07-11-2001 Council Agenda - Laserfiche WebLink

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• To address the developer's default on completion of construction by December 31, 2000, 2002's tax increment guarantee (320,213) on the Phase II property has been added to the purchase price payable at dosing. • To address the developer's late completion of the Phase I property, the tax increment shortfall guarantee of 338,057 (less '/ half payment) will be payable at closing instead of August V`. • To held guarantee completion of the building by December 1, 2001, we are withholding payment of 317,500 associated with the Phase I improvements. • To further help guarantee completion by December 1" I am proposing a deposit of 350,000 of additional security that would be returned if the developer compietes the project on rime and in full conformance with the agreement. It could also be used to address future tax increment guarantee shortfalls from Phase I or Phase II properties. (It is known that a Phase I shortfall of 338,057 will be due January 1 ".) Please note the developer does not agree with this provision as it puts a further strain on his cash flow. I have explained to him my concern that the building must be completed in order to generate full value in the subsequent assessment by Ramsey County. I do not feel it is in the City's best interests to put ourselves into further tax increment shortfall guarantees due to incomplete construction especially in light of pending property tax reform. (With a tax increment guarantee, the developer is locked to any higher property tax payment than will be faced by competition. This increases the likelihood of default and/or future requests to relieve the developer of this burden. This would be similar to the situation we faced with Kandice Heights I.) Given the fact that the City did not create the conditions that lead to the default, I feel it is in our best interests to require this additional deposit. Mr. Biagini has assured me he is ready to proceed with this project. Even with his assurances and the proposed deveopment agreement amendment. I am not convinced it makes sense for us to proceed with this project. I am concerned about the project's potential for success given that the buiiding has no tenants committed to a lease at this time, the developer's past difficulties in achieving compliance with the original development agreement, and the impact property tax reform will have on the competitiveness of this project. While Mr. Biagini has made improvements to this property at his own risk, title is still vested with the City. Once title is transferred to the developer, our remedies become very limited. Other developers have expressed :merest in this property that would negate many of these risk factors. Therefore, it may be in our best interests to not proceed with this development agreement and provide notice to the developer of our intent to terminate our relationship involving phase two. While I don't want to impugn Mr. Biagini's integrity, I want to ensure that the City's interests are appropriately protected. The City Attorney and 1 will be prepared to comment on this in greater detail at Wednesday's meeting. Page 53