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APPROPRIATION COMMITTEE 2' REPORT TO THE NOVEMBER 2012 STM Table 2: Expected incremental revenues under various scenarios Qualitative Analvsis It is impossible to predict with certainty when Ledgemont 3 will be developed. Even if the TIF agreement is approved, Vistaprint remains in negotiations with another property owner in another community and may find that the difference in lease rates for existing property relative to the lease rate for new construction at Ledgemont 3 is too large to warrant expansion in Lexington. Similarly, it is impossible to know when Hobbs Brook may choose to develop the site in the absence of Vistaprint's desire to expand. Nonetheless, the location is highly desirable and was acquired by Hobbs Brook with the knowledge that Vistaprint was looking for expansion space elsewhere. We believe that scenario 3 (a 2 -year delay without the TIF) is possible and that scenario 4 (a 3 -year delay without the TIF) is reasonably likely. As a result, we view the revenue associated with scenario 4 to be the minimum expected by the Town with respect to any TIF to be granted. The proposed TIF agreement satisfies that limit and provides a slightly better return when calculated as a net present value. Should Vistaprint choose to relocate to another community at the end of its current lease in 2017, as assumed in scenario 5, there is a risk that the current property at 95 Hayden Avenue may remain vacant for an extended period of time. While this will have limited short-term effect on the property's assessment, it may serve to reduce the region's occupancy rate and may reduce the roughly $1,000,000 in local commercial spending associated with Vistaprint's employees and its domestic and international visitors. This spending on local hotels, restaurants, and services improves the local economy and contributes to local meal and hotel occupancy tax receipts for the town. Given the desirability of the property, we see a protracted vacancy as a relatively low- probability event and discount its broad effects. We do, however, see a greater potential for a new tenant to have a more conventional mix of personal property and for those revenues to be cut in half to about $75,000 per year. Incremental benefit in million $$ Scenarios for development of Ledgemont 3 Property Tax Additional net Total benefit 1) TIF is turned down, but Vistaprint stays with construction and occupancy $ 9.53 $ 0.66 $ 10.19 proceeding on the proposed schedule. 2) TIF is approved, construction and occupancy proceed on the proposed $ 8.32 $ 0.66 $ 8.98 schedule. 3) TIF is turned down, Hobbs Brook proceeds with a longer construction $ 8.95 $ 0.42 $ 9.36 schedule, occupancy is delayed by 2 years. 4) TIF is turned down, Hobbs Brook proceeds with a longer construction $ 8,31 $ 0.50 $8.81 schedule, occupancy is delayed by 3 years. 5) TIF is turned down, Vistaprint leaves and $ 0 ($ 0.55) ($ 0.55) no new construction occurs on the site. Table 2: Expected incremental revenues under various scenarios Qualitative Analvsis It is impossible to predict with certainty when Ledgemont 3 will be developed. Even if the TIF agreement is approved, Vistaprint remains in negotiations with another property owner in another community and may find that the difference in lease rates for existing property relative to the lease rate for new construction at Ledgemont 3 is too large to warrant expansion in Lexington. Similarly, it is impossible to know when Hobbs Brook may choose to develop the site in the absence of Vistaprint's desire to expand. Nonetheless, the location is highly desirable and was acquired by Hobbs Brook with the knowledge that Vistaprint was looking for expansion space elsewhere. We believe that scenario 3 (a 2 -year delay without the TIF) is possible and that scenario 4 (a 3 -year delay without the TIF) is reasonably likely. As a result, we view the revenue associated with scenario 4 to be the minimum expected by the Town with respect to any TIF to be granted. The proposed TIF agreement satisfies that limit and provides a slightly better return when calculated as a net present value. Should Vistaprint choose to relocate to another community at the end of its current lease in 2017, as assumed in scenario 5, there is a risk that the current property at 95 Hayden Avenue may remain vacant for an extended period of time. While this will have limited short-term effect on the property's assessment, it may serve to reduce the region's occupancy rate and may reduce the roughly $1,000,000 in local commercial spending associated with Vistaprint's employees and its domestic and international visitors. This spending on local hotels, restaurants, and services improves the local economy and contributes to local meal and hotel occupancy tax receipts for the town. Given the desirability of the property, we see a protracted vacancy as a relatively low- probability event and discount its broad effects. We do, however, see a greater potential for a new tenant to have a more conventional mix of personal property and for those revenues to be cut in half to about $75,000 per year.