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HomeMy WebLinkAbout2007-10-10-AC-rpt APPROPRIATION COMMITTEE TOWN OF LEXINGTON REPORT TO THE 2007 SPECIAL TOWN MEETING October 10, 2007 Released October 9, 2007 Appropriation Committee Members—Fiscal Year 2008 Alan M. Levine Chair• Rodney E. Cole Vice-Chair• John Bartenstein Secretary Robert N. Addelson(ex-officio:non-voting) • Deborah Brown • Richard Eurich Pam Hoffman • Michael J. Kennealy • Susan McLeish • Eric Michelson 1 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM Summary of Warrant Article Recommendations 2007 Special Town Meeting (STM) Abbreviations. GF = General Fund EF = Enterprise Fund Ar Funds Funding Committee tide Title Requested Source Recommendation STM, October 10, 2007 at 7 30 PM Approve TIE Agreement(s) None n/a Approve 3 Amend FY 2008 Operating Budget See Text GF Approve 4 Amend FY 2008 Enterprise Fund See Text EF Approve Budgets 5 Municipal Electric Utilities None n/a Approve Resolution Page 2 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM Contents Summary of Warrant Article Reconmiendations. Warrant Article Analysis and Reconmiendations. 4 Article 2: Approve TIF Agreement(sl 4 Article 1. Amend FY2007 Operating Budget 8 Article 4 Amend FY2007 Enterprise Funds Budgets 9 Article 5: Municipal Electric Utilities Resolution. 11 Appendix A. Schedule for mitigation payments totaling$3.1 million 12 Appendix B: Demonstration of various revenue scenarios for parcels 200, 100,and 400. 13 Page 1 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM Warrant Article Analysis and Recommendations Article 2. Approve TIF Funds Funding Committee Agreement(s) Requested Source Recommendation None n/a Approve (9-0) Background Following its acquisition by new owners,Patriot Partners, about four years ago, the property which formerly housed Raytheon Corp. in Lexington became known as Lexington Technology Park. At the 2004 Annual Town Meeting,per request of Patriot Partners, the property zoning was changed to increase the allowed floor space and to permit biotechnology as well as office uses. Although the zoning now allows up to 631,600 sq. ft. of gross floor area, only a much smaller area is rented, and there are only three buildings on site (at 125 Spring St. 300 Patriot Way and 500 Patriot Way) even though there is room for and allowance under the new zoning for two additional buildings(at 200 and 400 Patriot Way). Only the buildings at 125 Spring St. and 500 Patriot Way are presently leased; the building at 300 Patriot Way is vacant. Shire Human Genetic Therapies, a unit of a global company is a biotechnology/pharmaceutical firm with operations in Cambridge that approached the Town earlier this year to discuss the possible relocation of its Cambridge office and lab space to Lexington Technology Park and, in particular, development of a manufacturing facility and additional lab/office space at the site. Shire has since occupied the building at 125 Spring St. by taking over the lease of another biotech company which vacated the building before its lease was up, and plans to lease and renovate the presently vacant building at 300 Patriot Way for lab and office use. Shire also proposes to construct new buildings at both 200 and 400 Patriot Way to house the manufacturing and additional lab and office space. Shire has requested that the Town agree to a Tax Increment Financing(TIF) arrangement that would provide then with a reduction in their property tax obligation(technically an obligation of the property owners but would effectively be an obligation of Shire) on the new construction only and allow then to qualify for an additional State investment tax credit benefit. Shire is also seeking additional State incentives, some recently proposed by the Governor. A team representing the Town(the Town Manager, the Assistant Town Manager for Finance,Lexington s Economic Development Officer, and Town Counsel) and representatives of Shire HGT have negotiated an agreement on a TIF schedule and terms. The purpose of this Article is to seek Town Meeting approval of the proposed agreement. The draft agreements and other pertinent information may be found on the Town s website at httn://ci.lexineton.mi.us/townmeetine/stm10 10 07documents.htm Basic description of the TIE agreement with Shire The TIF agreement consists of two parts. one for general lab and office space buildings at 200 and 300 Patriot Way and one for a manufacturing facility at 400 Patriot Way For the 200 and 300 Patriot Way buildings, the FY 2008 assessed value of the land and the currently existing 300 Patriot Way building is taken to be the initial base value;no building is currently standing at 200 Patriot Way The base value will be increased each year by a percentage equal to the percentage increase in the total assessed value of commercial and industrial property in Lexington. However, if the total commercial/industrial value decreases, the base value will remain unchanged. The TIF applies to these properties over the 20-year Page 4 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM interval of FY 2009 through FY 2028. In each of these fiscal years, the property tax would be reduced by a percentage given in a table in the agreement applied to the incremental assessed value that is defined as the actual assessed value of the property less the current base value. For the parcel containing the yet-to- be constructed building at 400 Patriot Way the initial base value would be the assessed value of the land in FY 2009 and the schedule would cover the 19-year interval of FY 2010 through FY 2028. The agreement details certain conditions to the Town s granting of the tax exemption. These include commitments from Shire to: • create a minimum of 600 permanent full-time jobs • make a minimum of$300 million in capital improvements on the site • contribute $250,000 to the Cary Memorial Library Foundation • contribute $150,000 to the Town("for a use recommended by the Board of Selectmen ) • pay$2.6 million to the Town for infrastructure improvements (subject to the Town s obligation to seek State grants for such projects, Shire s $2.6 million obligation will be reduced by any amounts the Town receives from the State) Additionally the agreement is conditioned on a contribution to the Town from Patriot Partners of $100,000. Appendix A details the expected pay-out schedule for the mitigation payments described above (which total$3.1 million). Our analysis is predicated on Shire developing all three of the 200, 300 and 400 parcels as outlined in the TIF agreements. We are seeking clarification that the $3.1 million mitigation payments must be paid in full even if Shire chooses to proceed with only the 200/300 parcels or only the 400 parcel. Analysis In our analysis, we examine the financial benefits to the town(from property taxes and the potential$3.1 million in mitigation payments)under various scenarios/assumptions to answer the question Is the Town likely to be better off financially if it approves the TIF agreement or if it votes it down?' For all scenarios, we compute FY2009 net present values assuming a 4% or 5% deflator consistent with the recent history of implicit price deflators for state and local government services. The scenarios, illustrated in detail in Appendix B, differ according to two main variables. • Time to build-out, and • Magnitude of tax revenues(tax revenues are a function of both assessed values and property tax rates). Since the parcels relevant to the TIF agreement are those at 200, 300, and 400 Patriot Way these are the only parcels considered in this analysis. The parcels at 125 Spring St. and 500 Patriot Way are currently occupied(by Shire and CBSET respectively) and are outside the scope of the TIF agreement. The scenarios can be described as follows. 1) TIF is approved,and Shire follows projected build-out. Four scenarios that each includes both tax revenues and the $3.1 million in mitigation payments stipulated in the TIF agreement: a) The tax revenue follows the model presented by the Town Manager and the Assistant Town Manager, Page 5 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM b) The tax revenue equals that in(a) +20% This illustrates the impact of higher tax revenues, c) The tax revenue equals that in(a) 20% This illustrates the impact of lower tax revenues, d) The tax revenue equals that in(a) 40% This illustrates the impact of even lower tax revenues. 2) TIF is turned down, but Shire follows projected build-out anyway Four scenarios, as described above,but the tax revenues to be received by the Town are not diminished by a TIF and there are no mitigation payments. 3) TIF is turned down; after a one-year delay another tenant comes forward without a TIF and executes a build-out plan similar to Shire s full build-out plan. Four scenarios present the impact of a one-year delay on the build-out schedule and thereby on tax revenues, assume that no mitigation payments would be received,but otherwise follow the assumptions described under(1). 4) TIF is turned down; after a two-year delay another tenant comes forward without a TIF and executes a build-out plan similar to Shire s full build-out plan. The four scenarios are like those in(3) except that a two-year delay is assumed. 5) TIF is turned down; after a four-year delay another tenant comes forward without a TIF and executes a build-out plan similar to Shire s full build-out plan. The four scenarios are like those in(3) except that a four-year delay is assumed. 6) TIF is turned down; no other tenant comes forward to build out parcels 200 and 400.The four scenarios adopt the assumptions in(1) above regarding the building at 300 Patriot Way but do NOT include any new tax revenue from buildings at 200 and 400 Patriot Way No mitigation payments are assumed. The bottom lines of these scenarios are summarized in the matrix below where we show FY 2009 net present values (computed using a 5% deflator) of the totals of property tax and mitigation revenues (in millions of dollars) the Town night receive during the 20-year period FY09—FY28 for the 200, 300, and 400 parcels at Lexington Technology Park. We emphasize that these figures are intended to show the relative impacts of the various scenarios on Town revenues using reasonable assumptions in regard to tax rates and property values. Given that actual property values and their changes over a 20-year period are highly uncertain, one should NOT regard these numbers as projections. Scenarios for NPV @ 50/0, in million $$ development of parcels 200, 300 & 400 I a) 1000/0 b) 1200/0 c) 800/0 d) 600/0 1) Now, w/TIF II $30.79 II $36.40 $25.17 $19 55 2) Now, no TIF $33 65 $40.38 $26 92 $20 19 3) 1 yr delay no TIF $32.45 $38.94 $25 96 $19 47 I 4) 2 yr delay, no TIF $30 92 $37 11 $24 74 $18 55 5) 4 yr delay no TIF $28 11 $33.73 $22.49 $17 03 I 6) 300 only, no TIF $16 10 $19 32 $12.88 $9 66 I The numbers in row(1)represent the scenarios that night follow if the TIF is approved under Article 2 while the numbers in the other rows represent other possible outcomes. The numbers in row(2) are higher Page 6 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM than the corresponding numbers in row(1). Thus we conclude, as one would expect, that if the TIF agreement is not approved but Shire nonetheless proceeds with its full plan, the Town is better off than if the TIF is approved. Sinnlarly three of four numbers in row(3)and two of four numbers in row(4) are higher than their counterparts in row(1). On the other hand, the numbers in rows(5) and(6) are all lower than the corresponding numbers in row(1). It has been argued that a tax reduction of some $5M to$SM represents less than 1% of the expenses that Shire will likely incur in implementing its stated plans over the next 20 years if the project goes forward, and therefore the magnitude of the TIF is rather unlikely to be a significant factor in Shire s determination of the location of the manufacturing facility and additional lab/office space. If this is true, then Shire might be expected to locate the facility in Lexington if the TIF agreement was less favorable to them and possibly even if no agreement is approved by Town Meeting(though one should not forget that approximately$5M in additional investment tax credits from the State will only be available to Shire if a TIF agreement is approved). If Shire s decision, in fact, does hinge upon Town Meeting s approval of the TIF but the TIF is not approved, then one needs to compare the numbers in row(1) with those in rows(3) through(6). If another tenant that wishes to fully develop the 200 and 400 Patriot Way parcels emerges in only one year(see row (3)), the Town scores a win IF the forthcoming development is comparable in assessed value to the kind of development envisioned by Shire. If the new tenant only develops office space, for instance, the property s values will not yield as much revenue as a Shire-like development; this is illustrated by comparing, e.g. the $30.79M in Scenario(la) and the $19 47M in Scenario(3d). If the wait for a new tenant is two years, it s a wash with a comparable tenant and a loss for a (similarly sized) office space use. If the wait is longer than about two years, the net revenue will be less than under the current proposal. The worst case among those we have considered is one where parcels 200 and 400 are never developed (see row(6)). The results demonstrate a substantial loss for the town relative to that in row(1). It is worth noting that these conclusions are independent of assumptions on future tax rates. Future tax rates only affect the magnitude of the differences between scenarios,not which scenario will net the Town the most revenue. The TIF agreement before Town Meeting presents an opportunity for a significant increase in property tax revenue. If the agreement is revised to be more favorable to the Town or if no agreement is reached, and Shire, counter to statements made to date by its representatives,nonetheless proceeds to build buildings at 200 and 400 Patriot Way the Town would receive an increase in net revenue that could be as much as 10% larger than that to be received under the Shire/TIF plan. However, if the TIF is not approved and Shire does not develop the 200 and 400 parcels, then, it is highly uncertain as to how and when these parcels will be developed. If this takes many years, then the new revenue could be as low as 50% of that to be received under the full Shire/TIF plan.We cannot estimate the chances that Shire will proceed with a development of the 200 and 400 parcels even if the present agreement is not approved,nor can we estimate the prospects that other companies will want to build there in the next few years or whether they'll build lab/manufacturing space (which is assessed at a higher value than office space); the chances could be good if the commercial real estate market continues to tighten and remains tight for a while, or they could be poor especially if the commercial real estate market weakens within the next couple of years. It has been a long time since a new office/lab/manufacturing building of comparable size has been built in Lexington. In short, if the TIF agreement before Town Meeting is not approved we put much of the potential revenue increase at risk in order to modestly increase that potential. We do not believe that the risk is worthwhile, and therefore we unanimously recommend approval of the agreement as it currently stands. Page 7 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM The Appropriation Committee unanimously supports this Article. Article 3• Amend FY2007 Funds Funding Committee Operating Budget Requested Source Recommendation See Text GF Approve(9-0) This Article seeks amendments to the FY2008 Operating Budget(Article 21) approved at the 2007 Annual Town Meeting. The amendments are necessary to account for(1) additional revenue which was not anticipated at the time of Town Meeting or which, although known, was inadvertently not presented to Town Meeting for appropriation and(2) additional unanticipated FY2008 expenses. Revenue Adjustments Overlav Surplus Each year the Town s budget allocates a certain amount of funds to what are described as Revenue Offsets, to meet anticipated expenditures of the Town. Included in these funds are suns for the Board of Assessors Overlay Account, to be used to meet real estate tax abatements or exemptions which will be granted with respect to that fiscal year. The process involved in determining whether abatements or exemptions will be granted can extend over a period of years, involving proceedings before the Board of Assessors and, sometimes, appeals to the State Appellate Tax Board. Whenever an abatement or exemption is granted, the Overlay Account for the involved fiscal years is appropriately charged. At some point, the Board of Assessors may determine that the amount remaining in a particular fiscal year s Overlay Account is more than sufficient to meet remaining potential obligations. When that determination is made, the Board of Assessors acts to release the surplus funds to the Town. Those funds are then available to the Town as revenue, and are part of the calculations used in setting the tax rate for the fiscal year in which they are released. Prior to the 2007 Annual Town Meeting, the Board of Assessors voted to release a combined surplus totaling$100,000 from the FY2000, 2001 and 2002 Overlay Accounts. Although the funds have actually been released to the Town, they must still be appropriated for FY2008 for purposes of tax rate setting. They were inadvertently overlooked, and thus not appropriated, at the time of Town Meeting, and adoption of this Article will correct that oversight. State Aid The amount of State Aid anticipated in the FY2008 Operating Budget presented to Town Meeting was$8,994 407 It turns out,happily that the total amount the Town will receive is $9,064,275, an increase of$69,868. Adoption of this Article will result in the Operating Budget correctly reflecting the total amount of State Aid. Expense Adjustments Town Clerk Personal Services &Expenses Subsequent to Town Meeting, Sen. Robert Bayern announced his retirement from the State Senate. His resignation will require the holding of two elections (primary and general),not anticipated at the time of the Annual Town Meeting, to elect his successor. It is estimated that these elections will Page 8 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM increase FY2008 expenses by$50,000. Adoption of this Article will appropriate that sum to line item 8500(Town Clerk), split equally between Personal Services and Expenses. Reserve Fund The $50,000 appropriation to line item 8500 leaves$19,868 remaining from the increased amount of State Aid. That amount is to be appropriated to line item 2310, the Reserve Fund, a contingency fund available to respond to extraordinary and unforeseen expenditures. This appropriation will increase the Reserve Fund, transfers from which are authorized by the Appropriation Committee, to$469,868. The Appropriation Committee unanimously supports this Article. Article 4 Amend FY2007 Funds Funding Committee Enterprise Funds Requested Source Recommendation Budgets See Text EF Approve(9-0) This article proposes several minor housekeeping adjustments to the appropriations made for the water and sewer enterprise funds at the Annual Town Meeting last spring. Adjustment to Reflect Final MWRA Charges In January of each calendar year, the Massachusetts Water Resources Authority(MWRA)provides its member towns with a preliminary estimate of their water and sewer assessments for the upcoming fiscal year The Town uses these preliminary assessment figures to establish the MWRA component of the water and sewer enterprise fund appropriations at the annual town meeting. In June of each year the MWRA completes its budget process and issues final assessments to its member towns. The final assessments are typically less than the preliminary estimates. When water and sewer rate-setting takes place in the late summer or early fall, the Town s practice has been to set rates in an amount projected to be sufficient to cover the actual, final MWRA assessments, as well as the other direct and indirect costs of the water and sewer enterprises. In effect, therefore, the Town raises in the rates and pays to the MWRA each year an amount that is somewhat less than the amount originally appropriated at the annual town meeting. The proposed adjustments will reduce the original appropriations made for the MWRA component of the FY2008 water and sewer enterprise budgets at last spring s Annual Town Meeting to reflect the actual, final assessments. The amounts appropriated at this year s annual town meeting for MWRA water and sewer charges and the actual, final assessments for FY07 are as follows. Appropriated Final Assessment Change Water $4,435,739 $4,117,775 $(317,964) Sewer $6,197,216 $5,630,863 $(566,353) Adjustments for Debt Costs Following this year s Annual Town Meeting, it was determined that modest additions would be required to the amounts originally appropriated for the costs of debt service (interest and issuance costs) for water and sewer enterprise fund capital projects, including the fund's share of the new Public Works Facility To cover those costs, adjustments to the original appropriations for debt costs Page 9 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM are proposed in the amounts set forth below The revised debt service costs will be taken into account when the FY08 water and sewer rates are set by the Board of Selectmen this fall. Orig. Approp. Rev'd Approp. Change Water $490,833 $504,246 $13,413 I Sewer $473,256 $482,424 $ 9,168 Adjustments to Reserve Funds Under the state statute governing enterprise funds, G.L. c.44, § 53F112, accumulated surpluses resulting from the operations of an enterprise fund, referred to as retained earnings or the reserve fund, may be used either tor capital expenditures of the enterprise, subject to appropriation, or to reduce user charges. For purposes of this fall's water and sewer rate-setting, the Town Manager has proposed to the Board of Selectmen(acting in its capacity as Water and Sewer Commissioners) the use of$362,570 in water enterprise retained earnings to mitigate the FY08 water rates. The effect would be to lower the projected reserves from the current amount of about$2.5 million to a little over$2 million. With this draw on retained earnings(down from$500,000 applied last year),no increase in the water rates will be required this year Last year, the Town Manager proposed, and the Board of Selectmen approved, the setting of sewer rates somewhat higher than was projected to be necessary to meet costs in order to augment the sewer enterprise fund retained earnings, which were then considered inadequate at about$450,000. This year due to favorable operating results and a significant non-recurring increase in cash resulting from a lien program that increased collections, the retained earnings in the sewer fund increased by nearly $1 7 million to a total of over$2 million, an amount now considered to be adequate. Accordingly the Town Manager has proposed to the Board of Selectmen that they neither add to,nor draw from, reserves when setting the FY08 sewer rates. Even without a draw on retained earnings, no increase in the sewer rates will be required this year. Data provided to the Board of Selectmen in connection with this year s rate-setting indicates that the Town s ability to forecast water usage, and thereby to anticipate revenues and reserve levels, has improved substantially Following up on a recommendation of the Water and Sewer Rate Study Committee, the town staff plans to develop a policy that defines the appropriate level of retained earnings to be maintained for emergency purposes for both funds. The policy would provide that any amounts in excess of those levels be used to mitigate future rate increases or finance capital projects. In order to reconcile the FY2008 enterprise fund appropriations for tax-rate-setting purposes, and to promote transparency in the setting of the water and sewer enterprise fund budgets, the Special Town Meeting will be asked to appropriate $362,570 from the water enterprise fund retained earnings in order to mitigate FY2008 water rates. The projected changes in water and sewer retained earnings(if the usage and other assumptions employed to set the rates are borne out) are as follows. 6/30/06 6/30/07(est.) Change Projected 6/30/08 I Water $2,090,334 $2,496,655 $(362,570) $2,134,085 I Sewer $ 447 441 $2,137,540 $0 $2,137,540 I Total $2,537 775 $4,634 195 $(362,570) $4,271,625 The Committee unanimously supports this article. Page 10 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM Article 5 Municipal Funds Funding Committee Electric Utilities Requested Source Recommendation Resolution None n/a Approve (9-0) In light of the escalating costs of energy the potential for rate savings to both the Town and to its residents from the establishment of a municipal electric company cannot be ignored. Existing laws, which govern the transfer of the infrastructure of local power distribution, make the establishment of such a company infeasible. We support this resolution which calls for the removal at the State level of the barriers to the establishment of a local municipal electric company If this enabling legislation should pass, then the Town would have the opportunity to undertake the arduous task of analyzing the cost and benefits of the establishment of a 'muni for Lexington. The Committee unanimously supports this article. Page 11 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM Appendix A. Schedule for mitigation payments totaling $3.1 million The table below shows the tinting of the mitigation payments that we use to compute net present values. The timing of the first three columns are more or less specified in the draft agreement,but the State/Shire obligation is only specified in terms of a FY 2012 deadline. Shire to Shire to Patriot Cary Library Town Partners State/Shire Totals (terms of (terms of (terms of obligation agreement) agreement) agreement) FY09 $50,000 $30,000 $10,000 $600,000 $690,000 FY10 $0 $0 $10,000 $700,000 $710,000 FY11 $50,000 $30,000 $10,000 $700,000 $790,000 FY12 $0 $0 $10,000 $600,000 $610,000 FY13 $50,000 $30,000 $10,000 $0 $90,000 FY14 $0 $0 $10,000 $0 $10,000 FY15 $50,000 $30,000 $10,000 $0 $90,000 FY16 $0 $0 $10,000 $0 $10,000 FY17 $50,000 $30,000 $10,000 $0 $90,000 FY18 $0 $0 $10,000 $0 $10,000 FY19 $0 $0 $0 $0 $0 FY20 $0 $0 $0 $0 $0 FY21 $0 $0 $0 $0 $0 FY22 $0 $0 $0 $0 $0 FY23 $0 $0 $0 $0 $0 FY24 $0 $0 $0 $0 $0 FY25 $0 $0 $0 $0 $0 FY26 $0 $0 $0 $0 $0 FY27 $0 $0 $0 $0 $0 FY28 $0 $0 $0 $0 $0 TOTAL $250,000 6150,000 $100,000 $2,600,000 $3,100,000 NPV 4% $206,748 $124,049 $81,109 $2,359,292 $2,771,199 NPV 5°t° $197,752 $118,651 $77,217 $2,304,657 $2,698,277 Page 12 of 18 APPROPRIATION COMMITTEE REPORT OCTOBER 9 2007 TO STM Appendix B. Demonstration of various revenue scenarios for parcels 200, 300, and 400 The following spreadsheets provide estimates of the revenues the Town will receive both from property taxes and the $3.1 million in mitigation monies over the time period FY09—FY2003 for parcels 200, 300, and 400 at Lexington Technology Park. They also provide calculations of net present value (NPV) for FY09 using 4% and 5% deflators, which are typical of recent trends in the State and Local Govemment Implicit Price Deflator The shaded colunms on each page represent the 20-year scenario that results from approval of the TIF agreement. The first shaded column(with the double-lined border) mirrors the assumptions about future assessed values and tax rates made by the Town in its analysis. The other three colunms demonstrate the results if the Town s assumptions about future tax revenues from the three parcels are varied by+/- 20% and by-40% that is, if one assumes the Town has been too pessinnstic (+20%) or too optinnstic ( 20% and-40%) in its assumptions. On each page of this appendix, the TIF scenario appears alongside a different 'no TM' scenario. These alternative scenarios can be described as follows. • TIE is turned down,but Shire follows the presently projected build-out anyway • TIE is turned down; after a one-year delay another tenant comes without a TIF and executes a build- out plan similar to Shire s full build-out plan. • TIE is turned down; after a two-year delay another tenant comes without a TIE and executes a similar build-out plan. • TIE is turned down; after a four-year delay another tenant comes without a TIE and executes a similar build-out plan. • TIE is turned down; no other tenant comes forward to build out parcels 200 and 400(the worst case among these scenarios). Note that in each of the scenarios, Shire s occupation and development of parcel 300 is assumed, since Shire has indicated that its decision on this parcel has been made and is independent of the decision on the TIF In the scenarios where Town Meeting turns down the TIF and we have to wait for another tenant to cone along for parcels 200 and 400, the 20% and 40% discount columns can be used to evaluate the impact if that eventual tenant builds something in a different commercial class with a lower valuation—i.e. office space instead of lab/manufacturing space. Since office space valuations are expected to run 35-40% lower than Shire s expected commercial classification, the 40% discount column is a reasonable approximation of this difference. 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