03-29-2012 Council Agenda - Laserfiche WebLink

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(214 �� /&e ( aa a zaa 515 Lillie Canada Road, L911e Canada, MN 55117-1600 (651) 766 -4029 / FAX: (651) 766 -4048 www.01.1iI..tle- eanada.mn.us MEMORANDUM TO: Mayor Blesener and Members of the City Council FROM: Joel Hanson, City Administrator DATE: March 23, 2012 MAYOR Bill memlin- COUNCIL. Rick Montour John 'cols Michael McGraw Shelly Boss ADMINISTRATOR Joel R. Hanson RE: Amendment to Development Agreement with Masterpiece Homes for 2966 Arcade As you know, the City has participated in the acquisition of 2966 Arcade by providing a mortgage to Masterpiece Homes, Inc. To develop that property, a new access point must be created. Masterpiece has negotiated a purchase agreement with the property owner of 2959 LaBore Road to help in this process. Ideally, 2945 LaBore should also be acquired in the future to provide proper buffering to adjacent properties and to enable the new road to line up with Cherry Hill Lane in the Gervais Woods development. (See map attached.) Attached is our current development agreement with Masterpiece I-Iomes, Inc. for 2966. You will note that we approved a mortgage (city financed) in the amount of $218,925 that represents 50% of the initial acquisition cost (see provision #1). In January of 2010, we amended the development agreement to include property taxes as an Allowable Development Cost in addition to those items listed in Provision #3 of the development agreement. With the acquisition of 2959 LaBore, Mr. Howe is asking the City to participate in the cost on a 50/50 basis. That would amount to $95,000 plus 50% share in property taxes. (Note: There will be rental income off this parcel that would also accrue to our benefit based on the 50% contribution.) To accommodate Masterpiece Homes, we would need to amend the development agreement to add the parcel at 2959 as an allowable cost. We would also need to provide for the issuance of a mortgage in the amount of $95,000 plus taxes. If the Council agrees, it may also be advisable to include 2945 Lal3ore in the amendment to cover the entire program. Attached is a Tax Increment Financing spreadsheet showing how this program would work. Staff believes it may make the most sense for us to act as the "developer of this area" in terms of providing financing for acquisition and improvements. (Improvements could be financed via special assessments for a short period such as three years. This would lower carrying costs and provide the City with a good investment mechanism versus what is available in the market.) We would then be selling lots to the Masterpiece at $100,000 each and they would need to commit to purchase lots on agreed upon schedule that negates our out of pocket cost. This schedule would 1