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we know a lot of other jurisdictions do a lot of other incentives. We don't want to go chasing <br /> after companies that aren't loyal to South Bend,but we do want to make sure companies loyal to <br /> South Bend retain their competitive edge especially if they are in a highly competitive trading <br /> sector. There are a number of policy goals that we may want to incentivize with public <br /> expenditures. <br /> Mr. Mueller continued, We've been asked what happens with a five (5)year one hundred percent <br /> (100%)tax abatement versus the ten(10) year straight line. In a hypothetical $10 million <br /> investment, the five (5) year one hundred percent(100%)would abate $800,000 and produce <br /> $800,000 paid. The straight-line abatement would abate $880,000 and produce $720,000 paid. <br /> For simplicities sake, we didn't add depreciation to the asset. If that was added, these would be <br /> roughly equal in value. The other question is why someone would want a more aggressive <br /> abatement. Answered simply is the time value of money. When banks look at financing,they're <br /> wanting to see the return on investment so they discount future dollars. It is more valuable to the <br /> developer when you have it moved forward in time. He then showed another example in the <br /> presentation of the difference between the two types of abatements. He went on, We can't <br /> guarantee the assessments. If we get involved in a project, often times we've wanted to spend <br /> TIF dollars early. However if we invest TIF dollars and somehow the project gets hung up or it <br /> fails,then we've sunk our money into it and the project is just sitting there. Then we are left with <br /> the choice of investing more to get it going or tearing it down. The abatement, however, is only <br /> in effect if the project is complete, so that is another advantage of abatements over TIF funds. <br /> We've shifted our focus of TIF expenditures on different public goods while simultaneously <br /> looking at a better use of tax abatements. He then referenced the presentation which highlighted <br /> a few local examples of projects that have utilized this strategy. <br /> Committee Chair Ferlic left the meeting at 4:17 p.m. Committee Vice Chair Randy Kelly <br /> presided over the remainder of the meeting. <br /> Committee Vice Chair Kelly opened the floor to questions from the Committee and <br /> Councilmembers. <br /> Committeemember Paul Tipps asked, Why would your development community opt for anything <br /> but the money up front? Especially since the net present value is greater in that scenario. <br /> Mr. Mueller replied, It depends. On projects we are trying to get a significant incentive, you're <br /> more likely to see one hundred percent(100%). There will be less than one hundred percent <br /> (100%) but it all depends on the needs of the developer. <br /> Councilmember Dr. David Varner asked, Are there any projects you went over in the <br /> presentation that is in a TIF District? <br /> Mr. Muller replied, I'm pretty sure all of the projects I went over were in TIF Districts. <br /> Councilmember Dr. Varner followed up, I think there ought to be guidelines that are dependent <br /> on project size so it prevents everyone walking in with the one hundred percent(100%)request. <br /> i <br /> 3 <br />