09/12/2005 Council Packet - Laserfiche WebLink

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Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 did not occur as planned, the Interfund Loan was not disbursed, and the mortgage on the TIF parcel held by Tagg is now in default. The proposed amendment provides an alternative disbursing procedure, summarized as follows: 1. $750,000 from the Met Council grant would be disbursed immediately after approval of the Contract amendment, so long as Development Property Owner secures a "forbearance agreement" from Tagg. That is, Tagg would agree not to take significant mortgage foreclosure actions before December 31, 2005 (except as described below). 2. If the site plan and final plat is approved by October 15, 2005, the EDA would disburse the balance of $950,000 on that date, so long as Development Property owner has delivered Assessment Agreements that set a minimum market value needed to generate enough Tax Increment to repay the Interfund Loan. This is similar to the original Contract terms, except that the Interfund Loan amount has been reduced from $1.7 million to $950,000, and the requirement for a building permit has been omitted. If this occurs, the Tagg mortgage would be satisfied, and the development would proceed as under the original Contract. 3. If the site plan and final plat are not approved by October 15, the EDA would nevertheless disburse $400,000 of the Interfund Loan on that date. However, this amount would be a forgivable loan, repayable if the site plan and plat approvals do not occur by April 30, 2006. Also, the City would have a third mortgage, and assessment agreements must be in place to cover the full $950,000. The Tagg forbearance agreement would remain in effect through December 31, 2005. However, if the conditions for this partial disbursement are not met (e.g., Assessment Agreements are not in place), the Tagg forbearance agreement may terminate on October 15 and Tagg may proceed with foreclosure. 4. If the partial disbursement is made on October 15, but the site plan and plat are not approved by April 30, 2006, the Developer will have defaulted on the obligation to commence construction by that date and the EDA will have all the remedies under the Contract (including the option to terminate). RECOMMENDATION While proposed changes represent a departure from the original requirements staff is confident that the city's position is adequately secured. The addition of the $750,000 from Met Council significantly reduces the City's upfront contribution with the remaining $950,000 provided from the proceeds of the sale of land to Hartford. Project development is underway and several requirements of the agreement have been addressed including the removal of all the buildings on the Tagg parcel. Mass grading