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Regular Meeting October 11, 2004 125. Page 3 District. He also stated this agreement would be for ten years, and at Ithat time the City could either sell the property and use the proceeds for educational activities for local youths, or continue to own and operate it under some arrangement. Whatever profits are made would go towards educational activities for local youths. He stated the American Housing Foundation has provided a cash flow chart showing the net for 2005 at $188,000.00 and the following year, $200,000.00 and would go up each year. Mr. O'Leary stated he needs direction from the City Council for a PaYment Lieu of Taxes Program. Mr. Thomaides inquired whether the PILOT would be a year-to-year agreement. Mr. O'Leary stated the PILOT would be for the life of the bond. Mr. Diaz stated he feels this is a good deal, especially since American Housing Foundation can remove property off the tax roll and is not required to pay anything to the City. Mr. Mark Taylor stated American Housing is a charitable institution under State Law. The Texas Tax Code provides for a property tax exemption for property once it is acquired. He also stated American Housing Foundation is seeking funding for this acquisition that is tax-exempt under federal income tax laws, and if the City approves the tax-exempt financing, then American Housing Foundation has agreed to enter into a PILOT. Mr. Diaz inquired to whether the cash flow could go to another educational agency or entity. Mr. Steve Sterquell, of American Housing Foundation, stated their goal is to have funds available for lower-income or first-generation Istudents. He also stated American Housing Foundation prefers to help kids in the sixth through tenth grades with contracts, if they stay crime-free, drug-free and have a chance to go to college. The educational foundation is the City Council's choice within the community. He stated American Housing Foundation has entered into an agreements with the City of Dallas, which has received $450,000.00 for scholarships. He stated they realize that the program costs money to have mentors and for people to work with these children. He stated this is why American Housing Foundation is offering $100,000.00 to the Educational Foundation as an up-front gift for the funds to run this program. He stated the City of Dallas set up a Phoenix Fund. He also stated the Internal Revenue Service issued American Housing Foundation a private letter, and they are currently the only non- profit organization in the United States that has the right to do student housing as a nationwide charitable activity without being a university. Mr. Bose stated he has some concerns about this project and feels it is too good to be true. Mr. Sterquell stated American Housing Foundation can take the property off the tax roll, but the foundation is offering a PILOT to help relieve the effect of removing the property off the tax roll. He stated they will get two percent of the Adjusted Gross Income to manage the property, which is all the IRS allows. He also stated the City will be provided an annual audit of the property. He stated he would be happy to provide an audit of their foundation for the Council to review. Mr. IMihalkanin stated San Marcos is facing problems with non-profit corporations coming to San Marcos and removing property off the tax rolls because of the State University. He stated he appreciates American