PROJECT FINANCIAL ANALYSIS:

1

• PROJECT FINANCIAL ANALYSIS
• DO THEY REALLY NEED MY MONEY?
• Phil Gonot
• PMG Associates, Inc,

2
GETTING STARTED

• Establish Rules
• Know what you want to achieve
• Set limits
• Be dispassionate
• Remember all of the partners
• CRA
• City
• Local Economy

3
PROJECT FINANCIAL ANALYSIS

• Evaluate revenue for the CRA
• TIF
• Measure revenue to the municipality
• Franchise Fees, Utility Taxes, other sources
• Identify benefits to the local economy
• Employment, wages, Economic Throughput

4
TIF

• Incremental Value of Project
• Look at Present Value
• Consider return for CRA as well as Developer

5
METHODS

• Property Appraiser
• Case Histories
• Evaluate Project Cost
• Discount Rate based on Cost of Money

6
CITY IMPACT

• Other Revenue
• Franchise Fees
• Utility Taxes
• Communications Service Tax
• User Fees
• State Shared Revenue
• Reduce Expenses
• Reduce service expenditures

7
METHODS

• Budget History
• Pro Forma from Developers
• Estimate Reasonable Usage by tenants/owners
• Survey other businesses in area

8
LOCAL ECONOMY

• Employment Generated
• Wages
• Economic Throughput
• Retail Sales
• Other Spending
• Spin-off

9
METHODS

• National Sources
• Claritas
• ESRI
• ULI
• Local Conditions
• Local Organizations
• TDC
• Economic Development Organizations

10
RETURN AND GAP

• What should the developer earn as a profit?
• How much incentive does it take to earn this
  profit?

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RATE OF RETURN

• Developer should obtain Normal Profit
• Profit based on Risk and Reward
• Developer should take on some risk
• Identify Gap
• Reasons for shortfall in revenue

12
ACCEPTABLE REASONS FOR GAP

• Unable to obtain Market Rates for product
• Site problems
• Transitional area
• City/CRA requests for additional infrastructure
  or improvements

13
BOTTOM LINE

• You want the developer to make money
• You want economic activity
• You will ALWAYS get the threat that We will
  leave town if we dont get the incentive
• Incentives only work if they level the playing
  field
• You need to receive benefit as well

14

• SOOOOOO..

15

• Do they really need my money?
• Sometimes

16

• Do they really want my money?
• Oh yes!

17

• Will they try very hard to get it?
• YES

18
REMEMBER

• Its supposed to be a partnership