04-12-2006 Council Agenda - Laserfiche WebLink

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ce k ra ceagsack 515 Little Canada Road, Little Canada, MN 55117-1600 (651) 766 -4029 / FAX: (651) 766 -4048 www.ci.little-canada.mn.us MEMORANDUM TO: Mayor Blesener & Members of the City Council FROM: Joel Hanson, City Administrator DATE: April 3, 2006 RE: Final Agreement with RAB, LLC Relative to Refinancing MAYOR Bill Blesener COUNCIL Jim LaValte Rick Montour Barbara Allan John Keis ADMINISTRATOR Joel R. Hanson At our last meeting, the Council authorized the terms of an agreement with RAB, LLC (Dick Biagini) relative to the refinancing of the two properties he owns on Country Drive (2925 & 2935). As you may remember, these projects were plunged into tax increment deficiencies with the 2001 Property Tax Reform enacted by the State of Minnesota. Recent projections even with the completion of the second building had annual deficits of approximately $31,000. These deficits were made up by deficiency payments by RAB, LLC and personally guaranteed by Dick Biagini. (Note: He has made all required payments to date.) Mr. Biagini was in the process of securing long -term financing that was favorable to his projects in terms of cash flow, rate protection, and amortization term. However, he was also increasing the debt against the project by over $900,000. This caused staff concern with the reduction in assets available to secure the TIF guarantees if a default were to occur. After considerable negotiation with Mr. Biagini and his bank, we were able to come to an agreement that addressed the City's concerns while still allowing Mr. Biagini to proceed with his refinancing. The key components of this agreement were as follows: ✓ $200,000 to be paid to City of Little Canada at closing to payoff outstanding developer deposits (about $4,900) and the balance to be advance payments on future TIP guarantees. This was a discounted value on the future payments that appears to be about breakeven for the City if we earn five percent interest on the money and estimated market values /real estate taxes remain relatively constant. It could yield us a windfall if values /taxes dramatically increase. A shortfall would exist if values were impacted by class rate changes or a dramatic reduction from current levels. ✓ The City releases Dick Biagini from future TIP shortfalls associated with his project and from any personal guarantees. ✓ The City releases the $31,000 letter of credit we had to secure one year's of TIF shortfall.