters of WalMart in Bentonville, Tyson Foods in Springdale and J.B. Hunt in Lowell, all of which are located in close proximity to NWARA. Following the opening of NWARA, there was a marked shift in corporate demand away from hotels in Fayetteville in preference for hotels located in Springdale or Bentonville. As such, many hotels in Fayetteville experienced significant 1 declines in corporate demand for much of 1999; o The University of Arkansas through its various academic and athletic programs is a major generator of lodging demand for the hotels in Fayetteville and the surrounding area. The University's football and basketball programs are important sources of weekend demand particularly during the fall and spring months; o Overall citywide hotel occupancy levels for Fayetteville averaged 49.2 percent in 1999 down from 53.1 percent in 1998. Average room rates for the market reached $58.61 in 1999, up from $54.64 the previous year. RevPar in 1999 reached $28.84, down from $29.00 in 1998, or a decline of 0.6 percent. Year-to-date through May, occupancy levels reached 51.9 percent, up 7.0 percent over the same period last year while average daily room rates reached $62.82, up 11.0 percent over the same period in 1999. INTERNATIONAL HOSPITALITY ADVISORS, INC. i • • EXECUTIVE SUMMARY II-4 I' I, o As with most lodging markets, hotels in Fayetteville are subject to seasonal fluctuations in demand. The off-season corresponds to the months of December and January when students at the University of Arkansas are away on break and most business travelers are also at ' home. Differences between weekday and weekend demand tends to be less pronounced for I i hotels in Fayetteville due to positive impact of major sporting events at the University which are usually held on weekends. This is particularly true during the football and basketball season. In contrast, hotels in Bentonville are much more likely to experience significant variations in demand between weekdays and weekends. T i c Subject Property Performance ❑ On the basis of our evaluation and analysis of existing and potential demand in the local lodging market, the subject hotel's location, concept and orientation, we have estimated the. following patterns of occupancy for the subject hotel's first ten years of operation as presented in the following table. Estimated Occupancy Proposed 105-unit Crowne Plaza Hotel Downtown Fayetteville, Arkansas Year Occupancy % 2002 60% 2003 - 64 2004 68 2005 68 2006-2011 68 Source: International Hospitality Advisors ❑ The foregoing occupancy levels were estimated based on the assumption that the subject hotel will generate its demand from the following demand segments during a representative year as follows. Market Segmentation — Representative Year Proposed 105-unit Crowne Plaza Hotel Downtown Fayetteville, Arkansas Ratio Market Segment to Total Individual Corporate Demand 65.0% Leisure Demand 25.0 Group/Other Demand 10.0 Total 100.0% Source: International Hospitality Advisors INTERNATIONAL HOSPITALITY ADVISORS, INC. EXECUTIVE SUMMARY II-5 ❑ We have estimated an annual average daily room rate of U.S. $95.00 in current value 2000 1 dollars. Assuming 2002 to be the first full year of operations and applying inflation and appropriate discounting, we believe this would equate to U.S.$95.50 for that year, increasing to U.S.$131.50 in 2011, the tenth year of operation. I: Estimated Operating Results ❑ Our estimates of income and expenses for the first ten years of operation, considering inflation and other market factors, reflect a profit before other deductions such as I i depreciation, amortization, ii dome taxes and interest as detailed in the following table. c Estimated Operating Results Redeveloped 105-unit Crowne Plaza Hotel Downtown Fa etteville, Arkansas Income Before Other Deductions* Estimated Average Total Ratio to Total Per Available Year Occupancy Daily Rate $000 Revenues Room $ 2002 60% $ 95.50 $ 761,000 30.0% $ 72248 2003 64 103.75 987,000 33.9 %400 2004 68 107.00 1,0951000 34.5 10,429 2005 68 110.25 1,105,000 33.8 10,524 2006 68 113.50 1,137,000 33.8 109829 2007 68 116.75 1,170,000 33.8 11,143 2008 68 120.25 112052000 33.8 11,476 2009 68 124.00 12245,000 33.8 11,857 2010 68 127.75 112823000 33.8 12,210 2011 68 131.50 19318,000 33.8 123552 * Other deductions include interest, depreciation, amortization, and income taxes. Source: International Hos itali `Advisors Recommendations On the basis of our analysis of existing comparable properties, we submit the following recommendations and comments for consideration in order to assist the subject property in establishing a quality reputation within the indicated markets. ❑ Guests Rooms -The subject hotel will offer 105 well-appointed guest rooms and suites that meet Crowne Plaza Hotels' size requirements. In consideration of the anticipated demand mix for the subject hotel, we recommend a room mix as follows: INTERNATIONAL HOSPITALITY ADVISORS, INC. EXECUTIVE SUMMARY Guest Room Mix Proposed 105-unit Crowne Plaza Hotel Downtown Fayetteville, Arkansas Unit Type Room Mix Percent King 55 52.0% Double/Double 20 19.0 Junior Suites 30 29.0 Total 105 100.0% International Hospitality Advisors II-6 In addition to meeting Crowne Plaza Hotels' room amenity requirements, the following should be considered for all guest rooms and suites: ➢ Electronic card door locking system; ➢ High -quality toiletries sucMas shampoos, conditioners and moisturizers; ➢ Wall -mounted hair dryer; ➢ In -room hospitality center featuring a microwave, mini refrigerator and coffee maker; ➢ Bottled mineral water; ➢ Remote -controlled cable television; ➢ Oversized towels and choice of pillows; ➢ Full-length mirrors, make-up mirrors and a selection of hangars; ➢ In -room safes for guest valuables; ➢ Seating area offering an easy chair and ottoman; ➢ Direct -dial telephones, twp per guest room (workdesk and bedside) with voice mail, dual line, speaker phone capabilities and data ports; ➢ A spacious, efficient work desk with ergonomic chair, desk -level electrical outlets, adjustable halogen desk light and computer -ready layout; ➢ Utility saving devices. ➢ Non-smoking rooms should also be provided within each room type. INTERNATIONAL HOSPITALITY ADVISORS, INC. ( EXECUTIVE SUMMARY II-7 I. ❑ Recommended Room Rates - Given the quality of facilities and services proposed (and recommended) at the subject property, we recommend published room rate ranges be established as follows in 2000 dollars: Recommended Published Room Rates Proposed 405-unit Crowne Plaza Hotel Downtown Fayetteville, Arkansas Published Discount Room Type Rates Rates King $105.00 $ 75.00 - $ 95.00 Double/Double $115.00 $ 80.00 - $110.00 Junior Suites $115.00 $ 80.00 - $110.00 Source: International Hospitality Advisors ❑ Food and Beverage Facilities - We recommend the following food and beverage outlets. I� ➢ A casual multi -purpose restaurant containing approximately 75 seats; i ➢ A comfortable spill -over lounge containing approximately 40 seats; ➢ A poolside bar and grill with seating for approximately 25 persons; Ix It should be noted that two restaurants (Hoffbrau and A Taste of Thai) located on Center Street are Ipart of a building that is owned by the developer and can be accessed directly from the hotel. ❑ Meeting and Banquet Space- The following meeting and banquet space is recommended t for the subject hotel: l ➢ A main ballroom of 2,000 square feet divisible into two sections and capable of i accommodating 100 persons banquet -style; ,r Lc ➢ Several smaller breakout rooms totaling approximately 2,000 square feet; ➢ A well-equipped boardroom of approximately 500 square feet; ➢ A former lounge located in the basement of the hotel could provide additional space for banquets and meetings, as required. INTERNATIONAL HOSPITALITY ADVISORS, INC. it • • I. EXECUTIVE SUMMARY II-8 o Other Guest Services and Amenities - Other facilities and services recommended for the redeveloped hotel include: (i ➢ A well-equipped, 1,200 square foot fitness center and spa offering an exercise room, a I sauna, massage facilities and beauty salon; i ➢ A state-of-the-art business center; ➢ A swimming pool on the third level of the building; ➢ Selected retail with direct public access totaling approximately 13,000 square feet; F ➢ A six -story parking structure with parking for 98 cars. As mentioned previously, two t additional levels could be added bringing the total parking inventory to 141 spaces; i ➢ 18-hour room service; i ➢ In-house valet/laundry facilities; i Management and Marketing t , To adequately establish a reputation as a first-class, boutique hotel, it will be necessary for the , subject property in addition to providing quality facilities and services, to maintain aggressive, on- going advertising and promotional programs aimed at the key demand sources. Fundamental to the 4 i projections presented in this report is the assumption that the subject hotel will be affiliated and t i managed by a well -recognized international hotel company such as Crowne Plaza that offers access to,a worldwide reservation and marketing network. Furthermore, we have assumed a strong and aggressive management team that is experienced in the operation and marketing of downtown, 1 commercially -oriented hotels. I'k ` INTERNATIONAL HOSPITALITY ADVISORS, INC. u EXECUTIVE SUMMARY II-9 I' I. j Condominium Sales Given the strength of the local real estate market, we recommend the inclusion of approximately 15 one-, two- and three -bedroom condominium units ranging in size between 1,400 and 1,800 square feet. Based on an analysis of the local condominium market, it is our opinion that these units could be sold for between $180.00 - $185.00 per square foot or between $252,000 to $324,000 per unit. It The following table presents our recommendations of unit mix and pricing for the condominium component. I i u r 1 Condominium Component Proposed Crowne Plaza Hotel Downtown Fayette illeArkansas Unit Type Unit Mix Unit Size Sales Price One -Bedroom 3 12400 $2527000 Two -Bedroom 10 1,600 296,000 Three -Bedroom 2 12800 3242000 1� Source: International Hos itali Advisors INTERNATIONAL HOSPITALITY ADVISORS, INC. STELLA BELLA PLAZA, LLC FAYETTEVILLE, ARKANSAS SECTION III SITE EVALUATION AUGUST 2000 INTERNATIONAL HOSPITALITY ADVISORS, INC. SITE EVALUATION III-1 PROPERTY LOCATION AND DESCRIPTION The subject seven -story property is located at the intersection of College Avenue and Mountain Street in Downtown Fayetteville, Arkansas overlooking the landmark Old Courthouse Building and the John Paul Hammerschmidt Federal Building. The site is rectangular shaped with approximately 1 102.6 feet of frontage on College Avenue and 200 feet of frontage on Mountain Street. The property is bordered to the east by College Avenue and the Old Courthouse Building, to the south by Mountain Street and the John Paul Hammerschmidt Federal Building, to the north by t Center Street and to the west by East Avenue. Access to site, is considered excellent. The hotel can be easily accessed via College Avenue, Mountain Street and Center Street. Visibility along these l i thoroughfares is also considered excellent. Photographs of the subject property and a site location map are presented at the end of this section. I, SALIENT CHARACTERISTICS OF THE SITE t Site Advantages The subject site benefits from several significant advantages: I, ❑ Location in the heart of historic downtown Fayetteville, which is undergoing a major 1 ` renaissance characterized by the renovation and re -development of numerous buildings, road improvements and significant investment in retail, dining, residential condominiums and recreational facilities; ❑ Proximity to the University of Arkansas campus, the principal demand generator for hotel accommodations in Fayetteville. The University is situated less than two miles from the subject site; ❑ Proximity to Dickson Street, the premier dining and entertainment thoroughfare in 1 Fayetteville and the surrounding two -county area. Dickson Street, located within walking distance of the subject property is part of a major redevelopment effort designed to make the T street more pedestrian -friendly and entertainment -oriented; t ❑ Excellent frontage on both College Avenue and Mountain Street, two principal streets in downtown Fayetteville; a Easy access to all points within the city and to the Interstate highway system; ❑ Excellent visibility from College Avenue, Mountain Street and Center Street providing for maximum exposure to the public; INTERNATIONAL HOSPITALITY ADVISORS, INC. I SITE EVALUATION III-2 o Within walking distance of the 14,000-square foot Town Center convention facility which is currently under construction and scheduled for completion in mid-2001. The Center is expected to serve as a catalyst for new room night demand for hotels in downtown Fayetteville; o Proximity to other area demand generators including the Federal Building, the County Courthouse and area companies; o Availability of all utilities to the site including water, electricity, sewerage and telephone hook-up; ❑ Adequate parking in a five -story parking garage facility located adjacent to the hotel; Site Disadvantages In our opinion, the site suffers from no material disadvantages. CONCLUSION It is our opinion that the location and physical attributes of the existing property are well -suited for redevelopment as a chain -affiliated, boutique hotel, as envisioned and recommended. r r INTERNATIONAL HOSPITALITY ADVISORS, INC. j u� ' Y � Y- :3 - 1.d91 i > t IjRr J � _ r u- 1 T ' ���333444 1 a . l d F - _ = f._. - _ 44 mom _ 1 F TO NORTHWEST ARKANSAS REGIONAL AIRPOF HWY. 112 Site Location NORTHWEST ARKANSAS MALL NORTH HILLS ti. MEDICAL PARK PAUIINE WHITAKEH c ANIMAL SC L CTR. SYCAMORE = G ;'021; OLD MAIN■ CK ■ N UNIVERSITY c s OF ARKANSAS BUD m WALTON ARENA ■ ■ HARMON s FIELD RANDAL TYSONGRE TRRACKACK ATHOUSE COMPLEX PARK CATO SPRING V.A. HOSPITAL ■ IbL'7J.HT113J7 LAKE FAYETTEVILLE 01 W VETERANS MEMORIAL PARK 0 t. N 'ARADISE VALLEY i GOLF COURSE TO EUREKA SPRINT GULLEY CROSSOVER HUNTSVILLE AN[ PARK PARK BRANSON, MO. AM. v� T SEOUOYAH SKYLINE DR. o � V ONFEDERATE CEMETERY NATIONAL �iY{ WALKER CEMETERY I PARK:, o c 15TH ST. `' '�' HWY. 16 1'ds Y z AD, Y� ¢ W G FAYETTEVILLE z COUNTRY CLUB o al TO DRAKE FIELD AND AIR MUSEUM HWY. 16 o� A STONEBHIDGE MEADOWS GOLF COURSE At NORTH 1 TO FORT SMITH AND 1-40 0 10 STELLA BELLA PLAZA, LLC FAYETTEVILLE,ARKANSAS 'SECTION IV w AREA OVERVIEW OF FAYETTEVILLE AUGUST 2000 INTERNATIONAL HOSPITALITY ADVISORS, INC. AREA OVERVIEW OF FAYETTEVILLE IV-1 c INTRODUCTION The seat of Washington County, Fayetteville is nestled against the Boston Mountains (foothills to the Ozark Mountains) in northwest Arkansas approximately 25 miles from the Missouri state line and 15 miles from Oklahoma. Fayetteville is the largest city within the two -county Metropolitan Statistical Area (MSA) which comprises Washington and neighboring Benton counties. „ Northwest Arkansas is one of the wealthiest regions of the state with a stable, diversified, economy and low unemployment. The region's economic stability is fueled by the presence of the University of Arkansas, the headquarters of several major companies including WalMart, Tyson Foods and J. B. Hunt, as well as, thriving manufacturing and retail sectors. 1012O WN 11I01►l The Fayetteville -Springdale -Rogers Metropolitan Statistical Area (MSA). includes both Washington and Benton Counties and is currently ranked the eighth fastest growing MSA in the country. The population of the MSA has increased from 246,300 persons in 1995 to 275,300 persons in 1999, representing a compound annual growth rate of 2.8 percent. By comparison, the population for the State of Arkansas has increased from 2,466,300 persons in 1995 to 2,552,100 persons in 1999, represeiting a compound annual growth rate of 0.86 percent. The population of the city of Fayetteville has grown from 53,900 persons in 1997 to 58,200 persons in 1999, representing a compound annual growth of 3.9 percent. The MSA's population is projected to increase to 305,600 persons by 2004, a growth rate of 2.1 percent. EMPLOYMENT The strength of an area's economic character is partly reflected in the distribution of its employment base by industry sector. Total non-agricultural employment for the MSA has increased from 110,475 persons in 1990 to 139,900 persons in 1999, representing a compound annual growth rate of 2.7 percent. As evidenced in the following table, retail trade, manufacturing and services represent the largest sectors of the local economy. INTERNATIONAL HOSPITALITY ADVISORS, INC. I AREA OVERVIEW OF FAYETTEVILLE IV-2 The following two tables present a breakdown of non -farm employment in the MSA for May 2000 and a list of major employers. Non -Farm Employment by Industry Sector —May 2000 Fayetteville -Springdale -Rogers MSA. Arkansas Sector Employed Percent Construction 6,500 4.2% Manufacturing 353900 23.2 Transportation & Public Utilities 1%600 6.9 Wholesale Trade 5,700 3.7 Retail Trade 38,200 24.7 Finance, Insurance & Real Estate 5,700 3.7 Services 31,300 20.3 Government 20,600 13.3 Total 154.500 100.0% Source: Fayetteville Chamber of Commerce Major Area Employers Northwest Arkansas Company Location Product Employees Wal-Mart Stores Bentonville Corporate Headquarters 5,000 + University of Arkansas Fayetteville Education 2,500 + George's, Inc. Springdale Poultry Processing 29500 + Tyson's — Three Plants Rogers Poultry Processing I,800 + First Brands Rogers Glad Bags 1,000 + Simmons Corp. Siloam Springs Poultry Products 12000 + Superior Industries Fayetteville Cast Aluminum Wheels I,000 + Danaher Tool Group Springdale Small Hand Tools 900 Emerson Electric Rogers Motors 850 Viassic Foods I Fayetteville Frozen Foods 800 Source: Fayetteville Chamber of Commerce The unemployment rate for the MSA has declined from 4.0 percent in 1990 to 2.4 percent in 1999. Year-to-date though May 2000, the unemployment rate stood at 2.0 percent. The following table presents historical trends in unemployment for the period 1990 through 1999. INTERNATIONAL HOSPITALITY ADVISORS, INC. I • ♦ "V w Al1L'DlliL'li/ ! V CA VC1r9rVX111r r Ti Historical Unemployment Trends Fayetteville -Springdale -Rogers MSA. Arkansas Year Rate 1990 4.0% 1991 3.9 1992 3.7 1993 3.0 1994 2.7 1995 2.6 1996 2.6 1997 3.2 1998 3.4 1999 2.4 Source: Fayetteville Chamber of Commerce UNIVERSITY OF ARKANSAS Established in 1871, the University of Arkansas situated in downtown Fayetteville offers more than 230 undergraduate and graduate degrees in more than 150 fields of study. In the Fall 1999, enrollment totaled 15,226 students. Demand generated through academic and athletic events at the University account for the largest source of room nights for hotels in the Fayetteville area. ARKANSAS RESEARCH AND TECHNOLOGY PARK Fayetteville is the site of the first new high-tech "fiberpark" installed by Southwestern Bell Telephone Company in Arkansas. The first of several projects throughout the state, it is designed to make Northwest Arkansas more attractive to new industry. TOWN CENTER CONVENTION FACILITY Currently under construction on Faybtteville's downtown square is the new state-of-the-art Town Center convention facility scheduled for completion by mid-2001. The facility offers 14,000 square feet of column -free space all on one level; 10,000 square feet of show offices, pre - function and kitchen area and extensive support services. When completed, the facility is expected to serve as an important source of new room night demand for hotels in the downtown Fayetteville area. INTERNATIONAL HOSPITALITY ADVISORS, INC. AREA OVERVIEW OF FAYETRVILLE • IV-4 I. INFRASTRUCTURE Highways The Fayetteville area is well served by federal, state, county and city roadways. Major highways r in the area include Interstate-540 and Highway 71B. The newly completed Interstate-540, connects the cities of Bentonville, Rogers, Springdale and Fayetteville with Interstate-40 to the r south while Highway 71B (College Avenue) serves as the principal business corridor through Fayetteville, Springdale and Rogers. Airports i Opened in November 1998, Northwest Arkansas Regional Airport (NWARA) is the principal commercial airport in the region. The airport, built at a cost of $107 million, is served by r American Eagle, Atlantic Southeast Airlines/Delta Connection, TransWorld Express, Northwest Airlink and US Airways Express. These carriers provide convenient daily connections to Dallas, (` Chicago, Atlanta, St. Louis, Memphis and Kansas City. In 1999, passenger enplanements and deplanements totaled 653,000 persons. Year-to-date through June 2000, passenger volumes have increased 24 percent over the same period in the previous year. The new airport is expected to I serve as a major catalyst for new investment and development throughout the MSA. I, CONCLUSION Overall, the Fayetteville -Springdale -Rogers MSA has grown significantly over the past five years. The area growth is attributabYe to several factors which include the continued expansion ! r of the University of Arkansas, the presence of major corporations such as Wal-Mart and Tyson Foods and the opening of the new Northwest Arkansas Regional Airport. This growth is expected to continue at a strong pace as new development occurs throughout the MSA. l: INTERNATIONAL HOSPITALITY ADVISORS, INC. i� r f' f STELLA BELLA PLAZA, LLC i FAYETTEVILLE, ARKANSAS SECTION V HOTEL MARKET SUPPLY AND DEMAND AUGUST 2000 i* �t (I It I. L: _i INTERNATIONAL HOSPITALITY ADVISORS, INC. HOTEL MARKET SUPPLY A DEMAND • V-1 INTRODUCTION The total lodging supply in the two -county area comprising Washington and Benton Counties at I! the end of June 2000, consisted of 55 lodging facilities with a total of approximately 4,154 available rooms. Fayetteville accounts for approximately 1,522 of the available room supply or �r i 37 percent of the total. A vast majority of the local lodging market is comprised of chain=affiliated, or non-affiliated limited service properties of les&= than 100 rooms, most of which are located at major i intersections along Interstate-540. Hotel chains currently represented in the market include Baymont Inns, Best Western, Comfort Inn, Clarion Inn, Courtyard by Marriott, Days Inn, E Econolodge, Fairfield Inn & Suites, Hampton Inn, Hilton, Hilton Garden Inn, Holiday Inn, r Holiday Inn Express, Motel 6, Park Inn, Quality Inn, Ramada Inn, Red Roof Inns, Scottish Inns, SpringHill Suites, Sleep Inn and Super 8. r Following the opening in late 1998 of the new Northwest Arkansas Regional Airport in Benton County, seven new hotels totaling 586 rooms have been added to the local lodging market. All of this new hotel development has occurred in the cities of Bentonville and Rogers both of which r are located in Benton County. Specifically, new hotels that have opened within the last two j years include a Clarion Inn, Holiday Inn Express & Suites, Sleep Inn, SpringHill Suites, Superior t Inn, Hilton Garden Inn and a Hampton Inn. COMPARABLE LODGING SUPPLY As mentioned previously, a vast majority of the local lodging inventory in both Washington and Benton counties is comprised of chain -affiliated, limited -service properties located along Interstate-540. Furthermore, with the exception of the 235-room Hilton Hotel, there are presently E no high -quality, full -service hotels located in the downtown Fayetteville area. t As such, given the current lack of existing hotels in the two -county area that would be truly ` competitive and comparable to the proposed Crowne Plaza Hotel, we believe that a strictly ' textbook analysis of the marketability of the subject property would not provide a clear ` indication of the project's potential. In a typical situation, we would compare within a narrowly I: - INTERNATIONAL HOSPITALITY ADVISORS, INC. i HOTEL MARKET SUPPLY A D DEMAND • V_2 r- defined geographic market, the growth in the supply and demand for competitive hotel rooms. Through the application of market penetration factors, which indicate our opinion of the 1 ; proposed hotel's ability to penetrate the various demand segments being captured in the area, we would then derive estimates of occupancy levels that we believe could be achieved by the I' i proposed hotel. r Since there is no adequate set of comparable hotels in the two -county area, it would be r impossible to form a realistic conclusion regarding the potential marketability of the subject hotel based on these standard and normally accepted analytical techniques. As such, we have ((T evaluated the subject hotel project based on the following methodology: I`t t ❑ Selected chain -affiliated hotels within the local lodging market were grouped together to provide indications of the potential performance of the proposed hotel; Ir ❑ We then identified specific properties within the local lodging market that would compete directly with the subject hotel for some or all of the demand segments; or would be comparable to the subject hotel in terms of scope of operations but might not compete (r directly for the same set of potential guests. We used the operational characteristics of � these hotels to measure the propensity of the targeted demand segments to seek accommodations in the individual sub -markets, rather than as a away to catalogue actual demonstrated demand captured within the sub -market. Though these hotels are not (; directly comparable to the subject in every aspect, each property's performance and ability to capture the desired demand segments, is indicative of the potential success of r the proposed hotel. As such, the performance of these hotels, were used primarily as I benchmarks for the rates and occupancy levels expected to be achieved by the subject, rather than points of direct comparison; I l o Based on the aforementioned analysis, we estimated occupancy levels that we believe the proposed hotel could achieve in its first ten years of operation, beginning in the year 2002. Our analysis was based on such specific factors as: i Ir ➢ Proposed management,- chain -affiliation, location and envisioned product t offering of the subject hotel; ➢ The current and future economic environment for Northwest Arkansas; I: ➢ Access from principal feeder markets; r r ➢ The diversity of the area's lodging base; fr INTERNATIONAL HOSPITALITY ADVISORS, INC. (r i ➢ The quality, orientation and product offering of existing hotels; ➢ Historical trends in market occupancy, average daily room rate and REVPAR; ➢ The achieved occupancy and average daily room rates of selected local hotels; ` ➢ The potential impact of additional comparable hotels that could be developed during the projection period; ➢ The potential impact of the Northwest Arkansas Regional Airport on area development and the location of new lodging additions to the marketplace. o Once we identified the market segmentation the subject hotel could achieve during a representative year of operation, we estimated the average daily room rate in current value 2000 dollars. The average daily room rate was based on the net room rates achieved by selected hotels in the local area, modified to reflect characteristics unique to the subject hotel that would influence rates such as location, size of property, quality level, orientation, affiliation and facilities offered. Fayetteville Lodging Market Based on our fieldwork, the selected chain -affiliated hotel supply in Fayetteville includes a mix of nine full -service and limited -service hotels with a total of 1,053 available rooms. The selected lodging market has experienced a significant increase in hotel room supply over the last several years. Specifically, room supply has increased from 296,380 available rooms in 1994 to 384,345 rooms in 1999, representing a compound annual growth rate of 5.3 percent. Much of the lodging additions in Fayetteville occurred during the latter half of 1995, with smaller additions in 1997. Market demand has however, not kept pace with supply, increasing from 178,336 room nights in 1994 to 203,982 room nights in, 1998 and declining to 188,959 room nights in 1999, representing a compound annual growth rate of only 1.1 percent. The decline in room night demand in 1999, can be directly attributed to the significant increase of new hotel rooms in the Bentonville area following the opening of the Northwest Arkansas Regional Airport. The following table lists the selected chain -affiliated hotels in Fayetteville and their respective number of rooms. INTERNATIONAL HOSPITALITY ADVISORS, INC. a L[ i LODGING DEMAND ANALYSIS Introduction In this portion of the report, we evaluate the level of demand for lodging accommodations in Fayetteville and the characteristics of that demand. The results are based on specific primary research conducted for this project, as well as, our in-house database. Historical Lodging Market Performance As discussed previously in the section, total occupied room nights for the selected chain - affiliated hotel in Fayetteville increased from 178,336 room nights in 1994 to 188,959 room nights in 1999, representing a compound annual growth rate of only 1.1 percent. Market occupancy also declined from 60.2 percent in 1994 to 49.2 percent in 1999, reflecting the negative impact of significant new room supply in the neighboring Bentonville area following the opening of the new regional airport. It should be noted however, that this trend appears to be reversing itself as the new supply is absorbed by the market and existing hotels reposition themselves. For the first five months of 2000, room night demand has increase 6.9 percent over the same period in the previous year, while occupancy levels increased 7.0 percent over the previous year. Despite significant declines in occupancy levels the average daily room rate for the selected market increased from $49.57 in 1994 to $58.61 in 1999, representing a compound annual growth rate of 3.4 percent. Year-to-date through May 2000, average daily room rates reached $62.82, up 10.9 percent over the same period in the previous year. Over the medium term, we estimate a modest increase in average daily room rates as a moderate amount of new hotel supply is added to the market and existing new supply is absorbed by the marketplace. INTERNATIONAL HOSPITALITY ADVISORS, INC. HOTEL MARKET SUPPLY � DEMAND V-6 RevPar (Revenue per Available Room) achieved by the selected market decreased from $29.83 in 1994 to $28.82 in 1999, representing a decline of 0.68 percent. The decline is attributable to the significant increase in new room supply over the past two years. Year-to-date through May 2000, RevPar for the selected market reached $32.60, up to 18.9 percent over the same period in 1999. The following table presents the historical trend in occupancy, average daily room rate, occupied room nights and RevPar for the selected market. Historical Performance - Selected Market Fa etteville Arkansas Occupied Average Daily Year Occupancy Room Nights Room Rate RevPar 1994 60.2% 178,336 $49.57 $29.83 1995 57.3 184,832 $51.84 $29.73 1996 50.2 `' 1929064 $51.79 $26.00 1997 52.7 202,436 $52.05 $27.42 1998 53.1 203,982 $54.64 $29.00 1999 49.2 188,959 $58.61 $28.82 CAG 1994-99 3.9% 1.1% 3.4% 0.68% YTDMay 1999 48.5% 77,165 $56.62 $27.46 YTD Ma 2000 51.9% 82,465 $62.82 $32.60 Growth % 7.0% 6.9% 10.9% 18.7% t't Compound Annual Growth Source: International Hospitality Advisors Market Segmentation Through interviews with management at the hotels listed previously in this section, we have determined that demand for local lodging accommodations currently emanates from the following sources: a Corporate Demand: This segment represents the largest overall source of demand for the selected hotels in Fayetteville, as well as, the neighboring cities of Springdale, Rogers and Bentonville. Demand from this segment is comprised of business professionals, sales personnel and technical persons visiting the corporate headquarters of major corporations such as WalMart, Tyson Foods and J. B. Hunt, as well as, other manufacturing and retail establishments in the area. The University of Arkansas, through its various academic programs is also a major generator of corporate lodging demand for hotels in the area. The following points define the salient characteristics of corporate travelers to Fayetteville and the neighboring communities: INTERNATIONAL HOSPITALITY ADVISORS, INC. HOTEL MARKET SUPPLY A DEMAND • V-7 ➢ Preference for hotels within close proximity to the respective place of business; ➢ Corporate demand is largely comprised of individual travelers, which translates into a low double occupancy factor; ➢ Typical length of stay is two to three nights with the highest demand occurring from Monday throughrThursday nights; ➢ Preference for accommodations that provide for a strong sense of security in addition to typical business and recreational facilities. t ❑ Leisure Demand: Demand from this segment is largely derived through the various athletic programs at the University of Arkansas. In particular, the University's football and basketball programs are important sources of weekend demand particularly during 1 the fall and spring months. Area hotels are usually sold out well in advance and command + premium rates during these events. Several regional recreational events such as the War Eagle Crafts Fair (held in May and October) are also important sources of leisure demand for area hotels. t ❑ Group/Other Demand: Included in this segment is demand originating from corporate t groups, state association conventions, airline crews and other non -specified demand. Based on conversations with local hoteliers and meeting coordinators, the months of April and October are the preferred months for meeting and convention activity. The scheduled opening of the Town Center convention facility in downtown Fayetteville in I t mid-2001 is expected to serve as a major catalyst for attracting more regional conventions to the benefit of hotels in Fayetteville, particularly those located in the downtown area. i Seasonality and Timing of Demand Conversations with hotel operators and tourism officials in Fayetteville indicate that the local lodging market is impacted by seasonality of demand considerations. Generally speaking, the 1 months of December and January represent the slowest periods of the year. For the rest of the year, demand remains relatively consistent. Furthermore, given the predominantly commercial orientation of the market, there are marked variations in occupancy levels between mid -week and 1 weekend nights. Differences between weekday and weekend demand however, tends to be less pronounced for hotels in Fayetteville due to the positive impact of major sporting events at the t University which are usually held on weekends. This is particularly true during the football and basketball season. In contrast, hotels in the Bentonville are much more likely to experience significant variations in demand between weekday and weekends. The following table presents a breakdown of market seasonality by month. Ir is INTERNATIONAL HOSPITALITY ADVISORS, INC. !t c i 1 Selected Hotels Seasonality of Demand Fayetteville, Arkansas Month Days Peak Season April 30 May 31 June 30 October 31 Sub -Total 122 Shoulder Season February 28 March 31 July 31 August 31 November 30 Sub -Total 151 Low Season January 31 December 31 Sub -Total 62 Total 365 Source: International HospitalityAdvisors CONCLUSION Our review of the local lodging market indicates sufficient existing and potential demand to support the operation of a 105-unit, Crowne Plaza -affiliated boutique hotel as recommended. Area hotels, particularly in Fayetteville, have been negatively impacted by a significant increase in new lodging supply over in neighboring Bentonville and Rogers over the past two years following the opening of the Northwest Arkansas Regional Airport. Nevertheless, market trends suggest that the new supply is being absorbed by the marketplace and only a limited amount of new additions are scheduled for development over the medium term. Continued economic strength and growth of traditional source markets, coupled with the emergence of new demand segments and aggressive marketing efforts by local civic leaders should bode well for continued growth in lodging demand for Fayetteville. „ INTERNATIONAL HOSPITALITY ADVISORS, INC. t _ l I� r� Ir r i Ir I: r i �r r r STELLA BELLA PLAZA, LLC FAYETTEVILLE, ARKANSAS Ir -SECTION VI lESTIMATED MARKET POSITION r AUGUST 2000 I? r 1 It �r t it r . �i r s INTERNATIONAL HOSPITALITY ADVISORS, INC. MARKET POSITION In a typical market study, the projected occupancy of a proposed hotel would be estimated based on our opinion of its ability to penetrate the competitive lodging environment and capture its share of demand. This penetration analysis would result in a penetration ratio defined as the percentage of room nights captured relative to the property's fair share. A property's fair share, in turn, is determined by dividing the subject property's number of guestrooms by the total number of guestrooms in the competitive supply (including the subject property). Market penetration is based on the attributes of a hotel relative to the competitive marketplace and is defined as the percentage of demand allocated to a given property on the basis of such competitive characteristics as location, appearance, rate structure, age, affiliation, reputation, facilities, services and amenities. The higher the penetration, the higher the occupancy. Factors indicating a hotel would have competitive advantages- 3uggest market penetration in excess of 100 percent, while competitive weaknesses are reflected in penetration ratios of less than 100 percent. Given the nature of the comparable/competitive market we are addressing in this engagement, we believe such an evaluation would not present a clear representation of the proposed hotel's potential marketability. Therefore, in lieu of a traditional penetration analysis, we present here a list of factors that, taken as a whole, we believe demonstrates the potential marketability of the proposed 85-unit, Crowne Plaza - affiliated boutique hotel at the levels projected. Contributing Factors ❑ Site: The location and configuration of the subject property is most conducive to a small, mixed -use development of the type proposed and recommended; ❑ Downtown Fayetteville: The do•amtown Fayetteville area is undergoing a major renaissance with the redevelopment of many historic buildings and the creation of an entertainment core along Dickson Street. As such, downtown Fayetteville has evolved into the preferred entertainment and recreation destination in the Northwest Arkansas region. A testimony to the success of these redevelopment efforts is the strength of the retail market and a growing trend by residents to purchase apartments in the downtown core at premium prices; ❑ Product Offering: A vast majority of the existing and recently opened lodging supply in the competitive market is comprised of chain -affiliated, limited -service properties that are all very similar in product offering, orientation and location. A notable exception is the highly successful, 49-unit Inn at the Mill located in nearby Johnson. The Clarion Carriage House - affiliated property offers a unique product offering (incorporated into a historic mill with INTERNATIONAL HOSPITALITY ADVISORS, INC. ESTIMATED MARKET POSAN • VI-2 eight one -of -a -kind fantasy suites), a signature restaurant and excellent service. As a result, the property enjoys a loyal, d"6tporate clientele during the week and local leisure clientele on f weekends. The property is projected to achieve an annual occupancy in the low 70 percent i range with an average daily room rate of between $85.00 to $90.00. In our opinion, given the location, history and configuration of the subject property, an excellent opportunity exists to provide a unique product offering and lodging experience that caters to a select niche market; o Local Lodging Environment: As detailed previously in this report, following the opening of the Northwest Arkansas Regional Airport (NWARA) several new hotels were opened primarily in Bentonville. As a consequence, hotels in Fayetteville experienced a significant (albeit temporary) decline in demand particularly with respect to the corporate segment. As such, a mixed -use development that combines a small hotel with condominium and retail components significantly helps to mitigate the development and market risk associated with the project while enhancing the overall economics and funding potential for the development; 1 ❑ Lack of Direct Competition: The 235-unit Hilton Hotel is the most closely comparable lodging property to the subject in downtown Fayetteville. The Hilton is projected to achieve an annual occupancy in the mid-50 percent range with an average daily room rate between $85.00 and $90.00 in 2000. Despite recent renovations, however, the property appears dated and unattractive. In our opinion, an excellent opportunity exists for the subject hotel to capture a portion of the demand that currently patronizes the Hilton and become the preferred ` f lodging choice in Downtown Fayetteville; t ❑ Management and Chain -Affiliation: The subject hotel is to be managed and affiliated with Crowne Plaza Hotels, a well -recognized international hotel company with extensive ` experience in operating first-class, commercially oriented hotels throughout the world. The affiliation with Crowne Plaza also provides access to a well -developed global reservation and lmarketing network. In our opinion, the ability to offer a well -recognized hotel brand coupled with consistent service, a unique product offering and access to awell-developed reservation network will provide a needed marketing edge for the subject hotel to compete effectively in the local lodging market; It should be noted that there are limiting factors associated with the marketability of the subject property: ❑ Seasonality and Timing of Demand: The subject hotel will be influenced by seasonal and timing fluctuations in demand. Management's success in attracting a more diversified base will be instrumental in reducipg overall seasonality of demand; ❑ Supply Additions: As evidenced, previous supply additions have negatively impacted overall occupancy and demand levels for hotels in Fayetteville. As such, the ability to provide a truly unique hotel product and lodging experience will be critical in helping to distinguish the subject hotel and mitigating the impact of future supply additions. INTERNATIONAL HOSPITALITY ADVISORS, INC. I , i TED MARKET • VI-3 SUBJECT PROPERTY PERFORMANCE Estimated Occupancy As discussed previously, the subject hotel would be impacted by seasonality and tuning of demand considerations. In the following table we present our estimates of occupancy by market demand segment for a representative year considering the impact of seasonality and timing of demand. Occupancy and Market Mix by Season Proposed 105-unit Crowne Plaza Hotel Downtown Fayette ille, Arkansas Segment Peak Shoulder Other Total Corporate Demand % of Demand 69% 62% 65% 65% Room Nights Captured 6,776 8,470 11694 16,940 Leisure Demand %of Demand 20% 29% 25% 25% Room Nights Captured 11955 3,909 652 6,515 Group/Other Demand % of Demand 11 % 10% 10% 10% Room Nights Captured 1,042 L303 261 2,606 Total Occupied Room Nights 9,773 13,682 2,606 26,061 Estimated Occupancy 76% 72% 40% 68% Source: International Hospitality Advisors Based on the factors presented previously, we believe that the redeveloped 105-unit Crowne Plaza — affiliated hotel could achieve a stabilized occupancy of 68.0 percent over its economic life. (We define economic life as the cycle of business activity of the property affected by such factors as demand, competition, obsolescence and inflation). Using the 68.0 percent stabilized ratio as a benchmark, we have projected occupancy levels for the proposed hotel's first ten years of operation as presented in the following table. Estimated Occupancy Proposed 105-unit Crowne Plaza Hotel Downtown Fayetteville, Arkansas Estimated Year Occupancy 2002 60.0% 2003 64.0 2004 68.0 2005 - 2011 68.0 Source: International Hospitality Advisors INTERNATIONAL HOSPITALITY ADVISORS, INC. ESTIMATED MARKET POSION • V14 AVERAGE DAILY ROOM RATE Methodology Our estimate of the subject property's average daily room rate, expressed in current value 2000 dollars, is based on an analysis of published and achieved room rates at comparable/competitive properties, the anticipated mix of business at the subject hotel, seasonality of demand, double occupancy and market conditions discussed. Average Room Rate Derivation We estimate the subject property could achieve an average daily room rate of U.S.$95.00 in a stabilized year based on current value 2000 dollars. Derivation of this average rate estimate for a representative year (68.0 percent occupancy) is presented in the following table. Average Daily Room Rate Derivation Proposed 105-unit Crowne Plaza Hotel Downtown Fayetteville Arkansas Segments Peak Shoulder Off Total Corporate Demand Revenues $689,500 $800,400 $1519600 $1,641,500 Room Nights 63776 8,470 1,694 16,940 Average Rate19 $101.75 $94.50 $89.50 $97.00 Leisure Demand Revenues $2019400 $363,500 $57,400 $622,300 Rooms Nights 1,955 37909 652 6,516 Average Rate"' $103.00 $93.00 $88.00 $95.50 Group/Other Demand Revenues $91,200 $1102800 $20,200 $222,200 Rooms Nights 1,042 1,303 261 2,606 Average Rate(l) $87.50 $85.00 $77.50 $85.25 Total Revenues $9829100 $11274,700 $229,200 $2,4869000 Total Room Nights 9,773 13,682 2,606 26,061 Average Rate(" $00.50 $93.25 $88.00 $95.00 t'r Numbers are rounded. Source: International Hospitality Advisors INTERNATIONAL HOSPITALITY ADVISORS, INC. ESTIMATED MARKET POS&N 0 VI-5 t Applying inflationary factors and first year discounting yields the following estimated average daily room rates for the property's first ten years of operation. Estimated Average Daily Room Rate Projections Proposed 105-unit Crowne Plaza Hotel Downtown Fayetteville, Arkansas Average Room Cumulative Inflated Rate in 2000 Inflation Average Room Year U.S. Dollars FactorP1 Rate 2002 $90.00 1.0609 $95.50 2003 95.00 1.0927 103.75 2004 95.00 1.1255 107.00 2005 95.00 1.1593 110.25 2006 95.00 1.1941 113.50 2007 95.00 1.2299 116.75 2008 95.00 1.2668 120.25 2009 95.00 1.3048 124.00 2010 95.00 1.3439 127.75 2011 1 95.00 1 1.3842 1 131.50 Our assumption of an annual 3.0 percent inflation factor is intended only to portray the effect of a long-term inflationary trend (over the projected period) rather than an actual forecast of price movements. Source: International Hospitality Advisors CONCLUSION We have estimated the potential market position of the proposed 105-unit, Crowne Plaza -affiliated Hotel relative to demand generators and the level of patronage that can be reasonably attracted to the subject property. It is our opinion that the subject property should achieve a representative occupancy of 68.0 percent. We further estimate an average daily room rate of U.S. $95.00 in current value 2000 dollars. INTERNATIONAL HOSPITALITY ADVISORS, INC. STELLA BELLA PLAZA, LLC FAYETTEVILLE, ARKANSAS SECTION VII ESTIMATED OPERATING RESULTS AUGUST 2000 INTERNATIONAL HOSPITALITY ADVISORS, INC. ( S ESTIMATED ANNUAL OPERATING RESULTS VII-I Ii 1 INTRODUCTION On the basis of our evaluation of the market findings relative to the potential demand for the j proposed project, we have prepared a ten-year statement of estimated annual operating results which we believe can be generated by the operation of a facility of the type and quality described in our j market demand report. f IAs is the case in estimates of this sort, we are not in a position to guarantee the results nor is I warranty intended that they may be achieved. The estimates of revenues, costs and expenses are based on the size and quality of the facilities recommended, and the operational characteristics t thereof. We have further applied, where applicable, the operating ratios of selected similar size and I1 type facilities, adjusted in our best judgment to reflect the circumstances outlined in our study of the 1 market and the application of sound management and control over costs and expenses. li Since these estimates are based on circumstances and events that have not yet transpired, they are (I subject to variations which may arise as the future operations and related factors actually occur. Accordingly, we cannot provide assurances that the estimates will be representative of the results r i that will actually be achieved during the first ten years of operation. �l � METHODOLOGY The Uniform Systems of Accounts for Hotels, recommended by the American Hotel and Motel l Association and in general use throughout the industry, has been used in the classification of income �i and expenses in this report. In conformity with this system ofclassification, only direct expenses are charged to operating departments ofthe hotel. The general overhead items which are applicable to the operations as a whole are classified as deductions from income and include administrative and general expenses, marketing, energy costs, and property operations and maintenance. r INFLATION i While we are unable to provide a definitive estimate of future inflationary trends, we do believe that t the inflation rate will continue to be a significant factor in the ongoing performance of a hotel T operation. In general, hotels tend to adapt more easily to inflation than other major investments, INTERNATIONAL HOSPITALITY ADVISORS, INC. 1 ESTIMATED ANNUAL OPERATING RESULTS VII-2 (i since the rates can be easily adjusted in response to changes in costs. For the purpose of this (; analyses, we have applied a dollar -based inflation rate of 3.0 percent over the projection period. { i INCOME AND EXPENSE PROJECTIONS On the basis of our estimate of the future occupancies and average daily room rates achievable at the subject Hotel, together with our analysis of operating data from comparable operations throughout the United States, we have prepared a statement of annual operating results for the subject hotel in inflated U.S. dollars. The projections are based on a ten-year estimate beginning January 1, 2002. Departmental Revenues and Expenses Rooms Revenue: There are two major factors in the computation of the rooms revenue figure: the average daily room rate and the projection of an occupancy curve for the subject hotel. Based on our analysis presented in the Estimated Market Position section of this report, the estimated rooms (t revenue over the projection period is as follows: fi t i Estimated Rooms Revenue(l) Proposed 105-unit Crowne Plaza Hotel Downtown Fa etteville, Arkansas Average Occupied Estimated Daily Room Rooms Estimated Room Rate Nights Revenue Year Occupancy (Rounded) (Rounded) $000s 2002 60% $ 95.50 23,000 $2,196 2003 64 103.75 24,500 21545 2004 68 107.00 26,100 29789 2005 68 110.25 262100 2,873 2006 68 113.50 262100 2,958 2007 68 116.75 26,100 3,043 2008 68 120.25 26,100 31134 2009 68 124.00 26,100 3,232 2010 68 127.75 26,100 3,329 2011 1 68 1 131.50 269100 1 3,427 (1) Stated in inflated U.S. Dollars Source: International Hospitality Advisors Rooms Expense: We have estimated rooms expense to be 24.0 percent of rooms revenue in a stabilized year. This equates to an expense of U.S.$22.80 per occupied room in the representative year. t INTERNATIONAL HOSPITALITY ADVISORS, INC. _i ESTIMATED ANNUAL OPERATING RESULTS VII-3 Rooms departmental expenses include salaries, wages and employee benefits for employees in the front office, housekeeping, laundry, and front service (bellmen, etc.) departments. Expenses also include guest room supplies such as linen, towels, glasses, ashtrays, shampoo, soap, cleaning supplies, uniforms for service personnel, and commissions paid to travel agents, as well as, other expenses as outlined by the "Uniform System of Accounts." �1 l r Food and Beverage Revenue: It is'dur understanding that the food and beverage facilities at the i subject property are to be leased out to independent operators. The income to be derived has been II s included under Real and Other Income. (i Telephone Revenue: Telephone revenues, generated by both local and long distance calls were estimated at approximately U.S.$2.25 per occupied room in the representative year. Telephone Expenses: Telephone expenses have been estimated at 70.0 percent of total telephone r revenues in the representative year or U.S.$1.55 per occupied room. Such an expense level assumes that the purchase of the telephone equipment will be capitalized rather than leased. Other Operated Departments: The income and expenses in Other Operated Departments is based on the planned configurations of the property and the operating results of comparable properties. 1 Nevertheless, the actual income and expenses in this area are dependent upon the extent of facilities t provided, the emphasis placed on them by management, as well as, whether they are operated as t separate entities, as concessions or extensions of the hotel facility. Revenues for the subject property ' were estimated at U.S.$52,500 or U.S.$2.00 per occupied room for the representative year. r Other Operated Department Expenses: This department's expenses have been estimated at 70.0 percent of revenues in the representative year. Rentals and Other Income: Revenues from this category include lease revenue from the retail space, restaurant and bar, parking, vending machines, currency exchange and other miscellaneous income. We estimate rentals and other income (net) to be approximately U.S.$235,000 orU.S.$9.00 per occupied room. INTERNATIONAL HOSPITALITY ADVISORS, INC. • ESTIMATED ANNUAL OPERATING RESULTS VII-5 Building and Contents Insurance: Building and contents insurance premiums were estimated at ft 1 i U.S.$250 per available room based on the experience of similar hotels in Fayetteville. ! Reserve for Replacement: We have deducted a reserve for replacement of furniture, fixtures and li equipment as well as other short-lived items such as roof coverings and interior finishes based on the Ir following: 2.0 percent of total revenues in 2002, 3.0 percent in 2003, 3.5 percent in 2004 and 4.0 Ir percent thereafter. t 1 Condominium Sales Analysis: Our estimates of the sales absorption and pricing of the proposed 15 I; condominium units are based on the actual performance of selected, projects in downtown t Fayetteville, adjusted to reflect circumstances unique to the subject development. Based on our I: market research, we estimate a two-year sell -out period with unit prices ranging between $180.00 - $185.00 per square foot. From the gross sales price, we have deducted appropriate expenses (i associated with the construction, marketing, administrative and sales of the units. IThe following tables present our estimates of potential annual operating results for the subject hotel Ir and income from the sale of the condominium units over the defined projection period. t L INTERNATIONAL HOSPITALITY ADVISORS, INC. E II) ESTIMATED ANNUAL OPERATING RESULTS VII-6 l� T 16 1 41 PROPOSED 105-UNIT CROWNE PLAZA HOTEL " FAYETTEVILLE, ARKANSAS STATEMENT OF POTENTIAL ANNUAL OPERATING RESULTS FOR A REPRESENTATIVE YEAR OF OPERATION IN CURRENT VALUE (2000) DOLLARS \GE OF OCCUPANCY 68% AT $95.00 DAILY ROOM RATE AMOUNT/ PER AMOUNT RATIO ROOM OCCUPIED ROOMS FOOD BEVERAGE TELEPHONE OTHER OPERATED RENTALS 8 OTHER INCOME TOTALREVENUE EPARTMENTAL EXPENSES (1) ROOMS FOOD 8 BEVERAGE TELEPHONE OTHER OPERATED TOTALDEPARTMENTALEXPENSES OTAL OPERATED INCOME NDISTRIBUTED EXPENSES: ADMINISTRATIVE 8 GENERAL MANAGEMENT FEE (2) MARKETING (3) CHAIN SERVICES FEES PROPERTY OPERATION 8 MAINT. ENERGY TOTAL UNDISTRIBUTED EXPENSES BEFORE FIXED CHARGES IXED CHARGES: REAL ESTATE & PROPERTY TAXES BUILDING 8 CONTENTS INSURANCE INCENTIVE MANAGEMENT FEE RENT TOTAL FIXED CHARGES BEFORE RESERVE FOR REPLACEMENT BEFORE OTHER DEDUCTIONS (4) $2,476,000 87.7% $23,581 $95.01 0 0.0% 0 0.00 0 0.0% 0 0.00 59,000 2.1% 562 2.26 52,000 1.8 % 495 2.00 235.000 8.3% 2,238 9.02 2.822.000 100.0% 26.876 108.28 594.000 24.0% 5,657 22.79 0 #DIV/0! 0 0.00 41,000 69.5% 390 1.57 39.000 75.0% 371 1.50 674,000 23.9% 6,419 25.86 2,148,000 76.1% $20,457 82.42 " 263.000 9.3 % 2.505 10.09 85,000 3.0% 810 3.26 168,000 6.0% 1,600 6.45 198,000 7.0% 1.886 7.60 126,000 4.5% 1.200 4.83 116,000 4.1% 1.105 4.45 956.000 33.9 % 9.105 36.68 1,192.000 42.2% 11,352 45.74 101,000 3.6 % 962 3.88 26,000 0.9% 248 1.00 0 0.0% 0 0.00 0 0.0% 0 0.00 127,000 4.5% 1.210 4.87 1.065,000 37.7 % 10.143 40.87 113.000 4.0% 1,076 4.34 952.000 33.7 % 9.067 36.53 Departmental expenses are presented as a percentage of departmental revenues; A base management fee of 3.0 percent of total revenues has been deducted. A chain services fee of 8.0 percent of moms revenues has been deducted based on Crowne Plaza requirements; Income before other deductions such as interest, depreciation. amortization and taxes on income. INTERNATIONAL HOSPITALITY ADVISORS, INC. I I ESTIMATED ANNUAL OPERATING RESULTS VII-7 W Is mmi ,Qi � m d6fi �6 gN @oqr75 qu25eQQSi QdEEpr EQ: :QSQR7S p�S Qnpe ROOM&QOspQsp Roogg ppeOOpp S�Qr,� Q_S y�E S e ri Z tl00 3n Tim �: ��64 m �ef^� '$OOg ��g �r�Xr N- ry - p! 'p aYt �l axe �e^ �Ye' �yt aatt art n Xi <F bbbxeq% SZbb� K Fi.D b,O �=A Fi, bAob= !o o m FF �R t< Q6:ccgN Q-pcg 5rv�e,p-pr Q�i qr QQyyppppppppr�QQiQ. pg p es�i Q .pp� d b QOOpppg S2Opp25 E ELOEEEE 25 ppOOp tl 25 L vvV 0ysRv „ i w o omsrvx�_rr -ommm o�N_$ aory ary0 ru CYww ,mot afri�—O `zm_" �` e"ieAL�a'% w n�`b�`n rW R-a eo6r::e8 ramrn mnN .n ' .ieo6. In $F 00 wo 7SSEE^ RPM qq ggQQQQ44QqQQ-OQQ SIi Q- p me4 qq _„ mz O zon mmp 6K Uq O ry W< WJ J ° uWt W O N ti door«`ro ne$ m r Ring- 00� o g °� a r 025 NNnr m xa o sm'aIc� 7 ar N 2 O O� ry NH YI S4 H ¢°p ° n„m e'o r-"e r x ssxx i o aW - = a "ma n'co ^ _ ON-mgFO C QQQQQQ Q �� 3 k EoOpyp ¢q Seggp $ 9$92525 z6 ESE a $$Oeq y p q i $n:M o `d=3io N FnEF�� S 3� Sm E a 1 IN s; Hr��-- O ON rrm�=�oen oJll n ooN � ry R g�� ry M. r � pOO§U§ VIM R ZaS �n NF x�a N m a a saE« ZS a N 9g @$g fz 0 £E 2 ym j u w a 4 sN INTERNATIONAL HOSPITALITY ADVISORS, INC. ESTIMATED ANNUAL OPERA-TING RESULTS � li ` xg0x�r�g g�xg x xxxxxx x xx � x x p C qN n00'N� NO < m0001QV QQ: QQ0 Q0_ IQL @QO QA QN pn Q01QQ1 q0 Ip�Q: QQ. p� QQ= QQN QQOO OO OO Q: Qn QQ� !QQ1 I r � b QCCZSESiS E�OSS S �biS iSESS E EE��D S S E n i Rs � ne ccN-eB Ae°3�F e 6oN::� c dc: cc < n n N - m O u �gvm "� s 1 GY 3<K N O IN l N:-' : MA ^ O - aR f4gegnu`" €�#C ' 1R b �xm o oan_ e o paW N� m00 N�m8 n Vnry r Ol1 Yln::^ = NGCC A 00 at W2 't w�R� $ Ml�nry awn - - w< n - '. ul 43 'x w Ct _W 1 'yFTW N JQ�o ae nano . S. -oRvi�.gn ._Don wW WZ o' Q o N� NMm o�'C YI N�NN�--_ : F < C U I ¢a wmxo600rvxe-ni08 rS'mxxm o 04440oyyrvNsXX essAas i mnwrvv 6666. n 'aLi I n n mv - N ¢0 2Z � 3Q yY Z •WY UZ' H'W N W w 8 W g <O o {�yu 6E y Ili gn {S O Upp'LL ur w W Q2 w w ¢ Q V py E 0 0 4 Ea o ripy pt GS 6 5 C ug o LLFOdy4LL O xU55u5� ? xlCaa i w' a o W O INTERNATIONAL HOSPITALITY ADVISORS, INC. ESTIMATED ANNUAL OPERATING RESULTS VII-9 p ' O O O O M O N m O O N N M M 8 8 8 O 00 ' > ' Coco M O N m O v O N p0 0 0 0 00 W t0 MN C g g ' NN 0000 M O N N O NO N 009 Q p p p N O m in S g g$ M N N N » > p p p p C Q O O O O O O M O N N O N N M N N 8 8 8 8 00 Cp O Co m G G l� N mCm gC NNIN'1 �N NMNN . d » M N p p o Coco M O N m O O 0000 p p p O O 1 N CO 00 ^ m M M» N 8 8 8 8 » »1 abTi n O )a 8 N V LL N N» )) p p p p O O O O M O N' O m M M M M 8 8 8 8 cot m (3RV N1IffN11M1- S h O O O O M O N N O N «» N p p p p p M»` O O p S ¢¢ y� C 8 8 m^m ¢c 'i W �n M N N N N M M > N � d O O O O M O N N O 0 M» N» p p p p N W V O O S O M lV 8 8 8 CO S LL p S 8 S 8 Cp p N v m M O N m O O O O O O O O O O 8 R 8 m p g p N M Ag N -. 100 �xj �[` VMI' MMMM NMM pMS SN 8888 8 O _ M O N M c x. ! ' N m - W N m � W m 0 O O O O O O O O W R O: }}FFijij O O O m M j M N M Oy N ' N z v b N ry M O O n N �m N m H H N N N M M a N �, g m E g? E q my Bm v a x E E 8 r w p m yy as 'C OF-H a Ab N m C 8 W m E g �F�S pE Eb a� Eb Fg Q Eg C b 588�_W 3&8m g$N3 Q yy 'E9F��y omm F $EmmbF ��n=� p I Q 0Fps .Z� m7 40 `0�1-- xf low m INTERNATIONAL HOSPITALITY ADVISORS, INC. FIDAVIT OF PUBLICATION do solemnly swear that I am the Legal CI rk of the A a s Democrat-Gazette/Northwest Arkansas Times n wspaper, printed and published in Lowell, Arkansas, and that from my own personal knowledge and reference to the files of said publication, that advertisement of: - d _ was C. e MS PO# inserted in the regular editions on ** Publication Charge: $�/`� J��U Subscribed ibJ//and sworn to before me this l-Ab day of AU al&'l,, 2005. otary. Public My Commission Expires: Sharlene D. Williams Notary Public State of Arkansas My Commission Expires ** Please do not pay from Affidavit. October 18, 2014 An invoice will be sent. RECEIVED JAN 10 2005 CITY OF FAYETTEVILLE CRY CLERK'S OFFICE P.O. BOX 1607 - 212 N. EAST AVENUE - FAYETTEVILLE. ARKANSAS 72701 - 479-442-1700 - 479-442-5477 (FAX) ORDINANCE NO. 73 _- - NN ORDINANCE ADOPTING THE PROJECT PLAN A, A' L FOR RDHIGHWAY O N? THE PRREDEVELOP-(GJMENT DISTRICT NUMBER ONE. FINDING THE PLAN IS ECONOMICALLY FEASIBLE,.REPEALING ORDI- NANCE4646ANDDECIMNGANEMERGENCY YANKA WHEIRAEr on Jury 27, 2004. the Fayetsylle City Coundl held a Public Hearing mnoOrring the creation of the Highway 71 Eesl Spuara RecovelocmOr DbMct; and WNKREAE. an August17, 2004, the Ofty Council passed Ordinance No. 4608 creating the Highme 71 East Sµasre RedevNoonnfint District and autwdzed Precession of a Redas"Opnwnl Rolact Pia and ,.qw to w constructed after onsinucteld after 0 held a Public Hearing on the Project Plan Proposed far .I: .' .„ .. .-.._— The ..__. (N The ". number end ocaforn of ell peNo wanks IX Innpoorrasnm within the dbtrot Including the acqualaon of real property, danwlhon of b"gMectIll buildings, and sale of the deamd lad to tlns nedeoelOpas: (b) an economic feasibility study: (0 a dataleci Est of mannered project costs: (Q) a description of funandrg tndhysg tan incranness bonds: (a) a cenrilOol n Of the county tan assessor of the base value, ad vabram rate, debt sw&e ad valorem rate, and ad velorem we for the retleeloprnhant district: (p m other Muds are expected to be deposited into the $pedal fulls: n a map of proposed inmap Aawing nuses and provamanls and Visas In the district; ions of feel property h the tlismct; (N are Anticipated: haion g charges (I reference to the Downtown Master Ran; pq mhon.prol6cl sons costs include tuerbe Iadvice,sPbcs bored mat$, eaxhomo lorecaaerg: (q m pennons cos entldpeted to be tllslalpmd; (M the anwnt of TIF indebtadness; IN the amount of tax ihcrernent esuneted to be generated M the project; (0) no other reanues are ardOW d to be used to sedge the tax i arennent fnendrg. NOW. TNBIIEPORE. BB IT OROAINED R BY TNB CITY COUNCIL OF THE CRY OF PAYET- TMLLB. ARKAKBA& Section 1: That the City Count of fie City of FayeteWe. AMenaas hereby ordi that the Project Pen for the Highway 71 Fast Squsm RetlevuOPrnent DLstid (attached as E)Nbil A) b emrnn nosey beside. Section 2: That the Ciry Coumil Of the Gry of Payer lla Aduvsas hereby adopts the Project Plan or the Highway 71 East Square Redaveoprnent District sntl dats"hunas It base complied with all regdre- menu ast bM it A.CA 4 14-166-306. Section 3: That upon tie B6edNa dale of this ordinance, Ordnance No. 4646 Originally Woofing the Project Plan for this RedavdOprnenl District is thereby repealed. Section 4: Emergerncy Clause. If this orceneme is col inunaoately atactvop she goal of the RadavaWnenl Dents shod its project Ran M remO+e a dangenOrs, dilappdated tuatrap cprgtl fail due to lack of tine-aersKhe funding The City Card, therafere. daternhil and details en ennogeICY erisOS which worts o h 4erl the publOpeace, health a safety and consequently arts orcenanCtt SW W in force end $tact hone the We of its passage and approval. PAYLD Any APPBOYBD his 261h day of December, 2004. DDAN COODYr Never r AFFIDAVIT OF PUBLICATION I, _ , do solemnly swear that I am the Legal C ark of the as Democrat-Gazette/Northwest Arkansas Times newspaper, printed and published in Lowell, Arkansas, and that from:my own personal knowledge and reference to the files of said publication, that advertisement of: L C was inserted PO# `" Publication Charge: $ 1,33 9,9 Subscribed and sworn to before me this day of L 2005. QQ/(/ J Notary. Public S arlene D. Williams My Notary Public State of Arkansas Commission5sion E,r{�ires October 18, 2014 Please do not pay from Affidavit. An invoice will be sent. in the regular editions on RECEIVEC JAN 10 2005 PURCHASING A IS HEREBY led§1GNEN that, pursuant to Arkansas rdye uev li. E IS RE §t4- EN th land §mttoArkans e heerhg"W canducled on January 25, 2005 1 p.m. In the City AtlMN5Va4m Bue ig, Room ARKANSAS l MI ee atforded a reasonable opportuNty their Nevvs on the proposed Amendment No. t to the Highway 71 East Square ant Olaslct Number One Project Ran. hearing impehed are available for all gblo meetings. 72 hour rotloe is regiied. M to request en Imegxeter, please call 479-575-11930. P.O. BOX 1607 • 212 N. EAST AVENUE • FAYETTEVILLE, ARKANSAS 72701 • 479-442-1700 • 479-442-5477 (FAX) City of rayetteville, Arkansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN 11/10/2004 Table of Contents Introduction 3 Phase 1 5 "Process of removing blight in the former Mountain Inn area -Catalyst Project" Phase II "City SWeiscape Improvements — First 10 Year Project" Economic Feasibility Study Existing Uses and Conditions Map City of Fayetteville, AR Ordinance No. 4608 Assessor's Certification ' TIF Financing Strategies Amendment 78 Local Demographics District Map and Legal Description Existing Conditions of Blight Downtown Master Plan FA W Exhibit 1 Exhibit 2 Exhibit 3 Exhibit 4 Exhibit 5 Exhibit 6 Exhibit 7 Exhibit 8 Exhibit 9 Exhibit 10 City of ragetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN Introduction: Plan documents have been prepared that are related to a proposed redevelopment of certain land areas and specific project parcels in the Highway 71 East Square Redevelopment District as adopted by the Fayetteville City Council on August 17, 2004, with the ordinance effective September 20, 2004. The Project Plan is specifically designed to benefit the City of Fayetteville in the removal of designated blight coupled with the reinvestment in infrastructure to benefit the project area and the City of Fayetteville as a whole. The geographical boundaries of the Highway 71 East Square Redevelopment District are illustrated belo%\ : I �1on ■ © pi LLUM El The redevelopment district anticipates incremental growth in tax collections to exceed $35 million over a twenty five year period beginning in 2004 and ending in 2029 (see Economic Feasibility Study, Exhibit # 1). The Highway 71 East Square Redevelopment District Project Plan outlines the public purposes and investments that are targeted in the redevelopment district. The purpose of the district is to encourage the commercial and residential redevelopment of real property, thereby preventing the spread of blighted, deteriorated and deteriorating areas, and discouraging the loss of commerce, industry and employment. The Project Plan once adopted may be adjusted over time by the Fayetteville City Council in order to ensure the return to the public is invested in a manner that will ensure economic vitality in the district, as well as the district's impact on the City of Fayetteville. There are initially two specific phases for the public investments to be made in the Highway 71 East Square Redevelopment District. They are: 1. Phase I - Process of removing blight in the former Mountain Inn area -Catalyst Project 2. Phase II — City Streetscape Improvements — First 10 Year Project The "catalyst" project in the district is the redevelopment of the blighted Mountain Inn area (see Section One). East Square, LLC, (The Developer) is proposing a $ 22.5 million investment into a destination hotel/meeting space condominium project. Approximately $19 million of the proposed redevelopment is from private investments. An additional $3.5 million for the public purpose of eliminating the existing blight will be secured by Tax Increment Bonds issued by the redevelopment district. No TIF proceeds will be used for the construction of the buildings of the proposed project but will be limited strictly to public purposes allowed under the law for redevelopment districts. The Fayetteville City Council has adopted the Dover Kohl Downtown Master Plan (see Exhibit # 10) that has as its focus improvements in much of the area now included in the approved TIF District. The adopted Downtown Master Plan identified as a clear priority the removal of the "eyesore" of the denigrated Mountain Inn. In addition to the catalyst project the Highway 71 East Square Redevelopment District Project Plan will also include a number of streetscape improvements in the district (see Section Two). City of Fayetteville, Arkansas PHASE I (Catalyst Project) HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT IMPROVEMENT RECOMMENDATIONS Section One - Removal of Blight Phase I of the project plan (the area identified as the Mountain Inn Project) for the Highway 71 East Square Redevelopment District targets the removal of blight as defined in Arkansas Statute 14-168- 301. It reads as follows: (3)(A) 'Blighted area" means an area in which the structures, buildings, or improvements, by reason of dilapidation, deterioration, age or obsolescence, inadequate provision for access, ventilation, light, air, sanitation, or open spaces, high density of population and overcrowding or the existence of conditions which endanger life or property, are detrimental to the public health, safety, morals, or welfare. (B) 'Blighted area" includes any area which, by reason of the presence of a substantial number of substandard, slum, deteriorated or deteriorating structures, predominance of defective or inadequate street layout, faulty lot layout in relation to size, adequacy, accessibility, or usefulness, unsanitary or unsafe conditions, deterioration of site or other improvements, diversity of ownership, tax on special assessment delinquency exceeding the fair value of the land, defective or unusual conditions of title, or the existence of conditions which endanger life or property by fire and other causes, or any combination of such factors, substantially impairs or arrests the sound growth of a city, retards the provision of housing accommodations, or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use, or any area which is predominantly open and which because of lack of accessibility, obsolete platting, diversity of ownership, deterioration of structures or of site improvements, or otherwise, substantially impairs or arrests the sound growth of the community. The recently adopted "Downtown Master Plan" contemplates specific key projects necessary for a fully revitalized downtown area. The Mountain Inn was identified as #3 in the list of immediate projects. The Downtown Master Plan states: "A key opportunity for infill development is the redevelopment of the Mountain Inn. The hotel, fronting College Avenue, has been vacant for a number of years. The existing structure is an eyesore, ..the location of the Mountain Inn among several other Downtown landmarks and historic structures offers the opportunity to create a taller building - a new landmark - which signals the revival of downtown'. For many years the remnants of the once premier lodging facility formerly known as the Mountain Inn have been decaying with little hope for a change in its blighted condition. In its day, the hotel was considered the destination of choice for travelers in the Fayetteville area as well as the hosting of other community traditions including Sunday brunch, regular business meetings, club events and wedding parties. Unfortunately, the hotel through a series of unsuccessful ventures became an inconsistent host and ultimately an outdated lodging facility. During the same period that the Mountain Inn lost its luster the Fayetteville downtown area went into a period of degradation and many business operators, vendors and customers left the area. After years of wasting away, concerned citizens, local government leaders and developers came together to revitalize the historic Fayetteville downtown square as well as neighboring Dickson Street. This rebirth has been ongoing for the past fifteen years with the vast majority of the significant building in the Downtown/Dickson Street area being revived to support the business, cultural and entertainment center it has become. In recent years multiple redevelopment projects have transformed parts of the downtown/Dickson Street area into a hub of culture, commerce and entertainment for northwest Arkansas. New construction and redevelopment projects of note that have emerged include: The Campbell Bell Building, The Ozark Theatre Building, The Three Sisters, UARK Bowl, The Bank Of Fayetteville Building, The Walton Arts Center, The Ozark Brew Pub, Camall Hall, The Ice Plant Building, Rollston Building, Cooper House, Pyeatt Building, Campbell Terrace, Laundry Building, Bakery Building, Collier's Drug, The Old Post Office Building, The Town Center and the recently completed new Fayetteville Public Library. Some of the redevelopments are pictured below: Noticeably absent from this regenerative trend has been the Mountain Inn with its broken windows and boarded -up doorways sitting on its prominent position at the crest of Archibald Yell/College Avenue. Unfortunately, now, the once bustling hotel's only visitors consist of vandals, transients and the local police force. Now with its neighbors alive with activity, the former Mountain Inn and other participating spaces will be transformed into a destination facility that will be unsurpassed in the Fayetteville market. The planned development project will incorporate a 144 room full -service hotel, 18 condominiums, 12,500 sq. ft. conference/meeting space, three restaurants, a day spa, exercise center, boutique shops, a 300 space multi -story parking garage and a rooftop botanical garden with observation deck. The project in its entirety is known as the East Square Redevelopment Project. The project's centerpiece is a planned full service national flagship hotel. The hotel will serve the mid -to -high end of the business traveler, short duration vacationer and meeting/event attendees. With a thoroughly defined design concept, the stylish hotel will offer the highest level of comfort and service along with the intrigue of its inviting amenities. The twelve -story main structure of the new hotel will be built on the existing site of the 1960's addition to the historic Mountain Inn. Condominiums will be built on the upper floors of the new structure. The architecturally pleasing section of the historic inn's arcade which faces Center Street will be preserved to accommodate pedestrian accessible boutique shops along the north/south lower level arcade and will house the day spa and function space on the upper floors. Banquet and conference facilities will be arranged in the northeast section of the complex with a multi -purpose ballroom and multiple flexible "break-out" meeting spaces. The planned botanical garden will be the crownjewel of the facility positioned on the rooftop of the main hotel building. The project will combine complementary architecture, functional access, technological amenities and comfortable furnishings of subtle ambience to satisfy visitors with the facility. The proposed subject property is anticipated to be complete and operational in or near the Spring of 2006. No rezoning is required for the project. 8 The project is located one block east of the heart of the downtown business district. It is conveniently located less than five minutes from the University of Arkansas, a short walk to the Fayetteville Town Center, within walking distance of the Dickson Street entertainment district, the University of Arkansas, the Walton Arts Center and approximately ten minutes from the I-540 north/south corridor. The following map illustrates the development's location: • a c��j( r . nir vID♦S�ONN SI, It w ■ •rr, a W> �]}y nVLI yII • •T a,64 FA1 lb VF. Bit iiiii - ETo1-00St "eZT a r.. b I g _ MAPLE ST : ; 1Y Grew 9: i ^-EA & _-_ ' O [ ?11t yI aR / 1, w camna s L O > LAFAYETTE S to bag aka 4 0 ,igelllYllb V Bo L ft _ r web SUTTON ST i----f EMunmikiPW �T, f U y K`-0'., I.1 nc"ai Y N ,}y 1c DICKSON ST if 4we feYeRe luntoan 1 � ], p _ > • CONNEll $� SRINGST� fit{ a�w� ; • Mountain Inn Project Site cc _w ;+ The Tax Increment Bonds to be issued by the Highway 71 East Square Redevelopment District will finance certain allowable public purposes as outlined by the enabling legislation Arkansas Code Annotated 14-168-301 through 14-168-323, Redevelopment District, Chapter 168, Community Redevelopment Generally, Subchapter 3, Community redevelopment — Creation and procedures. Specifically as described in 14-168-301(13A-E): "(13)(A) "Redevelopment project" means an undertaking for eliminating or preventing the development or spread of slums or deteriorated, deteriorating, or blighted areas, for discouraging the loss of commerce, industry, or employment, or for increasing employment, or any combination thereof. (B) A redevelopment project may include one (1) or more of the following: (i) The acquisition of land and improvements, if any, within the redevelopment district and clearance of the land so acquired; or (ii) The development, redevelopment, revitalization, or conservation of the project area whenever necessary to provide land for needed public facilities, public housing, or industrial or commercial development or revitalization, to eliminate unhealthful, unsanitary, or unsafe conditions, to lessen density, mitigate or eliminate traffic congestion, reduce traffic hazards, eliminate obsolete or other 1 PROJECT uses detrimental to the public welfare, or otherwise remove or prevent the spread of blight or deterioration; or (C) The financial or other assistance in the relocation of persons and organizations displaced as a result of carrying out the redevelopment project and other improvements necessary for carrying out the project plan, together with such site improvements as are necessary for the preparation of any sites and making any land or improvements acquired in the project area available, by sale or by lease, for public housing or for development, redevelopment, or rehabilitation by private enterprise for commercial or industrial uses in accordance with the plan; (D) The construction of capital improvements within a redevelopment district designed to alleviate deteriorating conditions or a blighted area or designed to increase or enhance the development of commerce, industry, or housing within the redevelopment district; or (E) Any other projects the local governing body deems appropriate to carry out the purposes of this subchapter;" In particular the public purposes of Phase 1 improvements financed by Tax Increment Financing include acquisition costs, asbestos remediation, demolition expenses, reclamation expenditures, waste recycling and site work on the site of the former Mountain Inn area. The expenditures are as follows: Expenditures 1 *Real Property Assembly costs: $ 216139000.00 765-01940-000,765-01930-000 $ 1,200,000.00 765-01938-000 $ 500,000.00 765-01939-000 $ 500,000.00 765-01929-000 $ 413,000.00 2 "Demolition & Site Preparation: 8879000.00 3,600,000.00 * No Condemnation procedures will be utilized for the Mountain Inn Project ** Demolition and Site Preparation expenditures include the following: A. Resolution of access issues B. Resolution of utilities as needed C. Water/sewer system upgrades as required D. Layout & engineering E. Asbestos and other environmental remediation The following aerial photograph delineates the Mountain Inn Project site: Historic Fagade Parking Garage 10 Meeting Facilities New Main Bldg. Upon the completion ofthe removal of blight the Developer will purchase the raw land of the project site at the established appraised fair market value. Other The project plan provides for temporary replacement parking (up to 25 spaces) or funds for said parking as allowed in 14-168-301. Definitions (C) "The financial or other assistance in the relocation of persons and organizations displaced as a result of carrying out the redevelopment project and other improvements necessary for carrying out the project plan." Direct Economic Impacts -Approximately 125 new jobs will be created in connection with the catalyst project -Construction jobs estimated at 55 -Increase in demand in consumer goods during construction period -Improved Property Values upon removal of blight -Tourism attraction drawing tourist dollars to Fayetteville -Adjunct to convention/meeting space for attracting additional conventions, etc. -Creates a catalyst for additional redevelopment along College/Archibald Yell -Promotes additional downtown living, thereby adding vitality to Fayetteville's downtown economy -New tax revenues (estimated on catalyst project only): 1) Sales tax of approximately $153,750 annually 2) HMR tax collections of approximately $60,000 annually 11 City Of Fayetteville, Arkansas PHASE II (First 10 Year Plan) HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT IMPROVEMENT RECOMMENDATIONS Section Two — Streetscane Improvements The purpose of this report is to provide recommendations for public work improvements that would be a part of the Highway 71 East Square Redevelopment TIF District Project Plan. These proposed recommendations were developed using the Downtown Master Plan and the Downtown Dickson Street Enhancement Project as a guide. PROPOSED TYPICAL SECTIONS: 2 ROIN: or ERS MILL Ez4TMG S =M�Yw+I 3O. J— > r PLAN VIEW The following is a summary of improvements for the typical section that will be applied to identified streets within the improvement district: ➢ Replacement of existing sidewalk with a uniform six foot wide sidewalk that would meet RIGHWAI 71 i 12 ADA requirements. ➢ Replacement of existing curb & gutter with historic type "stand-up" curb. ➢ Installation of a double band of concrete pavers adjacent to curb. ➢ Installation of trees at intervals of 30 feet including underground irrigation. ➢ Installation of decorative street lights at intervals of 120 feet with underground electrical supply. ➢ Provide a minimum of two inch asphalt overlay. ➢ Replace existing drainage structures and storm pipes as necessary. Below is a conceptual photograph of College Avenue that was contained in the Downtown Master Plan that illustrates the type of enhancements that are recommended. Downtown Master Plan Conceptual Photograph of College Avenue Portions of the major corridors within the Improvement District have been selected to be improved to the Typical Section in conjunction with the redevelopment project. These portions are listed below and are shown on a map on the following page. ➢ College Avenue — Between Mountain Street and Maple Street. ➢ School Avenue — Between TIF Southern Boundary (South of 7'h Street) and Prairie Street. ➢ Mountain Street — Between College Avenue and Downtown Square. ➢ Center Street — Between College Avenue and Downtown Square. ➢ Block Street — Between Downtown Square and Spring Street. This street portion will also require the replacement of the water and sewer lines located under the street due to the age of the infrastructure that was installed before 1915. 13 ➢ Downtown Square — This includes the replacement of the existing deteriorating sidewalks around the square. N 2 O in DICKSON 3 t w � z � � E SPRING _ MEADO ROCK n1 Proposed Improvement Corridors The following are the associated costs to improve the identified corridors to the improved typical cross sections: t Street Segment *Unit Cost per L.F. Length L.F. Cost From To enue Mountai n Maple $930.00 2,980 $2,771,400.00 EDowntownSquare et Colle a East $930.00 450 $418 500.00 treet Colle a East $930.00 450 $418 500.00 S uare N/A N/A $930.00 1 200 $1 116 000.00ue Center Srin $930.00 680 $864 900.00nue Prairie TIF Boundary $930.00 1,190 $1.106,700.00 TOTAL ESTIMATED COST $6,696,000.00 * The unit cost per Linear Feet of Street Enhancement was derived from the actual costs of the Downtown Dickson Street Enhancement Project. As previously stated, it will be necessary to replace the water and sewer lines under Block Avenue prior to the street improvements due to the age of the utility lines. These replacements have been estimated to cost $420,000.00. Total Estimated Cost for Street/Sidewalk Enhancements - $616969000.00 Estimated Costs for Block Avenue Water & Sewer Replacements - Sa20.000.00 TOTAL ESTIMATED COST- $71116,000.00 14 Total Anticipated Expenditures: Phase I - Process of removing blight in the former Mountain Inn area -Catalyst Project: S3,500,000 (based upon 2004 dollars) Phase 11 — City Streetscape Improvements — *First 10 Year Project: $7,116,000 (based upon 2004 dollars) $10,616,000 Total (based upon 2004 dollars) *Financing and related improvements will be phased in as revenues from the growth of incremental property taxes warrant them. IS City of rayetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.1 Economic Feasibility Study 16 An Economic Forecast of Assessment Values in the Highway 71 East Square Redevelopment District Produced for the City of Fayetteville, Arkansas SAM A ALTON UNIVERSITY COLLEGE gf BUSINESS IARKANSAS Centerfor Business and Economic Research Center for Business and Economic Research Reynolds Center Building 217 Sam M. Walton College of Business I University of Arkansas Fayetteville, Arkansas 72701-1201 (479)575-4151 Contact: Dr. Jeffery T. Collins, Director September 2004 17 The purpose of this study is to estimate the cash flows that will accrue to the Highway 71 East Square Redevelopment Tax District (ESRD) in Fayetteville, Arkansas as a result of the tax increment financing project that has the redevelopment of the Mountain Inn as its centerpiece. The ESRD encompasses 443 parcels in the central part of Fayetteville, running along US Highway 71 B from Maple Street to south of the Mill District. The ESRD centers on the Fayetteville Square, the Mountain Inn, and the Old Courthouse. The desired renovation of the Mountain Inn spurred the formation of the ESRD, as private developers were unwilling under the current economic environment to attempt the project. Further, the redevelopment is seen as key to improving local property values and fostering economic activity in the central corridor of the city. Tax increment financing (TIF) was chosen as the appropriate tool for this private/public partnership. Researchers at the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas were asked to project the revenues that tax increment financing will provide for the ESRD. The methodology employed was as follows. First, a copy of the property ownership report for the East Square Redevelopment District was obtained from City of Fayetteville staff. This report included the identification of and 2003 assessed valuation numbers for the 459 parcels included in the Highway 71 East Square Redevelopment District. Supplementing this information, CBER researchers used the Washington County Assessor's online property search database to obtain the 2004 assessment values for the same 459 parcels. CBER researchers then gathered historical data on assessment value growth rates in other parts of Fayetteville for comparison purposes. Research was conducted on the growth in property values in TIF districts in Tulsa, Oklahoma to assist in the determination of reasonable expectations for growth rates. The collected data show that 148 of the parcels in the ESRD are classified as Commercial Improved, 95 of the parcels are classified as Residential Improved, 116 of the parcels are exempt from property taxes (either as local or federal government properties or churches), and the remaining 100 parcels are a mix of commercial and residential vacant properties, public services, and miscellaneous usages. A total of 342 of the identified parcels had non -zero assessment values in 2004. In 2003, the total assessed value of the parcels in the ESRD was $16,691,61. In 2004, the year - on -year growth rate of the assessed value was 12.9%, while the median assessment growth rate was 10 percent. Of the relevant 342 parcels, 49 parcels had assessment growth rates of less than 10 percent, 208 had assessed values that grew at 10 percent, and 85 parcels had assessment growth rates of more than 10 percent. Only 6 parcels in the ESRD had lower assessments in 2004 than in 2003 In order to form a basis of comparison, the parcels that have addresses along Dickson Street in Fayetteville were examined. A substantial amount of private and public investment has gone into the redevelopment of Dickson Street in recent years and examining recent annual assessment increases might provide a fair indication of what assessment values might do in the ESRD after investments have been made. According to data from the Washington County Assessors Office, E in 2004 the average growth rate in assessed value on Dickson Street was 12.8 percent. The median growth rate was 10 percent. In 2003 the median growth rate of the assessed value of parcels on Dickson Street was 8.3 percent, while in 2002 and 2001 the median growth rates were 9.1 and 10.0 percent respectively. In Tulsa, Oklahoma, tax increment financing has been used in five districts. Oklahoma's TIF legislation differs from that of Arkansas in that both property and sales tax increments are available for revenues for the districts. The successes of the TIF districts in Tulsa have varied. Those that have been most successful have attracted a large retail anchor to the district or have been tied to a specific redevelopment project. Most Tulsa TIF districts have been unable to meet their projected increases in property tax and sales tax. This experience demonstrates that planners should use conservative estimates in their calculations for projected revenue. Based on all of the previous information, CBER researchers have developed a plausible revenue scenario for the ESRD. This scenario takes into consideration that owner -occupied residential property assessment growth is capped at 5 percent, that properties owned and occupied by residents over the age of 65 have frozen property assessments, and that all other property assessment growth is capped at 10 percent. Only new construction is assessed at its full value. In order to provide a conservative estimate of the revenue that will be generated in the TIF district, the following assumptions are made. In 2005 and 2006, assessed property values will grow at 8 percent, unless they are frozen or capped at 5 percent. From 2007-2029, property values grow at 10 percent, unless they are frozen or capped at 5 percent. These revenue estimates do not capture the growth in assessments that will result from new construction, and as such, likely underestimate the true revenues that are likely to accrue to the TIF district. Table I presents the revenue estimates by year that are derived from the listed assumptions. Figure I illustrates the growth path of the increment and the full assessment that is estimated for 2030. ,a. 200524)52M22W32009201020I 12012201320142015 MIS 201720112019202020212022202320242025202S20222M0=9 M30 19 Weighted Estimates by Property Taxation Classification Total Available Increment: $1,212.113,026 Total Available Yield: $35,466,427 Net Present Value of Total Available Yield: $20,508,103 Year 2005 2006 2007 2008 2009 Frozen Assessment $ 16,732,831 $ 16,732,831 $ 16,732,831 $ 16,732,831 $ 16,732,831 Total Assessment $ 17,964,708 $ 19,294,581 $ 21,084,090 $ 23,051,530 $ 25,214,645 Assessment Growth Rate 7.4% 7.4% 9.3% 9.3% 9.4% Increment $ 1,231.877 $ 2,561.750 $ 4,351,259 $ 6,318,699 $ 8,481,814 Available Yield $ 36,045 $ 74,957 $ 127,318 $ 184,885 $ 248,178 PV of Available Yield $ 34,995 $ 70,654 $ 116,514 $ 164,268 $ 514,080 Year 2010 2011 2012 2013 2014 Frozen Assessment $ 16,732.831 $ 16,732,831 $ 16,732,831 $ 16,732,831 $ 16,732,831 Total Assessment $ 27,592,949 $ 30,207,904 $ 33,083,116 $ 36,244,550 $ 39,720,762 Assessment Growth Rate 9.4% 9.5% 9.5% 9.6% 9.6% Increment $ 10,860,118 $ 13,475,073 $ 16,350.285 $ 19,511,719 $ 22,987,931 Available Yield $ 317,767 $ 394,281 $ 478,409 $ 570,913 $ 672,627 PV of Available Yield $ 266.125 $ 320,586 $ 377,661 $ 437,557 $ 500,498 Year 2015 2016 2017 2018 2019 Frozen Assessment $ 16,732.831 $ 16132,831 $ 16,732,831 $ 16.732,831 $ 16,732,831 Total Assessment $ 43,543.162 $ 47.746.297 $ 52,368.166 $ 57,450.562 $ 63,039,456 Assessment Growth Rate 9.6% 9.7% 9.7% 9.7% 9.7% Increment $ 26,810,331 $ 31,013,466 $ 35,635,335 $ 40.717,731 $ 46.306,625 Available Yield $ 784,470 $ 907.454 $ 1.042.690 $ 1,191,401 $ 1,354.932 PV of Available Yield $ 566,718 $ 636,470 $ 710,021 $ 787,656 $ 869,679 Year 2020 2021 2022 2023 2024 Frozen Assessment $ 16,732,831 $ 16,732,831 $ 16,732,831 $ 16,732,931 $ 16,732,831 Total Assessment $ 69,185,410 $ 75,944,039 $ 83,376,514 $ 91,550,119 $ 100,538,861 Assessment Growth Rate 9.7% 9.8% 9.8% 9.8% 9.8% Increment $ 52,452,579 $ 59,211,208 $ 66,643,683 $ 74,817,288 $ 83,806,030 Available Yield $ 1,534,762 $ 1,732,520 $ 1,949,994 $ 2,189,154 $ 2,452,164 PV of Available Yield $ 956,413 $ 1,048.203 $ 1.145.416 $ 1,248,444 $ 1,357.704 Year 2025 2026 2027 2028 2029 Frozen Assessment 2025 2026 2027 2028 2029 Total Assessment $ 16.732,831 $ 16,732.831 $ 16,732,831 $ 16,732,831 $ 16,732,831 Assessment Growth Rate $ 110,424,142 $ 121,295,501 $ 133,251,421 $ 146,400,231 $ 160,8615095 Increment 9.8% 9.8% 9.9% 9.9% 9.9% Available Yield $ 93,691,311 $ 104,562,670 $ 116,518,590 $ 129,667,400 $ 144,128.254 PV of Available Yield $ 2,741,408 $ 3,059.504 $ 3,409,334 $ 3,794,068 $ 4,217,193 zo City of rayetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.2 Existing Uses and Conditions Map City OF Fa!)Cttcvillc, Ark. nsas IIRJI\VAN 71 Ve"I SQ1 :ARE REDENTLOVMENI UISIRR.I 1114 0.1 hC I PLA\ 22 City of rayetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.3 City of Fayetteville, AR Ordinance No. 4608 Formation of the 71 East Square Redevelopment District No. 1 23 ORDINANCE NO.4608 AN ORDINANCE 'FORMING THE HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT NUMBER ONE PURSUANT TO AMENDMENT 78 OF THE ARKANSAS CONSTITUTION AND AUTHORIZING THE PREPARATION OF A PROJECT PLAN WHEREAS, the City Council after 15 day published notice has held a public hearing at which all interested parties were given the opportunity to .express their views on the proposed creation of the Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas and its proposed boundaries; and WHEREAS, prior to publication, a copy of said notice was sent by first-class mail to the chief executive officer of all local governmental and taxing entities having the power to levy taxes on property located within the proposed Highway 71 East Squure Redevelopment District Number One of Fayetteville, Arkansas, and to the school board of any school district which .includes property located within the proposed Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas; and WHEREAS, the City Council has designated the boundaries of the proposed Highway 71 East Square Redevelopment District Number One, of Fayetteville, Arkansas. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville. Arkansas hereby establishes the boundaries of the Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas as set forth on the map attached hereto as Exhibit "A" and incorporated herein. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby names the District the following name for identification purposes: Highway 71 Fast Square Redevelopment District Number One of Fayetteville, Arkansas. Section 3: That the City Council of the City of Fayetteville, Arkansas hereby creates the Highway 71 Fast Square Redevelopment District Number One of Fayetteville, Arkansas as of September 20, 2004. Section 4: That the City Council hereby finds that the real property within the Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas, will be benefited by the redevelopment protect by eliminating or preventing the development or spread of blighted, deteriorated, or deteriorating areas, or discouraging the loss of commerce, or employment, or increasing employment, or any combination thereof. Section 5: That the City Council of the City of Fayetteville, Arkansas hereby creates a separate and special food into which shall be deposited all tax incrernent revenues, and all other revenues designated by the City for the benefit of the Highway 71 East Square Redevelopment District Number One of Fayetteville, Arkansas. All project costs shall be paid from this fimd. This fund shall be known as the Highway 71 Fast Square Redevelopment District Number One of Fayetteville, Arkansas. Section 6: That the City Council of the City of Fayetteville, Arkansas hereby authorizes the preparation of a Redevelopment Project PASSED and APPROVED this 17°i day of August, 2004. APPROVED: ATTEST: zs City of rayetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.4 Assessor's Certification October I, 2004 Mr. Hugh Earnest City of Fayeneville 113 W. Mountain Fayetteville AR 72701 Dear Mr. Earnest, Please accept this letter and its attachments as the assessor's certification required by ACA 14-168-306(b)(5) for the approval of the Redevelopment District Project Plan. The assessed value of all real property within the redevelopment district subject to ad valorem taxation, also known as the Base Value as of January 1, 2004, is: 16,616,684. The current toad millage rate of WashingtonCottnty, the Fayetteville School Dist icl.and the City of Fayetteville, also known as the Total Ad Valorem Rate, is: 52.96. Tlie portion of the total ad valorem rate that was, at January 1, 2001, pledged to the payment of debt service by the Fayetteville School District, also known as the Debt Service Ad Valorem Rate, is: 23.7. The total ad valorem rate less the debt service ad valorem rate, also known as the Applicable Ad Valorem Rate, is: 29.26. Attached is the certification firm the Fayetteville School District of the debt service ad valorem rate, a copy of the most recent millage ordinance detailing levied ad valorem millage rates for all taxing entities in Washington County with the pertinent items marked with an asterisk, and a report from the assessor's database deviling the appraised and assessed value ofeach parcel in the redevelopment district along with totals for the entire district. Sincerely, Lee Ann Ki= Fayettav8le TIF district PARCEL ID Tvoe Total Auoraiisod Total Assessed 765-01638-M CI 136,600 26,488 765-01639-M CI 125,800 20.020 765-01640-000 RI 1419850 22.719 765-01641-000 CV 43,700 6.435 765-016424M CM 64,100 9,724 765-01643.000 CI 696.850 125.070 765-01644-000 CI 1,358,600 182.559 765-01645-M ET 0 0 765-01646-000 CI 210,950 35.905 765-01647-000 CI 275.950 49,207 765-01648-000 EX 0 0 765-01649-000 EX 0 0 765-01650-000 CI 379,000 71258 765-01651-000 CI 576,450. 98.927 765-01652-000 CV 86,000 16.819 765-01780-M EX 0 0 765-01781-M CI 282.450 44,165 765-01782-M CI 268.800 45,133 765-017834)00 CI 1889650 31,812 765-01784-000 CI 70,900 12,999 765-01785-000 CM 61.450 8.514 765-01786-000 CI 284,600 23.995 765-01787-M RI 136,300 17,604 765-01788-M CI 223,100 25, 109 765-01789-000 CI 263.050 34,738 765-01790-000 RI 98,200 9,295 765-01791-000 RI 90,2M 97020 765-01792-000 CI 92.950 15,656 765-017934000 RI 73.000 10,704 765-01794-000 ET 0 0 765-01795-000 ET 0 0 765-01796-000 CI 144.100 21,912 765-01797-M CI 146,300 19.005 765-0.1798-000 CI 168.950 25,267 765-01799-000 CI 193,000 317257 765-01800-000 ET 0 0 765-01801-000 ET 0 0 765-01902-000 CI 226.500 37,190 765-01803-000 CI 184200 26,312 765-01804-M CI 339,000 48,532 765-01806-000 CI 173,850 33,297 765-01907-M PS 5,211,350 1,042,270 765-01808-M Cl 168,350 28,882 765-01809-M PS 144.750 28,950 765-01810-000 CI 1,077.000 152.757 765-01811.OW CI 11296,200 206,492 765-01812-000 CI 290,300 58.060 765-018134000 CM 47,850 6,710 765-WS14-M CI 380200 73.871 765-01815-000 CM 55,600 10,978 765-01820-M CI 6,400,000 1280.000 765-01821-000 CI 6,190.100 1,086,591 765-01827-M CI 171,100 32,990 765-01828-ON CI 199.850 389338 765-01829-M CI 141,800 26,712 765-01830-M CI 580,000 67.696 765-01831-OW CI 240,300 44,573 765-01832-M CI 169.100 31.746 765-01832-001 CI 100.100 18,633 10/12004 PARCEL ID Two Total Aooreised Total Assessed 765-018334000 CI 163.700 22,537 765-01834-000 CI 405.400 64.106 76MI835-M CV 396,900 75.533 765-01835-001 CB 1,953.100 299207 765-01836-000 CI 4,000.000 770,000 765-01837-M CV 64,850 11231 765-01815-000 Cl 40%400 80.993 765-01817-000 ET 0 0 765-01846-000 CI 722.150 127,470 765-01847-M cl 702.950 140.590 765-01848-000 CI 2,500.000 461.627 765-01849-NO ET 0 0 765-018504000 ET 0 0 765-01851-000 ET 0 0 765-01852-M ET 0 0 765-01853.000 EX 0 0 765-01838-M CI 455.400 84.885 765-01839-000 cl 982.300 122.694 765-01840-000 CM 89.000 17270 765-01841-M CI 68.150 12.112 765-01842-M EX 0 0 765-01843-000 CI 85250 14.143 765-01944-ON CI 67.100 11.168 765-01844-001 CI 67,000 11.140 765-01845.000 cl 275.950 52.573 765-01918-000 CI 1,975.950 377.706 765-01919-M cl 244.900 34,120 765-01920-WO CI 238.800 45.485 765-01924-000 CI 236.850 47.370 765-01925-000 CI 481.400 79.671 765-01926-M EX 0 0 765-01928-NO EX 0 0 765-01929-000 ET 0 0 765-01955.000 RV 22,500 3.168 765-01930.000 CI 389.750 77.950 765-01932-000 CI 527.600 59.068 - 765-01933-M CI 432,400 72.758 765-01935-M CI 4,380.500 849.736 765-01938-000 CI 167.550 30,488 765-019394)00 CI 134,850 62.062 765-01854.000 ET 0 0 765-01855-M ET 0 0 765-01948.000 CI 332,700 61,576 765-01949-000 CI 239.150 44.959 765-01950-000 CI 260.950 52.190 765-019524M ET 0 0 765-01953-000 ET 0 0 765-01940.000 CI 668.400 119,577 765-01940-001 CI 230,800 45,495 765-01941-000 EX 0 0 765-01942-M CI 341.350 68-M 765-01943-000 CI 470250 90,167 765-01944-M CI 109.650 14,715 765-019454)00 cl 175.450 23.695 765-01946-000 EX 0 0 765-01947-000 EX 0 0 765-01954-000 CI 151.150 26.609 765-019274D00 CI 7177700 129.031 765-01958-M EX 0 0 765-01956-000 RI 72,550 12.913 765-01959-000 EX 0 0 765-01960-000 EX 0 0 10112004 2 PARCEL ID Twe Total Aowaesed Total Assessed 765-01961-M EX 0 0 765-01962-000 EX 0 0 765-01963-000 EX 0 0 765-01964-000 EX 0 0 765-01965-NO EX 0 0 765-01985-M ET 0 0 765-01985-001 CI 11219.550 225,577 765-01986-M EX 0 0 765-01987-M EX 0 0 765-01988-000 EX 0 0 765-01989-M EX 0 0 765-01990-M EX 0 0 765-01993-000 ET 0 0 765-01991-000 CI 392,300 69.398 765-01992-000 ET 0 0 765-01966-M CI 484,750 79,325 765-01967-000 CI 98.200 10,496 765-01988-M CV 69,000 13.365 765-01969-000 CV 34.500 6.688 765-01970-000 CV 34,500 6.698 765-01971-000 CV 23.000 4,455 765-01972-NO CI 1,294.050 130.545 765-01975-M EX 0 0 765-01976-000 ET 0 0 765-01977-000 ET 0 0 765-01978-M ET 0 0 765-01979-M ET 0 0 765-01980-000 ET 0 0 765-01981.000 ET 0 0 765-01982-M ET 0 0 765-02070-M CR 35%500 52.773 765-02071-000 PS 1,750 350 765-02072-M EX 0 0 765-02073-M EX 0 0 765-01983-M ET 0 0 765-01984-000 ET 0 0 765-02076-000 RI 66,250 10.427 765-02074.000 RI 50.900 5.808 765-02075-M RV 22.500 2.860 765-02077-000 RI 132,800 10.962 765-02078.000 RI 61,650 7.765 765-02080-M RI 35.650 6,303 765-02081-000 RI 47,950 7222 765-02082-000 CI 153.200 24.915 7654)2083-000 RI 51.800 7.444 765-02084-000 RI 35.850 5.477 765-02085-000 RI 57.050 87065 765-0208&000 CV 26,500 3.795 765-02087-M CV 43,700 5,754 765-0208&000 CI 160250 21,607 765.02088-001 CI 34.950 4,791 765-02092-M RV 100 20 7654Y2093-000 RV 500 100 765-02093-001 RI 61.100 6.901 765-02094-M CI 79.250 137607 765402095-M RV 17,500 2,464 765-02103.000 RV 17,500 2.402 765-02096-M RI 51.200 9,812 765-02097-M CV 23,500 4.312 765-02098-000 CV 80.050 14,674 765-02099-000 CV 52,150 9,559 765-02104-000 EX 0 0 PARCEL ID Twe Total Anornised Total Assessed 765-02106-000 RI 49,650 7,072 765-02134-000 CI 131,300 18,733 765-02135-000 RI 112.800 16,574 765-021374M RI 66.100 6.195 765-02138-000 CM 18.550 3,663 765-02139-M RI 110,750 8.900 765-02140-M RI 93,600 9,708 765-02108-M CI 44.850 67787 765-02112-000 RI 58,100 7,579 765-02113-M RV 20,000 2,231 765-02114-000 RV 6,250 1,250 765-02115-000 RM 19,350 3,069 765-02116-M CI 231.950 41.599 765-02118-000 RV 10,000 1.408 765-02119-000 RI 68,250 77424 765-02120.000 RI 54,000 67499 765-02121-000 RI 67.950 10,013 765-02123-000 RV 26,250 5250 765-02124-000 CI 98,900 157473 765-02127-000 RV 31.250 2.603 765-02128-000 RI 66.850 8,309 765-02129-M RV 33,750 4,752 765-02130-000 CI 324,750 64,146 765-02133-000 CV 34,250 5.445 765-02100-000 RI 48.000 7,951 765-02102-000 RV 15.000 21059 765-02980-000 RI 44,050 67119 765-MBI-M CI 73.250 12,474 765-M82-000 RI 43.450 6,363 765-02983.000 RM 10.500 1.485 765-02984-000 RI 22,250 2,922 765-02985-000 RI 36.250 6.450 765-02986.000 RI 37.500 4.936 765-02987-000 RI 33,950 5.048 7654)2988-000 RI 72,950 10.221 765.02989.000 RI 26,250 4.147 7654)2990.000 RM 100300 1.496 765-02991-000 RI 23,600 4,276 765-04325-M CM 58,300 7,309 765-04319-000 CI 113,200 22,418 765-04320-000 CI 4990050 60,117 765-04321-000 CI 342,150 65,670 765-04322-M CM 97,850 16.632 765-043234)00 CM 40,350 6.765 765-04324-M CM 52.2M 6,428 765-04310-000 CI 98,250 19.437 765-04312-000 RI 165,500 23,568 765-04313-M RI 157,400 18,559 765-04314-000 RI 61,100 8,910 765-04315-000 CI 160700 32,140 765-04316-000 RI 167,650 24.518 765-04317-000 RI 14%050 210411 765-04318-000 CI 228,050 447318 765-044484)00 Ex 0 0 765-04449-M CI 134,350 28,345 765-04450-M CI 334,600 64,162 765-04451-000 EX 0 0 • 765.04452400 CI 261,200 44,602 765-04453-000 EX 0 0 765-04459-000 EX 0 0 765-04454-M EX 0 0 765-044554000 EX 0 0 101112004 4 PARCEL ID Type Total Agwaised Total Assessed 765-044564000 EX 0 0 765-04457-000 EX 0 0 765-04458-000 EX 0 0 765-04467-000 EX 0 0 765-04461-000 EX 0 0 765-04462-000 EX 0 0 765-04463-000 EX 0 0 765-04464-000 EX 0 0 765-04465-M EX 0 0 765-04466-000 EX 0 0 765-05446-000 EX 0 0 765-05441.000 CI 1.300,650 159.654 765-05441-001 EX 0 0 765-05442-000 RI 69.500 13,288 765-05442-001 RV 28.400 4,543 765-05443-M RV 14.400 2.475 765-05444-000 RI 56.700 10.780 765-05445-000 RI 55,750 10.582 765-05467-000 EX 0 0 765-05447-000 CV 2737950 23298 765-05448-000 CI 230t65O 46.130 765-05448-001 EX 0 0 765-05449-000 CI 77.200 12.864 765-054504000 EX 0 0 765-05451-000 CR 107,300 18.336 765-05452-000 RM 22,500 3,900 765-05453-ODO RI 41,150 7,699 765-05454-000 CR 76250 8.965 765-05455-000 EX 0 0 765-05456-000 CV 5180D 825 765-05457-000 EX 0 0 765-05458-000 CI 73.600 12.758 765-05459-000 EX 0 0 765-05480.000 EX 0 0 765-05461-000 EX 0 0 765-05465-000 CI 107,850 17,827 765-05466-000 EX - 0 0 765-05468-000 CI 250,850 46.884 765-05498-M EX 0 0 765-05499-000 EX 0 0 765-05500-000 EX 0 - 0 765-05531-000 CI 69,850 13.970 765-05501-000 CI 110,700 14.542 765-05501-001 EX 0 0 765-05502-000 CV - 42,550 4,455 765-05504-000 ET 0 0 765-05505-000 EX 0 0 765-05506-001 EX 0 0 765-05506-002 EX 0 0 765-05507-000 IV 451750 8,852 765-05508-000 CI 28.700 4.994 765-05509-000 II 418,350 80,553 765-05528-000 CI 14.550 2.910 765-05478-000 RI 44,250 7.036 765-05479-OW CI 205,000 31,163 765-054814000 CM 16,350 2,563 765-05482-000 RI 67.750 10.854 765-054874000 CI 93.500 159928 765-05492-001 EX 0 765-055104000 CI 103.350 16,541 765-05511-000 CI 83.300 16.613 765-05522-000 IV 360550 4,378 /ter FFqT4.9 PARCEL ID TWO Total Aowaised Total Asaossed 765-05523-M II 366,850 73,370 765-05523-001 EX . 0 0 765-05525-001 CV 17.800 2,640 765-06380-M RI 62,100 11,571 765406382-000 RI 49,850 9,515 765-06381-M RV 12.600 1,683 765-07060-M CI 69.850 11,826 765-07061-000 RI 20,650 2,898 765-07082-000 RI 86,900 12,396 765-07083-000 RI 33,150 5,577 765-07064-000 RV 15,000 1,760 765-07065-M RI 45.150 5?218 765-07066-000 RI 33,700 5.302 765-07087-000 RV 109500 1,232 765-07068-000 RV 10,500 1,232 765-07069-000 RI 40,900 6,886 765-07070-000 RI 32,750 5,005 765-07100-000 RI 57.700 8.038 765-07099-M RI 4%500 6.992 765-07087-000 CI 287,550 43,987 765-0708&000 CI 116,550 22.156 765-07089-000 RM 14,250 1,749 765-07090-000 RI 36,400 4,950 765-07091-M RI 66,450 9.961 765-07092-000 RI 50.400 6.835 765-07093-M RI 41,000 4.460 765-070944000 RI 57,450 9.639 765-07095-000 RI 29,500 3.861 765-07096-M RV 100 20 765-07097-000 RI 41.800 6.842 765-07098-000 RI 37.450 5,657 765-07125-000 CV 10.500 1.650 765-07128-000 EX 0 0 765-07128-000 RI 13,250 2.650 765-07129-M RI 59,000 7,770 765-07130.000 RV 18,750 27200 765-071314M RI 56.500 7.030 765-07979-000 CI 246,350 477539 765-07980.000 CI 163250 31,635 765-08245400 EX 0 0 765-08247-000 EX 0 0 765-08248-M CI 189,500 37.900 765-082494)00 RI 106,300 13,388 765-08249-001 CV 18,900 2,970 765-08250-000 RI 55.000 5.941 765-07969-000 RI 107.250 18,280 765-07972-000 RI 110.350 17241 765-07973.000 CI 187.850 37.445 765-07975-M CI 308.200 55.873 765-07976-000 CI 100,350 20,070 765-07978-000 CR 205,000 38.885 765-07984.000 RI I11,250 19.360 765-07987-000 CI 1t007J00 1967118 765-07988-0W EX 0 0 765-08077-000 CI 2,059,200 411.840 765-08078-000 PS 30.400 6,080 765-08082-000 CV 92,450 10.824 765-08083-OW CI 525,300 92.398 765-08084-000 CV 77.050 9,020 765-08088-000 CV 18,900 1.130 765-08089-000 EX 0 0 765-08239-000 RI 54,850 9474 1011=04 PARCEL ID Twe Total ALma'isad Total Assessed 765-08240-000 RI 60,100 8,565 765-11664-ON RI 139.450 14,041 765-11723-000 EX 0 0 765-11724-000 EX 0 0 765-11724-001 EX 0 0 765-11731-000 EX 0 0 765-11731-001 CM 60,2W 10,353 765-11731-010 EX 0 0 765-12671.OW ET 0 0 765-12972-OW CI 133,6W 26,068 765-12673-M CI 266,600 50,850 765.12674-000 RI 71,350 12,455 765-12675-000 CM 27,500 5,500 ' 765-12876-OW RI 98,350 18.150 765-12681-000 ET 0 0 765-12682-000 ET 0 0 765-12684-000 EX 0 0 - 765-12686-000 CI 493,100 94,373 765-12687-000 RV 23,000 3,575 765-1268"00 RI 128.350 14.288 765-12689-M EX 0 0 765-12689-001 RV 1,000 200 765.12691-000 EX 0 0 765-12710.004 CI 170,293 27.080 765.12710-005 CI 19%308 31,702 765-12710-006 CI 68,680 10,929 765-12710-007 CI 28,076 4,145 765-12710-009 CI 65,W8 10,340 765-12710-010 CI 22,648 3,603 765-12710-011 CI 11.388 1,815 765-12711-WO ET 0 0 765-127124000 ET 0 0 765-12713-M ET 0 0 765-127144000 ET 0 0 765-127154000 CI 1,724,950 247,592 765-12716-000 EX 0 0 765-12718-M CV 12.800 1.188 765-12720-000 CV 19,200 1,782 765-12721.ON CV 14.700 1.364 765.127224000 CM 26,000 2,552 765.12724-000 EX 0 0 765-12766-000 RV 14.400 2,288 765-12767-000 RV 16.000 2,574 765-12768-000 RV 16.000 2,574 765-12781-000 CR 4%900 8.723 - 765.12782-000 CI 74,150 11,288 765-12783-000 CM 17.150 2,013 765-12785-000 CI 467,70D 88,717 765-12789-000 CV 28.350 4,455 765-12791-000 CM 36.150 5,786 765-12792-000 RI 111,600 21.043 765-12793-000 RI 47,650 8,148 765-12794-000 RV 19,2W 3,300 765-20935-020 CI 3717646 707528 765-22032-000 RI 420.119 78,887 765-22033-W0 RI 359.032 84,170 765-22034-000 Rl 384,607 72,188 765-22035-000 RI 465.242 93.048 765-22036-000 CI 315.192 .49280 765-22037-WO CI 145,374 24.640 765-22038-000 CI 859.361 141.680 765-22039-000 CI 293,367 49,260 10112004 7 PARCEL ID Twe Total Anoraised Total Assessed 765-22040-000 CI 252,856 43.120 765-127954000 RV 13,600 2,145 765-12796-000 RV 8,000 1,375 765-12797-000 RI 58,000 8,050 765-22538-000 CI 457,600 91.520 765-22539-000 CI 476.000 95,200 765-225404M RI 239.850 47,970 765-22541-M RI 228,800 45,760 765-22542-M RI 184,500 361900 765-22543-000 RI 114.400 22,880 765-22544-000 RI 114,400 22,880 765-22545-M RI 147.650 29,530 765-22546-000 CI 5530550 110.710 765-22547-000 CI 439.150 67.830 765-22536-000 CI 339.500 67,900 765-22537-000 CI 394.850 78.970 765-22548-000 CI 0 0 765-12811-000 RI 24,800 47290 765-17377-000 EX 0 0 765-20935-010 CI 1,436.854 273.665 765.127644)00 EX 0 0 765-12764-001 CI 307.800 25.454 765-12764-002 CI 436.250 801680 765-12765-000 RV 14.400 2,298 765-12709-000 ET 0 0 765-12710-001 CI 320.142 50.912 765-12710-002 CI 194,534 307943 765-12710-003 CI 146.175 23243 95,167, 900 16,616,684 10I1(200d g 35 City Of rayetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.5 TIF Financing Strategies 36 EXHIBIT No.5 TIF Financing Strategies General Tax Increment Financing Information Tax increment finance ("TIF") is a type of public finance that the Arkansas General Assembly added to the powers of municipalities and counties by Amendment 78 to the Arkansas Constitution. Amendment 78 empowers municipalities and counties to create "redevelopment districts" that can issue bonds the repayment of which is secured by ad valorem tax payments made by owners of taxable real property in the district. The real property within the district receives an increased assessed value due to the public improvements and private reinvestment. Public improvements are financed by the proceeds of the bonds issued and sold by the district. The district pledges to the payment of its bonds that portion of the ad valorem tax that is otherwise levied by the city or county that formed the district (the amount of which is increased by the value of the public and private improvements within the district). That is, the district pledges the tax on the increment in value of the real property within its boundaries before and after the improvements. TIF bonds are secured by the existing municipal and county tax levied against the increase in assessed value. There is no new tax levied. TIF's are generally used as a tool for economic development available to municipalities to promote industry and redevelopment of real property, and to eliminate blight. Projects are funded by using taxes collected in the district itself, without raising the taxes of residents outside the district. This concept is referred to as "redevelopment from within." A TIF financing raises funds for redevelopment and acts to stimulate revitalization without using general revenues of municipality. TIF uses tax-exempt financing to encourage growth and redevelopment within the district, which in turn stimulates economic growth outside the district. TIF captures, during its life, the increased tax revenue that results when private investment is stimulated. These tax receipts are called the "tax increment." As private investment adds to the tax base within the district, the increment is directed back to pay for the public investment projects. When the bonds are paid off, the tax receipts generated by the tax increment goes back into the general tax revenues or can be dedicated to additional projects within the district. Financine of Estimated Project Costs The proposed project costs for improvements within the Highway 71 East Square Redevelopment District are as follows: TIF Bond Proceeds Private Investments Financing Timetable Phase I $ 3,500,000.00 $ 19,000,000.00 2004-2005 Phase 11 $ 7,116,000.00 2004-2029 37 District Indebtedness It is anticipated that tax-exempt bonds will be issued by the Highway 71 East Square Redevelopment District due to the public nature and purposes of the proposed improvements. The amount of indebtedness to be incurred pursuant to the Highway 71 East Square Redevelopment District Project Plan is projected to provide bond proceeds as follows: Phase 1 - Process of removing blight in the former Mountain Inn area -Catalyst Project: $3,500,000 (based upon 2004 dollars) Phase 11 — City Streetscape Improvements — First 10 Year Project: $7,116,000 (based upon 2004 dollars) $10,616,000 Total bond Proceeds (based upon 2004 dollars) Other Costs Other costs relating to the issuance of bonds may include, among other things, reserve funds, capitalized interest, feasibility studies, accounting, financial advisory, legal and underwriting fees. Any initial bonds and subsequent financings will be subject to allowable financing parameters as determined by bond underwriting requirements, debt service coverage ratios, projections of incremental growth in assessed values, interest rates and other requirements of the capital markets. Professional Services In accordance with Arkansas Code Annotated 14-168-304 (see Exhibit No. 7). Powers Generally, a district may "(3) Issue redevelopment bonds and notes and to pledge tax increments and other redevelopment revenues for repayment of them; (15) Designate one (1) or more official or employee of the local government to make decisions and handle the affairs of redevelopment districts created pursuant to this subchapter; and (19) Do all things necessary or convenient to carry out the powers granted in this subchapter". The district may engage as may be necessary professional advisors, consultants, attorneys and other TIF specialists to carry out the project plan and related financings. The Mayor of the City of Fayetteville or others as may be assigned by the Mayor may engage professionals to specifically meet the desired results of the Project Plan. Application of District Revenues All tax increment collected for the established twenty-five year period will be used to cover district indebtedness including initial bonded debt and additional bonds that may be issued as district revenues permit. Excess revenues shall retire the district's indebtedness or fund additional projects as may be approved by the City Council in accordance with bond covenants and obligations. Interest Earnines All interest earnings will be used towards debt service obligations on issued Tax Increment Financing bonds/notes. Earnings may be applied to the payment of Capitalized Interest and any prepayment of debt obligations as may be permitted. FT.'3 City o� �ayetteville, ArLansas, HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.6 Amendment 78 39 EXHIBIT No.6 Arkansas Code Annotated 14-168-301 through 14-168-323 Redevelopment District Chapter 168 Community Redevelopment Generally Subchapter 3 Community redevelopment — Creation and procedures 14-168-301. Definitions. As used in this act subchapter, unless the context otherwise requires: (1) "Applicable ad valorem rate" means the total ad valorem rate less the debt service ad valorem rate; (2) "Base value" means the assessed value of all property within a redevelopment district subject to ad valorem taxation, as of the most recent assessment preceding the formation of the redevelopment district; (3)(A) "Blighted area" means an area in which the structures, buildings, or improvements, by reason of dilapidation, deterioration, age or obsolescence, inadequate provision for access, ventilation, light, air, sanitation, or open spaces, high density of population and overcrowding or the existence of conditions which endanger life or property, are detrimental to the public health, safety, morals, or welfare. (B) "Blighted area" includes any area which, by reason of the presence of a substantial number of substandard, slum, deteriorated or deteriorating structures, predominance of defective or inadequate street layout, faulty lot layout in relation to size, adequacy, accessibility, or usefulness, unsanitary or unsafe conditions, deterioration of site or other improvements, diversity of ownership, tax on special assessment delinquency exceeding the fair value of the land, defective or unusual conditions of title, or the existence of conditions which endanger life or property by fire and other causes, or any combination of such factors, substantially impairs or arrests the sound growth of a city, retards the provision of housing accommodations, or constitutes an economic or social liability and is a menace to the public health, safety, morals, or welfare in its present condition and use, or any area which is predominantly open and which because of lack of accessibility, obsolete platting, diversity of ownership, deterioration of structures or of site improvements, or otherwise, substantially impairs or arrests the sound growth of the community; (4) "Current value" means the assessed value of all property within a redevelopment district subject to ad valorem taxation, as of the most recent assessment after the formation of the redevelopment district; (5) "Debt service ad valorem rate" means that portion of the total ad valorem rate that has been, at January 1, 2001, pledged to the payment of debt service on bonds issued by any taxing unit in which all or any part of the redevelopment district is located; (6)(A) "Incremental value", for any redevelopment district, means the difference between the base value and the current value. (B) The incremental value will be positive if the current value exceeds the base value, and the incremental value will be negative if the current value is less than the base value; (7) "Local governing body" means the city council, city board of directors, county quorum court, or any other ELI legislative body governing a local government in the State of Arkansas; (8) "Local government" means any city or county in the State of Arkansas; (9)(A) "Project costs" means expenditures made in preparation of the project plan and made, or estimated to be made, or monetary obligations incurred, or estimated to be incurred, by the local government, which are listed in the project plan as costs of public works or improvements within a redevelopment project district, plus any costs incidental thereto. (B) Project costs include, but are not limited to: (i) Capital costs, including, but not limited to, the actual costs of the construction of public works or improvements, new buildings, structures, and fixtures, the demolition, alteration, remodeling, repair, or reconstruction of existing buildings, structures, and fixtures, environmental remediation, parking and landscaping, the acquisition of equipment, and site clearing, grading, and preparation; (ii) Financing costs, including, but not limited to, all interest paid to holders of evidences of indebtedness issued to pay for project costs, all costs of issuance, and any redemption premiums, credit enhancement, or other related costs; (iii) Real property assembly costs, meaning any deficit incurred resulting from the sale or lease as lessor by the local government of real or personal property within a redevelopment district for consideration which is less than its cost to the local government (iv) Professional service costs, including, but not limited to, those costs incurred for architectural, planning, engineering, and legal advice and services; (v) Imputed administrative costs, including, but not limited to, reasonable charges for the time spent by local government employees in connection with the implementation of a project plan; (vi) Relocation costs, including, but not limited to, those relocation payments made following condemnation and job training and retraining; (vii) Organizational costs, including, but not limited to, the costs of conducting environmental impact and other studies, and the costs of informing the public with respect to the creation of redevelopment project areas and the implementation of project plans; (viii) The amount of any contributions made in connection with the implementation of the project plan; (ix) Payments made, in the discretion of the local governing body, which are found to be necessary or convenient to the creation of redevelopment areas or the implementation of project plans; and (x) That portion of costs related to the construction of environmental protection devices, storm or sanitary sewer lines, water lines, or amenities or streets or the rebuilding or expansion of streets, the construction, alteration, rebuilding, or expansion of which is necessitated by the project plan for a district, whether or not the construction, alteration, rebuilding, or expansion is within the area; (10) "Project plan" means the plan which shall be adopted by a local governing body for a redevelopment project as described in § 14-168-308; (1 1) 'Real property" means all lands, including improvements and fixtures on them and property of any nature appurtenant to them or used in connection with them and every estate, interest, and right, legal or equitable, in them, including terms for years and liens by way ofjudgment, mortgage, or otherwise, and the indebtedness secured by the liens; (12) 'Redevelopment district" means a contiguous geographic area within a city or county in which a redevelopment 41 project will be undertaken, as defined and created by ordinance of the local governing body; (13)(A) "Redevelopment project" means an undertaking for eliminating or preventing the development or spread of slums or deteriorated, deteriorating, or blighted areas, for discouraging the loss of commerce, industry, or employment, or for increasing employment, or any combination thereof. (B) A redevelopment project may include one (1) or more of the following: (i) The acquisition of land and improvements, if any, within the redevelopment district and clearance of the land so acquired; or (ii) The development, redevelopment, revitalization, or conservation of the project area whenever necessary to provide land for needed public facilities, public housing, or industrial or commercial development or revitalization, to eliminate unhealthful, unsanitary, or unsafe conditions, to lessen density, mitigate or eliminate traffic congestion, reduce traffic hazards, eliminate obsolete or other uses detrimental to the public welfare, or otherwise remove or prevent the spread of blight or deterioration; or (C) The financial or other assistance in the relocation of persons and organizations displaced as a result of carrying out the redevelopment project and other improvements necessary for carrying out the project plan, together with such site improvements as are necessary for the preparation of any sites and making any land or improvements acquired in the project area available, by sale or by lease, for public housing or for development, redevelopment, or rehabilitation by private enterprise for commercial or industrial uses in accordance with the plan; (D) The construction of capital improvements within a redevelopment district designed to alleviate deteriorating conditions or a blighted area or designed to increase or enhance the development of commerce, industry, or housing within the redevelopment district; or (E) Any other projects the local governing body deems appropriate to carry out the purposes of this subchapter; (14) "Special fund" means a separate fund for a redevelopment district established by the local government into which all tax increment revenues and other pledged revenues are deposited and from which all project costs are paid; (15) "Tax increment' means the incremental value of a redevelopment district multiplied by the applicable ad valorem rate; (16) "Taxing unit' means any city, county, school district, or community college district; and (17) "Total ad valorem rate" means the total millage rate of all county, city, school, or other local general property taxes levied on all taxable property within a redevelopment district in a year. History. Acts 2001, No. 1197, § 2. 14-168-302. Construction. The General Assembly declares that this subchapter is necessary for the welfare of this state and its inhabitants, and it is the intent of the General Assembly that it is to be broadly construed to effect its purpose. History. Acts 2001, No. 1197, § 3. 14-168-303. Powers supplemental. The powers conferred by this subchapter are in addition and supplemental to the powers conferred upon local governments and improvement districts by the General Assembly relating to the issuance of bonds. History. Acts 2001, No. 1197, § 4. 14-168-304. Powers generally. In addition to any other powers conferred by law, a local government may exercise any powers necessary and 42 convenient to carry out the purpose of this subchapter, including the power to: (1) Create redevelopment districts and to define the boundaries of redevelopment districts; (2) Cause project plans to be prepared, to approve the project plans, and to implement the provisions and effectuate the purposes of the project plans; (3) Issue redevelopment bonds and notes and to pledge tax increments and other redevelopment revenues for repayment of them; (4) Deposit moneys into the special fund for any redevelopment project district; (5) Enter into any contracts or agreements, including agreements with bondholders, determined by the local governing body to be necessary or convenient to implement the provisions and effectuate the purposes of project plans; (6) Receive from the federal government or the state loans and grants for, or in aid of, a redevelopment project and to receive contributions from any other source to defray project costs; (7)(A) Exercise the right of eminent domain to condemn property for the purposes of implementing the project plan. (B) The rules and procedures set forth in §§ 18-15-301 - 18-15-307 shall govern all condemnation proceedings authorized in this subchapter; (8) Make relocation payments to such persons, businesses, or organizations as may be displaced as a result of carrying out the redevelopment project; (9) Clear and improve property acquired by it pursuant to the project plan and construct public facilities on it or contract for the construction, development, redevelopment, rehabilitation, remodeling, alteration, or repair of the property; (10) Cause parks, playgrounds, or water, sewer, or drainage facilities, or any other public improvements, including, but not limited to, fire stations, community centers, and other public buildings, which it is otherwise authorized to undertake, to be laid out, constructed, or furnished in connection with the redevelopment project; (1 l) Lay out and construct, alter, relocate, change the grade of, make specific repairs upon, or discontinue public ways and construct sidewalks in, or adjacent to, the redevelopment project; (12) Cause private ways, sidewalks, ways for vehicular travel, playgrounds, or water, sewer, or drainage facilities and similar improvements to be constructed within the redevelopment project for the particular use of the redevelopment district or those dwelling or working in it; (13) Construct any capital improvements of a public nature, as such term is defined in § 14-164-303(a)(2), as now or hereafter amended; (14) Construct capital improvements to be leased or sold to private entities in connection with the goals of the redevelopment project; (15) Designate one (1) or more official or employee of the local government to make decisions and handle the affairs of redevelopment districts created pursuant to this subchapter; (16) Adopt ordinances or bylaws or repeal or modify such ordinances or bylaws or establish exceptions to existing ordinances and bylaws regulating the design, construction, and use of buildings within the redevelopment district; (17) Sell, mortgage, lease, transfer, or dispose of any property, or interest therein, acquired by it pursuant to the project plan for development, redevelopment, or rehabilitation in accordance with the project plan; (18) Invest project revenues as provided in this subchapter; and EW (19) Do all things necessary or convenient to carry out the powers granted in this subchapter. History. Acts 2001, No. 1197, § 5. 14-168-305. Creation of district. (a) The local governing body, upon its own initiative or upon request of affected property owners or upon request of the city or county planning commission, may designate the boundaries of a proposed redevelopment district. (b)(1) The local governing body shall hold a public hearing at which interested parties are afforded a reasonable opportunity to express their views on the proposed creation of a redevelopment district and its proposed boundaries. (2)(A) Notice of the hearing shall be published in a newspaper of general circulation in the city or county at least fifteen (15) days prior to the hearing. (B) Prior to this publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all local governmental and taxing entities having the power to levy taxes on property located within the proposed redevelopment district and to the school board of any school district which includes property located within the proposed redevelopment district. (c) The local governing body shall adopt an ordinance which: (1) Describes the boundaries of a redevelopment district sufficiently definite to identify with ordinary and reasonable certainty the territory included in, which boundaries may create a contiguous or noncontiguous district; (2) Creates the redevelopment district as of a date provided in it; (3)(A) Assigns a name to the redevelopment district for identification purposes. (B) The name may include a geographic or other designation, shall identify the city or county authorizing the district, and shall be assigned a number, beginning with the number one (1). (C) Each subsequently created district shall be assigned the next consecutive number; and (4) Contains findings that the real property within the redevelopment district will be benefitted by eliminating or preventing the development or spread of slums or blighted, deteriorated, or deteriorating areas, or discouraging the loss of commerce, industry, or employment, or increasing employment, or any combination thereof. (d)(1) No county shall establish a redevelopment district, any portion of which is within the boundaries of a city. (2) Provided, however, that one (1) or more local governments through interlocal agreement may join in the creation of a district, the boundaries of which lie in one (1) or more local governments. (e)(1) The ordinance shall establish a special fund as a separate fund into which all tax increment revenues and other revenues designated by the local government for the benefit of the redevelopment district shall be deposited, and from which all project costs shall be paid. (2) Such special fund may be assigned to and held by a trustee for the benefit of bondholders if tax increment financing is used. (f)(1) The boundaries of the redevelopment district may be modified from time to time by ordinance of the local government. (2) Provided, however, that in the event any bonds, notes or other obligations are outstanding with respect to the redevelopment district, any change in the boundaries shall not reduce the amount of tax increment available to secure ►n such tax increment financing. History. Acts 2001, No. 1197, § 6. 14-168-306. Project plan - Approval, (a)(1) Upon the creation of the redevelopment district, the local governing body shall cause the preparation of a project plan for each redevelopment district, and such project plan shall be adopted by ordinance of the local governing body. (2) This process shall conform to the procedures set forth in this section. (b) Each project plan shall include: (1) A statement listing the kind, number, and location of all proposed public works or improvements within the district or, to the extent provided, outside the district; (2) An economic feasibility study; (3) A detailed list of estimated project costs; (4) A description of the methods of financing all estimated project costs, including the issuance of tax increment bonds, and the time when the costs or monetary obligations related thereto are to be incurred; (5) A certification by the county tax assessor of the base value, total ad valorem rate, debt service ad valorem rate, and applicable ad valorem rate for the redevelopment district; (6) The type and amount of any other revenues that are expected to be deposited to the special fund of the redevelopment district; (7) A map showing existing uses and conditions of real property in the district; (8) A map of proposed improvements and uses in the district; (9) Proposed changes of zoning ordinances; (10) Appropriate cross-references to any master plan, map, building codes, and city ordinances affected by the project plan; (1 1) A list of estimated nonproject costs; and (12) A statement of the proposed method for the relocation of any persons to be displaced. (c) If the project plan is to include tax increment financing, the tax increment financing portion of the plan shall set forth: (1) The amount of indebtedness to be incurred pursuant to this subchapter; (2) An estimate of the tax increment to be generated as a result of the project;, (3) The method for calculating the tax increment, which shall be in conformance with the provisions of this subchapter, together with any provision for adjustment of the method of calculation; (4) Any other revenues, such as payment -in -lieu -of -taxes revenues, to be used to secure the tax increment financing; and (5) Any other provisions as may be deemed necessary in order to carry out any tax increment financing to be used for the redevelopment project. 45 (d) If less than all of the tax increment is to be used to fund a redevelopment project or to pay project costs or retire tax increment financing, the project plan shall set forth the portion of the tax increment to be deposited in the special fund of the redevelopment district, and provide for the distribution of the remaining portion of the tax increment to the taxing units in which the district lies. (e)(1) The local governing body shall hold a public hearing at which interested parties are afforded a reasonable opportunity to express their views on the proposed project plan. (2)(A) Notice of the hearing shall be published in a newspaper of general circulation in the city or county at least fifteen (15) days prior to the hearing. (B) Prior to this publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all local governmental and taxing entities having the power to levy taxes on property located within the proposed redevelopment district and to the school board of any school district which includes property located within the proposed redevelopment district. (3) The hearing may be held in conjunction with the hearing set forth in § 14-168-305(b)(1). (4) Prior to publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all local governments or entities having the power to levy taxes on property within the district and to the school board of any school district which includes property located within the proposed redevelopment district. (f)(1) Approval by the local governing body of a project plan must be within one (1) year after the date of the county assessor's certification required by subdivision (b)(5) of this section. (2) The approval shall be by ordinance which contains a finding that the plan is economically feasible. History. Acts 2001, No. 1197, § 7. 14-168-307. Project plan - Amendment. (a) The local governing body may adopt by ordinance an amendment to a project plan. (b)(1) Adoption of an amendment to a project plan shall be preceded by a public hearing held by the local governing body as provided in § 14-168-306(e)(1), at which interested parties shall be afforded a reasonable opportunity to express their views on the amendment. (2)(A) Notice of the hearing shall be published in a newspaper of general circulation in the city or county once a week for two (2) consecutive weeks. The first such publication shall be fifteen (15) days prior to the hearing. (B) Prior to publication, a copy of the notice shall be sent by first-class mail to the chief executive officer of all local governments or entities having the power to levy taxes on property within the district and to the school board of any school district which includes property located within the proposed district. (c)(1) One (1) or more existing redevelopment districts may be combined pursuant to lawfully adopted amendments to the original plans for each district. (2) Provided that the local governing body finds that the combination of the districts will not impair the security for any bonds previously issued pursuant to this subchapter. History. Acts 2001, No. 1197, § 8. 14-168-308. Termination of districts. (a) No redevelopment district may be in existence for a period longer than twenty-five (25) years, unless, pursuant to amendment of the redevelopment plan, additional bonds have been issued and would not be fully paid until after the date which is twenty-five (25) years from the date of creation of the district. F (b) The local governing body may set a shorter period for the existence of the district, and may also provide that no bonds shall have a final maturity on a date later than the termination date of the district. (c) Upon termination of the district, no further ad valorem tax revenues shall be distributed to the special fund of the district. (d)(1) The local governing body shall adopt, upon the expiration of the time periods set forth in this section, an ordinance terminating the redevelopment district. (2) Provided, however, that no district shall be terminated so long as bonds with respect to the district remain outstanding. History. Acts 2001, No. 1197, § 9. 14-168-309. Costs of formation. (a) The local government may pay, but shall have no obligation to pay, the costs of preparing the project plan or forming the redevelopment district. (b) If the local government elects not to incur those costs, they shall be made project costs of the district and reimbursed from bond proceeds or other financing, or may be paid by developers, property owners, or other persons interested in the success of the redevelopment project. History. Acts 2001, No. 1197, § 10. 14-168-310. Overlapping districts. The boundaries of any redevelopment districts shall not overlap with any other redevelopment district. History. Acts 2001, No. 1197, § 11. 14-168-311. Valuation of real property. (a)(1) Upon and after the effective date of the creation of a redevelopment project district, the county assessor of the county in which the district is located shall transmit to the county clerk, upon the request of the local governing body, the base value, total ad valorem rate, debt service ad valorem rate, and applicable ad valorem rate for the redevelopment district and shall certify to it. (2)(A) The assessor shall undertake, upon request of the local governing body, an investigation, examination, and inspection of the taxable real property in the.district and shall reaffirm or revalue the base value for assessment of the property in accordance with the findings of the investigation, examination, and inspection. (B) The assessor shall determine, according to his or her best judgment from all sources available to him or her, the full aggregate value of the taxable property in the district, which aggregate valuation, upon certification thereof by the assessor to the clerk, constitutes the base value of the area. (b)(1)(A)(i) The assessor shall give notice annually to the designated finance officer of each taxing unit having the power to levy taxes on property within each district of the current value and the incremental value of the property in the redevelopment district. (ii) The assessor shall also determine the tax increment by applying the applicable ad valorem rate to the incremental value. (B) The notice shall also explain that the entire amount of the tax increment allocable to property within the redevelopment district will be paid to the special fund of the redevelopment district. (2) The assessor shall identify upon the assessment roll those parcels of property which are within each existing district specifying on it the name of each district. History. Acts 2001, No. 1197, § 12. 47 14-168-312. Division of ad valorem real property tax revenue. (a) For so long as the redevelopment district exists, the tax assessor shall divide the ad valorem tax revenue collected, with respect to taxable property in the district, as follows: (1) The assessor shall determine for each tax year: (A) The amount of total ad valorem tax revenue which should be generated by multiplying the total ad valorem rate times the current value; (B) The amount of ad valorem tax revenue which should be generated by multiplying the applicable ad valorem rate times the base value; (C) The amount of ad valorem tax revenue which should be generated by multiplying the debt service ad valorem rate times the current value; and (D) The amount of ad valorem revenue which should be generated by multiplying the applicable ad valorem rate times the incremental value; (2) The assessor shall determine from the calculations set forth in subdivision (a)(1) of this section the percentage share of total ad valorem revenue for each according to subdivisions (a)(1)(B) - (D) of this section, by dividing each of such amounts by the total ad valorem revenue figure determined by the calculation in subdivision (a)(1)(A) of this section; and (3) On each date on which ad valorem tax revenue is to be distributed to taxing units, such revenue shall be distributed by: (A) Applying the percentage share determined according to subdivision (a)(1)(B) of this section to the revenues received and distributing such share to the taxing entities entitled to such distribution pursuant to current law; (B) Applying the percentage share determined according to subdivision (a)(1)(C) of this section to the revenues received and distributing such share to the taxing entities entitled to such distribution by reason of having bonds outstanding; and (C) Applying the percentage share determined according to subdivision (a)(1)(D) of this section to the revenues received and distributing such share to the special fund of the redevelopment district. (b) In each year for which there is a positive tax increment, the county treasurer shall remit to the special fund of the redevelopment district that portion of the ad valorem taxes that consists of the tax increment. (c) Any additional moneys appropriated to the redevelopment district pursuant to an appropriation by the local governing body and any additional moneys dedicated to the fund from other sources shall be deposited to the redevelopment district fund by the treasurer of the local government. (d) Any funds so deposited into the special fund of the redevelopment district may be used to pay project costs, principal and interest on bonds, and to pay for any other improvements of the redevelopment district deemed proper by the local governing body. (e) Unless otherwise directed pursuant to any agreement with bondholders, moneys in the fund may be temporarily invested in the same manner as other municipal funds. (f) If less than all of the tax increment is to be used for project costs or pledged to secure tax increment financing as provided in the plan for the redevelopment project, the assessor shall account for such fact in distributing the ad valorem tax revenues. History. Acts 2001, No. 1197, § 13. 14-168-313. Payments in lieu of taxes and other revenues. (a) The local governing body may elect to deposit in the special fund of the redevelopment district all or any portion of the local government's share of payments in lieu of taxes on property within the redevelopment district. (b) Other revenues to be derived from the redevelopment project may also be deposited in the special fund at the direction of the local governing body. History. Acts 2001, No. 107, § 14. 14-168-314. Bonds generally. (a)(1) Bonds may be issued for project costs which may include interest prior to and during the carrying out of a project and for a reasonable time thereafter, with such reserves as may be required by any agreement securing the bonds and all other expenses incidental to planning, carrying out, and financing the project. (2) The proceeds of bonds may also be used to reimburse the costs of any interim financing entered on behalf of the redevelopment district. (b) Bonds issued under this subchapter shall be payable solely from the tax increment or other revenues deposited to the credit of the special fund of the redevelopment district and shall not be deemed to be a pledge of the faith and credit of the local government. (c) Every bond issued under this subchapter shall recite on its face that it is a special obligation bond payable solely from the tax increment and other revenues pledged for its repayment. History. Acts 2001, No. 1197, § 15. 14-168-315. Redevelopment bonds or notes - Authority to issue. For the purpose of paying project costs or of refunding notes issued under this subchapter for the purpose of paying project costs, the local governing body may issue redevelopment bonds or notes payable out of positive tax increments and other revenues deposited to the special fund of the redevelopment district. History. Acts 2001, No. 1197, § 16. 14-168-316. Redevelopment bonds or notes - Authorizing resolution. (a) Redevelopment bonds and notes shall be authorized by ordinance of the local governing body. (b)(1) The ordinance shall state the name of the redevelopment project district, the amount of bonds or notes authorized, and the interest rate to be borne by the bonds or notes. (2) The ordinance may prescribe the terms, form, and content of the bonds or notes and such other matters as the local governing body deems useful, or it may include by reference the terms and conditions set forth in a trust indenture or other document securing the redevelopment bonds. History. Acts 2001, No. 1197, § 17. 14-168-317. Redevelopment bonds or notes - Terms, conditions, etc. (a)(1) Redevelopment bonds or notes may not be issued in an amount exceeding the estimated aggregate project costs, including all costs of issuance of the bonds or notes. (2) The redevelopment bonds and notes shall not be included in the computation of the constitutional debt limitation of a local govemment. (b)(1) The bonds or notes shall mature over a period not exceeding twenty-five (25) years from their date of issuance or a period terminating with the date of termination of the redevelopment district, whichever period terminates earlier. (2) The bonds or notes may contain a provision authorizing their redemption, in whole or in part, at stipulated prices, at the option of the local government on any interest payment date and, if so, shall provide the method of selecting the bonds or notes to be redeemed. sil (3) The principal and interest on the bonds and notes may be payable at any place set forth in the resolution, trust indenture, or other document governing the bonds. (4) The bonds or notes shall be issued in registered form. (5) The bonds or notes may be in any denominations. (6) Each such bond or note is declared to be a negotiable instrument. (c) The bonds or notes may be sold at public or private sale. (d) Insofar as they are consistent with subdivision (a)(1) and subsections (b) and (c) of this section, the provisions of §§ 14-169-220 and 14-169-221 relating to procedures for issuance, form, contents, execution, negotiation, and registration of municipal bonds and notes are incorporated by reference therein. (e)(1) The bonds may be refunded or refinanced and refunding bonds may be issued in any principal amount. (2) Provided, that the last maturity of the refunding bonds shall not be later than the last maturity of the bonds being refunded. History. Acts 2001, No. 1197, § 18. 14-168-318. Redevelopment bonds or notes - Security - Marketability. To increase the security and marketability of redevelopment bonds or notes, the local government may: (I ) Create a lien for the benefit of the bondholders upon any public improvements or public works financed by the bonds;or (2) Make such covenants and do any and all such actions, not inconsistent with the Arkansas Constitution, which may be necessary or convenient or desirable in order to additionally secure the bonds or notes, or which tend to make the bonds or notes more marketable according to the bestjudgment of the local governing body. History. Acts 2001, No. 1197, § 19. 14-168-319. Redevelopment bonds or notes - Special fund for repayment. (a) Redevelopment bonds and notes are payable out of the special fund created for each redevelopment district under this subchapter. (b)(1) The local governing body shall irrevocably pledge all or part of the special fund to the payment of the bonds or notes. (2) The special fund, or the designated part thereof, may thereafter be used only for the payment of the bonds or notes and their interest until they have been fully paid. (c) A holder of the bonds or notes shall have a lien against the special fund for payment of the bonds or notes and interest on them and may bring suit, either at law or in equity, to enforce the lien. History. Acts 2001, No. 1197, § 20. 14-168-320. Redevelopment bonds or notes - Tax exemption. Bonds and notes issued under this subchapter, together with the interest and income therefrom, shall be exempt from all state, county, and municipal income taxes. History. Acts 2001, No. 1197, § 21. 14-168-321. Excess funds. 50 (a) Moneys received in the special fund of the district in excess of amounts needed to pay project costs may be used by the local governing body for other purposes of the district or for any other lawful purpose of the local governing body. (b) Upon termination of the district, all amounts in the special fund of the district may be used by the local governing body for any lawful purpose. History. Acts 2001, No. 1197, § 22. 14-168-322. Impact reports. The Assessment Coordination Department, in cooperation with other state agencies and local governments, shall make a comprehensive impact report to the Governor and to the General Assembly at the beginning of each biennium as to the economic, social, and financial effect and impact of community redevelopment financing projects. History. Acts 2001, No. 1197, § 23. 14-168-323. Value of assessed property in a redevelopment district. (a) If state funding to a school district is calculated with regard to the value of assessed property located in the school district, the incremental value of real property within a redevelopment district shall not be included in the assessed value of the real property within the school district for purposes of computing school district funding if the real property is located within the redevelopment district and within the school district and the assessed value of the real property increases above the base value. (b) Subsection (a) of this section shall apply for each school year during which the tax increment for real property within the redevelopment district is distributed pursuant to § 14-168-312. History. Acts 2003 (2nd Ex. Sess.), No. 43, § I. 51 City of ragetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.7 Local Demographics 52 EXHIBIT No.7 Local Demographics Summary Economic strength continues to be the mainstay of the Northwest Arkansas MSA. Recently named as the top ranking MSA in the country by the Milken Institute, NWA is now gathering much attention for its regional economy. Fayetteville continues to experience robust growth along with the rest of Northwest Arkansas. Fayetteville is still considered the city of choice for living mainly because of its reputation for offering a superb quality of life. One highlight Fayetteville offers are the attractions associated with the University of Arkansas including sporting events and cultural activities. Fayetteville also is known in the region for its entertainment district located primarily along Dickson Street which connects the historic areas of town and the university campus. There has been a tremendous surge in demand for downtown/urban style living in Fayetteville near the heartbeat of culture for northwest Arkansas. Economic impact from the University of Arkansas in Fayetteville continues to be a major factor. Beginning in 1871 when the University of Arkansas was created with a major land-grant under the Morrill Land -Grant College Act the campus population has been ever increasing. On April 11, 2002 the University of Arkansas announced that it had been the recipient of the largest gift in the history of American public higher education. The Walton Family Charitable Support Foundation of Bentonville, AR committed $300 million to establish and endow an undergraduate honors college and endow the graduate school. $177 million will be targeted towards students, $82 million towards faculty, and $41 million towards library, technology, and other support areas. At the time, the University was in the midst of six -year campaign targeting to raise $500 million. As a result of the Walton's gift, the University decided to revise its parameters, upping the goal to raising $900 million by June 2005. As of Fall, 2003 the campaign had raised $770 million. Chancellor John White said in his annual State of the University address in September 2002 that over the next decade the University would spend $642 million on building construction and improvement. Many of these facilities and projects are necessary to the University's vision, as they have stated a goal of having 22,500 students by the year 2010. Current enrollment is just over 16,000. The Fayetteville -Springdale -Rogers corridor gained notoriety when the 2000 Census indicated that the area was the sixth fastest growing MSA in the country over the last 10 years. The population jumped from approximately 211,000 to 31 1,000. Most notably during that time Wal-Mart Stores, whose headquarters are in Bentonville, a sister city and north of Fayetteville, increased their sales from $26 billion to $191 billion. Besides Wal-Mart, two other corporate giants call Northwest Arkansas home. Tyson Foods, which had been a $7 billion sales giant, increased to $23 billion in sales in 2002 with the takeover of IBP. JB Hunt Trucking, also headquartered in the MSA, has annual sales in the $2-2.5 billion range. All three of these companies had phenomenal success during the 1990s and are significant factor in the growth ofthe area. This bustling corner ofthe state's saga has not escaped the media's attention as it has received write-ups in several national publications thus aiding growth in yet another way. 53 Economic Overview of the Fayetteville -Springdale -Rogers MSA Overview The two -county area of Northwest Arkansas has experienced unprecedented economic and population growth since the 1990's. A dominant driver behind the growth has been the success of Wal-Mart, as it grew to become the world's largest retailer. Along the way, Wal-Mart has encouraged its vendors to be accessible to the company which directly translated into the opening of offices within Benton or Washington County for Fortune 500 and other companies. The resulting high quality job creation has spawned a boom in the commercial real estate market, as the demand for office space has increased and as the population growth has created the need for more retail shops, restaurants, entertainment facilities and service providers. A corresponding escalation has occurred in the construction of residential housing. Wal-Mart has not been the only driver of growth in Northwest Arkansas. Tyson Foods has also grown rapidly during the same period, becoming the world's largest "protein" company. The Northwest Arkansas area has long been the home base of several large trucking companies. JB Hunt has become one of the largest providers of logistics services in North America and Willis Shaw Express is a major provider of transportation of refrigerated and frozen food products. Fayetteville is also home to the University of Arkansas, a major research university, which is steadily improving its national rankings. Some academic areas have reached the top tier nationally. In 2002, the University of Arkansas was the recipient of a $300 million challenge grant from the Wal-Mart Foundation, the largest grant ever given to a public university in the U.S. The university has accelerated its quest for excellence and at the same time is pursuing a goal of increasing its enrollment, to a total of 22,500 students by 2010. The following pages provide some economic highlights of the Fayetteville -Springdale -Rogers MSA 54 National Perspective In June of 2003, the Milken Institute released an update of its "Best Performing Cities" rankings, which is intended to rank U.S. cities on two counts: leading the nation in economic performance overall and in job creation. The components of the index include job, wage and salary and technology growth. Using these criteria, the Fayetteville -Springdale -Rogers MSA ranked as the number one regional economy in the United States. Top 20 Best Performing Cities Composite Index '_003 Rank Rank fear ago Metro Index 1 23 Fayetteiille-Springdale-Rogers, AR 100.00 ? 3 Las Vegas, NV 4Z 120.00 3 37 Fat Myers -Cape Coral, FL 123.08 4 12 West Palm Beach -Boca Raton. FL 138.77 5 1 San Diego, CA 149.23 6 7 San Luis Obispo-Atascadero, CA 15 L08 7 16 Laredo, TX 180.31 8 9 Brownsville -Harlingen -San Benito, TX 183.38 9 5 Mc-411en-Edinburg-Mission, TX 186.46 10 50 ?Monmouth -Ocean. NJ 186.46 11 48 Anchorage, AK 194.15 12 20 Raleigh -Durham -Chapel Hitt, NC 197.23 13 41 Chico -Paradise, CA 206.46 14 4 Ventura. CA 207.38 15 18 Sacramento, CA 210.46 16 33 Houma, LA 215.08 17 15 Vallejo -Fairfield -Napa, CA 219.08 18 36 San Antonio, TX 223.08 19 28 Washington, DC -MID -VA -WV 226.15 20 11 Riverside -San Bernardino. CA 228.92 So e: %lam rus=:e Unemployment Rate The unemployment rates for the U.S. and for the state of Arkansas have followed the same general trend and the levels have been fairly close.The unemployment rate for the Fayetteville -Springdale - Rogers MSA has consistently been significantly lower than both. It has been at the three percent or under level since the second half of 1998. Unemployment Rates, Seasonally Adjusted 6.5 5.5 0 4.5 Y fo d 3.5 2.5 %N 1.5 oK a e 16 oK 0Z`99 e" 0 O eO�^ 0 Old: eO�ryPA p(DP o'�� i pdQ� m oo U.S. 4Arkansas—FaySpr-Rog MSA Sou=: Bureau of LaEor Stabsibs, Seasonal AEjuat=nt By UA Center for Business am Econome RessanA 56 Non -Farm Emnlovment The monthly establishment -based employment survey conducted by the Bureau of Labor Statistics shows that, on a seasonally adjusted basis, total non -farm employment in both the U.S. and Arkansas are at levels about 105 percent of the level in June of 1998. The Fayetteville -Springdale -Rogers MSA has experienced a noticeably larger increase in employment. Currently, the level is just about 125 percent of the level of June 1998. 1.30 1.20 1.10 1.00 Non -Farm Employment Relative to June 1998 Seasonalty Adjusted r�rrwrrMrr1� rr� rltirrl-� O.on _s p c�0 �M19 00 �9 c�9 � � cp0 00 po `ph cps �1 p� pM1 pM1 nM1 ,pM1 p"� cp9 �9 ,p9 Y a�' U.S. 4Arkansas—FaySpr-Rog MSA Somta: Bureau of L&W StNsurs, Saasonal Adjusunant by UA Carder kr Businasund Emnonl Rasaar 57 Sector Employment Sector employment in the region has shown varying trends. Manufacturing employment has declined since 1998, but by a lesser amount than nationally or in the state. Construction, trade - transportation -utilities and services have shown significant gains in the past six years. 1.5 1.4 1.3 1.2 1.1 1 0.9 Fayetteville -Springdale -Rogers MSA Sector Employment Relative to June 1998, Seasonally Adjusted 90 99 Ay_ Kd',' �•',Na'' � t� Fp P1 cep, QP1 P1�e5P`t' cP�' GPI' P�'�,SP"' �" c�"' P"' �Ff'3` Construction Manufacturing Trade, Transportation, 8 utilities �—Services Soum Bureau of Lauor Slausucs, Seasonal Adpsunent by UA Center fa Business nd Economc Rssaar Bui/dine Permits While there is some monthly volatility in the monthly data compiled by the United States Census Bureau, the strong upward trend in the value of building permits in Northwest Arkansas since the Fall of 1998 is evident. Over the last two years, this growth trend has accelerated. In fact, the value of residential building permits in the area has equaled or exceeded the value of those in the Little Rock metropolitan area, an area that currently has a population almost double that of the Fayetteville -Springdale -Rogers MSA. e0,000 50,000 40,000 30,000 20,000 10,000 Fayetteville -Springdale -Rogers MSA Residential Building Permits, Seasonally Adjusted Value in $ Millions, Source: Bureau of Me Census, Seasonal Adjuelmenl by UA Conk, Or Business and Economic Research 59 Population Proiections In June of 2003, the Center for Business and Economic Research released updated population projections for Arkansas, its counties and its metropolitan areas. The Fayetteville -Springdale - Rogers MSA is projected to experience a doubling of its population by the year 2025. Population Projections for Fayetteville -Springdale -Rogers MSA nsaoo �zs000 6J5000 625000 579M 525000 a a156ro a a25o00 L 37MK) 325000 215000 235000 in" 125000 Year Sounn: V.S. Cen... Bmeu., OA Center far Bus nest M E[onomi. Mun.b �Hawline aaaa*l.uwer Bound ,,,,UpP rBou lld City of ragetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.8 District Map and Legal Description Highway 71 East Square ' a Redevelopment District .. > IAFAYETTE ST . men = 11 l • • .•.• M_ •� = : ; SOLES STh a. N, =Y 88i P ALLEY 3JJ WATSON STO t1�ll O nP �' + I ` 1-DIG(SI II rmen Am a'w-1-R'—. oil f p1 -1IN m i • `': ia �J•Jltii' EALTowsr■ • a ■• � �JJ I NNE Well J. . CENTE,• • +� �I •IN fair • • 'J Y •�.: MWNTMN ST I allIf / a ' ALLEY t a 0 IN ST / 0 ■ Gam•NOJJJ • a • . ioor 0 yV.0�V0 r > •PRMRIE ST— WII • ,< I STH ST.fy W • 1 ' t. . OR prc • 1 //// 8 ' .� ' 1 �. If H — r rff • .. • Ems. MAPLE ST r I • . . .• ., i /W M0O r,•`y ° Ii 2 aI•• iSUTTON ST ON MIND i IN Ittl CENTER ST I 0 I nT i ,.r I •.• 0 yMOUNTMN ST.le 1 I MOUNTMN ST.' 1 f J ' A 'L /P IS MV n3 'a iuTHST a �♦ �,' as . Iamb* • , '♦♦ F sea • '- '� 'TN sr �. ST Legend V BOUNDARY W+E - Building (1998) — Hwy 71 B s o sso t.aos zoos Fast 61 low Highway 71 East Square Redevelopment District A part of the Northwest Quarter (NW'/.) and a part of the Southwest Quarter (SW%) of Section 15, a part of the Northeast Quarter (NEY.) and a part of the Southeast Quarter (SE%) of Section 16, and a part of the Northwest Quarter (NW'/.) of the Northeast Quarter (NEA) of Section 21, all within Township 16 North, Range 30 West, and being more speeftally described as follows! Beginning at the Northwest corner of said Section 15; thence South 87' 17' 27" East 249.668 feet, within the right-of-way of Maple Street; thence South 01' 47' 40' West 20.003 feet; thence South 02` 42' 16" West 174.001 feet; thenco North 87' 17" 32' West 26.0 feet; thence South 02' 43' 09' West 133.515 feet; thence North 85' 27' 59' West 6.224 feet; thence South 02' 42' 49' West 75.089 feet; thence South 87' 10' 49" East 21.222 feet thence North 02' 42' 08" East 86.052 feet; thence South 87' 17' 23' East.42.0 feet thence South 02' 42' 09' West 181.078 feet; thence South C9" 38' 06" East 53.252 feet thence South 02" 42' 31' West 88.117 feet thence South 87' 17' 25" East 6.578 feet; thence South 02' 42' 34" West 118.249 feet; thence North 87' 17' 1g" West 6.405 feet thence South 02" 42' 33' West 178.179 feet thence North 87' 17' 29" West 48.248 feet; thence South 02" 36' 09' West 140.177 feet; thence South 87' 17' 25' East 18.0 feet thence South 02' 42' 21" West 8.749 feet thence South 87' 17' 21" East 66.367 feet; thence South 02' 42' 47' West 250.57 feet; theme South 87' 10' 22" East 588.485 feet within the right-of-way of Dickson Street thence South 02' 47' 49" West 193.929feet thence North 87' 17' 30" West 60 feet; thence South 02" 47' 53" West 60 feet; thence North 87' 12' 10" West 178.5 feet; thence North 02' 47' 24" East 6.8 feet; thence North 87' 12' 11" West 72.75 feet; thence South 02" 47' 49" West 108.121 feet thence North 87" 12' 11" West 135.25 feet; thence North 02" 4T 50' East 63.132 feet thence North 87' 17' 31" West 12.0 feet; thence South 02' 47' 50" West 76.7 feet; thence North 87' 17' 28" West 57.931 feet; thence South 02' 47' 60" West 217.289 feet; thence South 27' 30' 47' West 23.922 feet; thence South 02' 42' 33" West 170.585 feet; thence North 87' 17' 24' West 50.0 feet; thence South 02" 52' 40' West 163.672 feet thence South 87' 17' 27' East 64.825 feet; thence South 02' 42' 33' West 150.0 feet; thence North 87' 11' 17' West 11.476 feet thence South 02' 42' 48' West 448.801 feet thence South 40' 00' 30' East 36.293 feet; thence South 02' 43' 58" West 419.838 feet, within the right-of-way of Washington Avenue; thence North 87' 10' 22' West 209.244 feet; within the right-of-way of Rock Street; thence South 02' 43' 58" West 546.724 feet within an alley; thence North 87' 10' 2T West 210.365 feet, within the right-of-way of South Street; thence South 02' 43' 57" West 66.685 feet within the right-of-way of College Avenue; thence North 87' 10' 22" West 518.504 feet, within the right-of-way of South Street; thence South 02' 43' 58" West 353.905 feet, within the right-of-way of East Avenue; thence North 87" 10' 22" West 266.896 feet, within the right-of-way of Fourth Street; thence South 02' 43' 58" West 336.999 feet, within the right- of-way of Block Avenue; thence North 87' 10' 16- West 762.561 feet; thence South 02' 43' 58" West 983.02 feet, within the rightof-way of Locust Avenue; thence North 87' 00' 49' West 312.479 feet thence North 46' 44' 23' West 92.814 feet; thence North 87' 00' 48' Wesl 306.778 feet thence South 02' 54' 17' West 40.0 feet; thence South 73' 33' 26' East 16.52 feet; thence South 02' 02' 57" West 27.743 feet; thence North 71' 09' 03' West 403.805 feet; thence North 02' 49' 30" East 106.181 feet; thence South 82" 59' 29' West 25.111 feet; thence North 02" 49' 31" Fast 118.176 feat; thence North 80' 4S 3r East 39.444 feet thence North 74" 49 51" East 31.257 feet thence North 02" 09 42" East 195.911 feet; thence North 85" 34' 21" West 57.073 feet; thence North 00' 24' 18" East 106.401 feet; thence South 87' 10' 22" East 370.524 feet, within the right-of-way of Sbdh Street; thence North 02' 44' 00' East 52.635 feet; thence North 01' 46' 36' East 62.183 feet; thence North 06' 19' 32" West 48.42 fact; thonco North 10' 47' 29" West 37.114 feet; thence North 14' 03' 53" West 218.89 feet; thence North 02" 26' 34' Fast 76.273 feet; thence North 09' 56' 28" West 61.522 feet; thence North 14' 03' 08" West 181.254 feel; thence South 86' 57' 21" East 122.451 feel; thence South 66" 13' 30" East 64.306 feet thence South Sr 10' 16' East 323.255 feet; thence North 02" 43' 59" East 149.989 feel, within the right-of-way of School Avenue; thence South 87' 10' 15' East 350.602 feet thence North 02" 43' 52' East 5.751 feet thence South 86' 50' 33" East 227.568 feet thence South 02' 41' 24" West 54.443 feet; thence South 87' 10' 16" East 160.561 feet thence North 02' 41' 25' East 2228.846 feet within the right-of-way of Church Avenue; thence South 87' 10' 23" East 642.95 feet, within the right-of-way of Spring Street; thence North 02' 43' 68" East 608.315 feet, within the right-of-way of East Avenue; thence South 87" 10' 21' East 170.883 feet within the right-of-way of Dickson Street thence North 02' 44' 13" East 1333.608 feet, within the right-of-way of Highland Avenue; thence South 87' 02' 57" East 347.732 feet, within the right- of-way of Maple Street to the Point of Beginning and containing 144.467 acres, more or less. 63 City of rayetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.9 Existing Conditions of Blight loa City Of Faycltcvillc, Arkansas HIGHBI'A171 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN City of Fayetteville, ArLansaa HIGHII'AI71 EAST SQEARE REDEVELOPMENT DISTRICT PROJECT PLAN 4QI., 14?P*. � , 1. 6-• 200igo-ram °Tr..f�• .f City of Faycttc illc, Arkan as HICHWAV 71 EAST SQI ARE REDEVELOPMENT DISTRI(U PROJECT PLAN 7"Nal 11w __ - •.� S 1 ilk, if; � � � , I ��� k .� City of Fayetteville, Ar6nsas IIIGHWAN 71 EAST SQI-ARE REDEVELOPMENT DISTRICT P RO.I E. CT PLA\ meg City of rayetteville, ArLansas HIGHWAY 71 EAST SQUARE REDEVELOPMENT DISTRICT PROJECT PLAN EXHIBIT No.10 Downtown Master Plan FAYETTEVILLE CITY COUNCIL MEETING 4 dAIA6#A�4A 9�c0. sl(.(o3 STATUS REPORT HIGHWAY 71 EAST SQUARE RE -DEVELOPMENT PROJECT 9-28-2004 After considerable discussion, city administrative and legal staff and the developers of record are in agreement that public involvement in the first phase of this important project will be limited to the removal of the Mountain Inn and adjoining structures. This limited use of public funds generated through the Tax Increment Financing Mechanism TIF follows the clear intent of the blight removal focus of the state enabling legislation. As of this date, the city has completed the following tasks as identified in 14-168-306 Project Plan -Approval 1. A list of public improvements proposed for the TIF District 2. An economic feasibility study has been completed and is under review 3. A map showing existing uses and conditions of real property in the district 4. Certification by the county Tax Assessor of the base value, total ad valorem rate, debt service ad valorem rate and applicable ad valorem rate for the redevelopment district In order to continue to progress on this project, the following items are necessary: 1. A detailed list of estimated project costs 2. A description of the methods of financing all estimated project costs, including the issuance of tax increment bonds and the time when the costs or monetary obligations related thereto are to be incurred. 3. Receipt of a letter detailing the financing conditions for the hotel/condo project. City staff has tentatively scheduled the public hearing as required by statute. However, prior to affirming the schedule, we must have in hand the items as listed. The public hearing is currently scheduled for October 19, 2004. However, both the developers and the staff are in agreement that the project plan must clearly address all of the conditions mandated in the enabling legislation. In sum, it will not be released until the concerns of all parties are satisfied.