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HomeMy WebLinkAbout09-12-2005 EDA PacketL., AGENDA ECONOMIC DEVELOPMENT AUTHORITY MONDAY SEPTEMBER 12, 2005 6:00 P.M. 1. Ca11 to Order and Roll Call 2. Consideration of Minutes of February 28, 2005 (TO FOLLOW) 3. Consideration of Resolution No. 05-02 Approving Amendment to the Contract for Private Development between the Lino Lakes Economic Development Authority, City, and Harford Development, Inc. 4. Adjourn DATE MEMBERS PRESENT MEMBERS ABSENT OTHERS PRESENT APPAI&L, CITY OF LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY MINUTES : February 28, 2005 : J. Bergeson, D. Carlson, C. Dahl, J. Reinert, D. Stoltz : None : Mary Divine, Gordon Heitke, and Bill Hawkins CONSIDERATION OF MINUTES OF DECEMBER 20, 2004 EDA Member Dahl moved to approve the December 20, 2004 minutes, as presented. EDA Member Stoltz seconded the motion. Motion passed unanimously. CONSIDERATION OF ANNUAL APPOINTMENTS Ms. Divine summarized the Staff report, reviewing the positions held by various Board Members in previous years. EDA Member Stoltz moved to appoint Jeff Reinert as EDA President; Caroline Dahl as EDA Vice President, and Dan Stoltz as Treasurer. EDA Member Bergeson seconded the motion. Motion carried unanimously. EDA Member Carlson asked if Bank of the West had been added to the list, as they discussed at the work session. Ms. Divine indicated the list had been amended to include that Legal Depository. EDA Member Bergeson moved to approve the EDA Secretary, Assistant Treasurer, Executive Director, Official Newspaper and Legal Depositories as recommended by Staff. EDA Member Carlson seconded the motion. Motion carried unanimously. CONSIDERATION OF BUSINESS SUBSIDY FOR SCHWAN'S HOME SERVICES, INC. Ms. Divine summarized the Staff report, indicating that Staff is recommending approval. EDA Member Dahl moved to open the public hearing at 6:11 p.m. EDA Member Carlson seconded the motion. Motion carried unanimously. There being no public input, EDA Member Bergeson moved to close the public hearing at 6:12 p.m. EDA Member Stoltz seconded the motion. EDA MINUTES FEBRUARY 28, 2005 DRAFT 46 47 Motion carried unanimously. 48 49 A. CONSIDERATION OF RESOLUTION NO. 05-01 APPROVING THE 50 CONTRACT FOR PRIVATE DEVELOPMENT BY AND BETWEEN THE 51 LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY AND SCHWAN'S 52 HOME SERVICE, INC., AND AWARDING SALE OF $91,715 TAX 53 INCREMENT REVENUE NOTE 54 55 Ms. Divine summarized the Staff report, stating that Staff is recommending approval. 56 57 EDA Member Bergeson moved to adopt Resolution No. 05-01 approving the contract for private 58 development by and between the Lino Lakes Economic Development Authority and Schwan's Home 59 Service, Inc., and awarding sale of $91,715 Tax Increment Revenue Note. EDA Member Stoltz 60 seconded the motion. 61 62 EDA Member Carlson stated she would note no on this resolution. She indicated one reason is they 63 do not know what they will get on this site, or if it will be better than what is there. She stated the 64 second reason is the Comprehensive Plan goal of reducing taxes. 65 66 EDA President Reinert asked if there was any way they could know what will go there. Ms. Divine 67 stated the site has not yet been sold, although Schwan's has some interested parties. She indicated 68 Staff has asked Schwan's if they would be willing to agree not to sell the site to an automobile use for 69 additional tax incentive and Schwan's has declined. Ms. Divine stated it is possible Schwan's would 70 decide not to sell the property if this is denied, or may sell it to a use that is allowed on the site as it is. 71 She indicated in that case someone could use the site for a number of years with the intent of 72 redeveloping it in the future, without changing the building or doing any improvements now. She 73 indicated this is not a huge dollar amount, so she does not know if it is a make it or break it condition 74 for the Schwan's deal. She stated Schwan's appears committed to being in Lino Lakes, however 75 since the new site is on the freeway it is costing them more. She indicated that Schwan's based their 76 application on the fact that the site had extraordinary costs. She stated Schwan's meets all of the 77 criteria of building standards and TIF standards. She indicated it has been clear that the incentive is 78 based on Lino Lake's desire to keep a long-standing company in the city, and also a desire to 79 redevelop Lake Drive, which this would allow. She stated Staff or Schwan's did not agree to have 80 any specific thing on this site but Schwan's did agree to remove the existing building 81 82 EDA Member Carlson expressed concern about a gas station going on the site, and the fact that the 83 EDAC minutes reflect that the realtor has a gas station interested. She stated this is what is guiding 84 her concern that they may not get a better use for the site. 85 86 EDA Member Bergeson asked that they keep in mind TIF is taxes they do not currently collect. He 87 stated if they do not approve this he believes there is a high probability Schwan's will take the project 88 somewhere that they can get TIF. He indicated what the City would then be left with is a lack of 89 funds to relocate a business that is in the wrong place, and without the benefit of getting additional 90 taxes after TIF runs out. He stressed they are not taking taxes from current taxpayers, and if they do 2 EDA MINUTES FEBRUARY 28, 2005 DRAFT 91 not do this they are losing the future tax benefit that does flow to the current taxpayers. He indicated 92 that this, along with the agreement to tear down an existing building that brings the City one step 93 closer to realignment of 77th Street and the ultimate redevelopment of both sides of Lake Drive is a 94 benefit to the Lino Lakes taxpayers. 95 96 EDA Member Dahl commented that she, too, did not want a gas station there. She indicated they 97 need a sit-down restaurant in that location, and asked if there was anyway they could rezone the site 98 or amend the Comprehensive Plan so a gas station is not permitted. EDA President Reinert indicated 99 that is spot zoning and is illegal. 100 101 Community Development Director Grochala noted that a new building will be of higher quality than 102 the existing building as it will be necessary to conform to the current building standards. He stated 103 they are also prohibiting a grandfathered non -conforming use by requiring that the buildings come 104 down. He indicated the least amount of improvement will be a new, better quality building on the site 105 versus the pole building that is there now. 106 107 EDA Member Bergeson agreed a gas station is not the first choice they would have for that site, 108 however the other gas station in that area is a facility that pays a lot of taxes and is a nice looking 109 building. He indicated a gas station does not have to be a blight on Town Center, and with the City's 110 architectural guidelines he believes it would be better than what is there now. 111 112 EDA Member Stoltz asked how many employees are at Schwan's. Ms. Divine stated that with 113 drivers she believes it is currently in the 50 to 60 range. 114 115 Motion carried. Vote: 3:2 EDA Members Carlson and Dahl opposed. 116 117 ADJOURNMENT 118 119 There being no further business, EDA Member Stoltz moved to adjourn. EDA Member Bergeson 120 seconded the motion. Motion passed unanimously. 121 122 Meeting adjourned at 6:33 p.m. 123 124 Transcribed by: 125 Karen Bucklen 126 TimeSaver Off Site Secretarial, Inc. 127 3 L STAFF ORIGINATOR: EDA MEETING DATE: TOPIC: ACTION REQUIRED: BACKGROUND AGENDA ITEM 3 Michael Grochala September 12, 2005 Consideration of Resolution No. 05-02 Approving First Amendment to Contract for Private Development. Legacy at Woods Edge Simple Majority In October of 2004 the City Council approved the Contract for Private Development between the Economic Development Authority (EDA), City and Hartford Development, Inc., for the Legacy at Woods Edge project. Hartford Development closed on the City owned property and the Tagg property in December of 2004. Under Section 3.5 of the Contract referenced above, the EDA agreed to disburse $1,700,000 to the "Development Property Owner" (an entity related to Hartford Development, Inc.) under certain terms and conditions. Disbursement was a two-step process: the funds were to be placed with an escrow agent after (among other things), the City had approved a preliminary plat for the first townhome development. Then, funds would be disbursed to the Development Property Owner when the City had issued the first building permit for the townhomes, and the parties executed Assessment Agreement setting minimum market values for the townhomes in an amount sufficient to generate tax increment needed to repay the full $1,700,000 interfund loan. Since that time, the original townhome proposal has been withdrawn, and Hartford is working towards City approval of a mixed -use development as the first phase, including 60 units of workforce rental housing with associated commercial space and a separate hotel facility. The current schedule calls for council consideration of the site plan and final plat for that development on October 12. The other key change since the date of the Contract is that the City has received a Met Council grant in the amount of $750,000, which will reduce the Interfund Loan of City funds by that amount. Hartford has now requested that the Contract be amended to permit different terms for dispersal of the $1.7 million. The reason for this request is that Hartford purchased the "TIF Parcel" from Tagg under a note and mortgage, which Hartford expected to pay with proceeds of the Interfund Loan (assuming the conditions described above would be met, given the expected townhome development). When the townhome development L 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 Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 operations have been completed and public improvements will commence within the week. More importantly the proposed changes will keep the project moving forward. Staff is recommending approval of Resolution No. 05-02. ATTACHMENTS 1. Resolution No. 05-02 2. First Amendment to Contract L 3 Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. 05-02 RESOLUTION APPROVING A FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT BETWEEN THE LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, THE CITY OF LINO LAKES AND LEGACY HOLDINGS/LINO LAKES, LLC BE IT RESOLVED By the Board of Commissioners ("Board") of the Lino Lakes Economic Development Authority ("Authority") as follows: Section 1. Recitals. 1.01. The Authority currently administers Development District No. 1 (the "Project)" pursuant to Minnesota Statutes, Sections 469.124 to 469.134 ("Development District Act"). 1.02. The Authority, the City of Lino Lakes ("City") and Legacy Holdings/Lino Lakes, LLC (the "Developer") entered into a into a Contract for Private Development dated December 20, 2004 (the "Contract"), setting forth the terms and conditions of redevelopment of certain property within the Project, referred to generally as the Legacy at Woods Edge Project. 1.03. The parties have determined a need to amend the Contract in certain respects, and in that regard the Board has reviewed a draft First Amendment to the Contract and finds that the execution thereof and performance of the Authority's obligations thereunder are in the best interest of the City and its residents. Section 2. Authority Approval: Further Proceedings. 2.01. The First Amendment to the Contract as presented to the Board is hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the President and Executive Director, provided that execution of the documents by such officials shall be conclusive evidence of approval. 2.02. The President and Executive Director are hereby authorized to execute on behalf of the Authority the Contract and any documents referenced therein requiring execution by the Authority, and to carry out, on behalf of the Authority its obligations thereunder. 4 L L Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 Approved by the Board of Commissioners of the Lino Lakes Economic Development Authority this 12th of September, 2005. ATTEST: Secretary 5 President L., Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 Second Draft September 2, 2005 FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT THIS AGREEMENT, made as of the 12th day of September, 2005, by and between the LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, a public body corporate and politic under the laws of Minnesota (the "Authority"), the CITY OF LINO LAKES, a Minnesota municipal corporation (the "City") and HARTFORD DEVELOPMENT, INC., a Minnesota corporation (the "Developer"). WITNESSETH: WHEREAS, the City, Authority and Developer entered into a Contract for Private Development dated December 20, 2004 (the "Original Contract"), providing for redevelopment by Developer of certain property in the City and certain assistance by the Authority in such effort; and WHEREAS, in light of scheduling changes, the parties have determined a need to revise the Original Contract as further provided herein; NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties hereto, each of them does hereby covenant and agree with the other as follows: 1. A new Section 3.5A is inserted, as follows: Section 3.5A. Disbursement of Grant and Interfund Loan (a) As of the date of this Amendment, no funds have been deposited by the City or disbursed to Development Property Owner under an Escrow Agreement as described in Section 3.5 of the Original Contract. The parties further acknowledge that, since the date of the Original Contract, the City has received a "livable communities act" grant from the Met Council in the amount of $750,000 (the "Second LCA Grant") to fund the costs described in Section 3.5, above and beyond the grant described in Section 3.7. Accordingly, the Interfund Loan has been reduced from $1,700,000 to $950,000, and the payment schedule for such Interfund Loan will be adjusted to reflect the reduced principal amount. (b) The proceeds of the Second LCA Grant will be disbursed to Development Property Owner as reimbursement of part of the cost of acquisition of the TIF Parcel promptly upon execution of this Amendment and delivery of the agreement described in paragraph (d) below. 6 Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 (c) The proceeds of the Interfund Loan ($950,000) will be disbursed to Development Property Owner in accordance with the following terms and conditions: (i) the Development Property Owner has delivered fully executed Assessment Agreements in accordance with Section 6.3 that provide an aggregate minimum market value in at least the amount that generates Tax Increment sufficient to pay the scheduled payments when due on the Interfund Loan, as determined by the City's financial advisor; (ii) the Developer has obtained City Council approval of the site plan and final plat providing for a Rental Housing Component that includes at least 60 units of so-called "work force housing" and a Commercial Component that includes the commercial improvements described in the site plan application filed with the City on August 15, 2005 (i.e., commercial space associated with the rental housing and a separate hotel facility); (iii) if the site plan and plat approval required under clause (ii) does not occur by October 15, 2005, then on that date the Authority will disburse a portion of the Interfund Loan in the amount of $400,000, subject to the conditions that (1) Assessment Agreements are delivered in accordance with clause (i) above, ensuring Tax Increments sufficient to repay the full $950,000 amount of Interfund Loan; (2) the agreement described in paragraph (d) below remains in full force and effect; and (3) such disbursement will be made in the form of a forgivable loan secured by a third Mortgage (subordinate to the first Mortgage given by Development Property Owner to Marshall Investments Corporation dated December 24, 2004, and to the Tagg Mortgage (as defined in paragraph (d) below). The note and third Mortgage will provide that if the conditions under clause (ii) are not met by April 30, 2006, the principal amount disbursed together accrued interest at the rate of 4% is due and payable on April 30, 2006. Any documents necessary to evidence such loan and Mortgage may be executed by Authority officials subject to approval by the Authority President and Authority Executive Director, provided that execution of the agreement by those officials will be conclusive evidence of their approval. (iv) if $400,000 of the Interfund Loan is disbursed under clause (iii) above, the balance of the Interfund Loan ($550,000) will be disbursed promptly upon (1) Development Property Owner's satisfaction of the conditions in clause (ii), but no later than April 30, 2006; and (2) Development Property Owner having delivered evidence reasonably satisfactory to Authority that Development Property Owner has cured (or will cure upon application of such Interfund Loan proceeds) any outstanding default under the Tagg Mortgage. If the conditions for final disbursement have not been met by April 30, 2006, such failure will be an Event of Default subject to the Authority's remedies under Section 9.2 of the Original Contract. Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 (d) Upon or before any disbursement under paragraphs (b) or (c)(iii) of this Section 3.5A, Development Property Owner must have delivered to the Authority a written forbearance agreement between Development Property Owner and Joel and Elise Tagg ("Tagg") in a form reasonably satisfactory to the Authority providing that Tagg will not commence advertisement for sale or petition for receivership of the TIF Parcel under the Mortgage given by Development Property Owner to Tagg in connection with acquisition of the TIF Parcel (the "Tagg Mortgage"). Such agreement shall provide that the funds disbursed hereunder shall be paid in their entirety to Tagg as partial payment of the Tagg Mortgage. The forbearance agreement must remain in effect through December 31, 2005, except that if the conditions for disbursement under clause (c)(iii) are not and consequently no partial disbursement of Interfund Loan funds is made, the forbearance agreement may terminate on October 15, 2005. (e) The provisions of this 'Section 3.5A supersede in all respects Section 3.5 of the Original Contract except as the context clearly requires otherwise. 2. The Original Contract remains in full force and effect and is not modified except as expressly provided herein. s Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 IN WITNESS WHEREOF, the Authority and City have each caused this Agreement to be duly executed in its name and behalf and its seal to be hereunto duly affixed and the Developer has caused this Agreement to be duly executed in its name and behalf as of the date first above written. LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY By Its President By Its Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this day of 2005 by and , the President and Executive Director of the Lino Lakes Economic Development Authority, on behalf of the Authority. Notary Public 9 Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 CITY OF LINO LAKES, MINNESOTA By Its Mayor By Its City Administrator STATE OF MINNESOTA ) ) SS. COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this day of 2005 by John Bergeson and Gordon Heitke, the Mayor and City Administrator of the City of Lino Lakes, Minnesota, on behalf of the City. Notary Public 10 L Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 HARTFORD DEVELOPMENT, INC. By Its STATE OF ) ) SS. COUNTY OF The foregoing instrument was acknowledged before me this day of 2005 by , the of Hartford Development, Inc., a Minnesota corporation, on behalf of the company. Notary Public 11 Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 DEVELOPMENT PROPERTY OWNER'S CONSENT The undersigned consents to the foregoing Contract for Private Development by and between the Lino Lakes Economic Development Authority, the City of Lino Lakes and Hartford Development, Inc.; provided that nothing in the consent will be construed to impose upon the Development Property Owner any obligation of the Developer thereunder. STATE OF COUNTY OF ) SS. LEGACY HOLDINGS-LL, LLC By Its The foregoing instrument was acknowledged before me this day of , 2005 by , the of Legacy Holdings-LL, LLC, a Minnesota limited liability company, on behalf of the company. Notary Public 12 Economic Development Authority Amendment to Development Contract - Legacy September 12, 2005 LENDER'S CONSENT The undersigned consents to the foregoing First Amendment to Contract for Private Development by and between the Lino Lakes Economic Development Authority, the City of Lino Lakes and Hartford Development, Inc.; provided that nothing in the consent will be construed to impose upon the Lender any obligation of the Developer thereunder. STATE OF COUNTY OF ) SS. MARSHALL INVESTMENTS CORPORATION By Its The foregoing instrument was acknowledged before me this day of , 2005 by , the of Marshall Investments Corporation, a Delaware corporation, on behalf of the corporation. Notary Public 13