HomeMy WebLinkAbout07-25-2016 EDA Packet LINO LAKES
ECONOMIC DEVELOPMENT AUTHORITY
MEETING
Monday, July 25, 2016
Immediately Following Regular City Council Meeting
City Council Chambers
1. Call to Order and Roll Call
2. Consideration of Minutes of June 13, 2016
3. Action Items
A. Consider Resolution No. 16-04, Approving Modified Development
District Plan and Approving Tax Increment Financing Plan, Michael
Grochala
B. Public Hearing. Consider Resolution No. 16-05, Approving Contract for
Private Development and Awarding Sale of Tax Increment Revenue Note.
4. Adjourn
LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO.16-04
RESOLUTION APPROVING TAX INCREMENT FINANCING PLAN FOR TAX
INCREMENT FINANCING (ECONOMIC DEVELOPMENT) DISTRICT NO. 1-12
AND A MODIFIED DEVELOPMENT PLAN FOR DEVELOPMENT DISTRICT
NO. 1
WHEREAS, the City of Lino Lakes, Minnesota (the "City") and the Lino Lakes Economic
Development Authority (the "Authority") have established, and the Authority administers, Development
District No. 1 (the "Development District") located within the City and have caused to be created a
Development Plan (the "Development Plan") therefor, pursuant to Minnesota Statutes, Sections 469.090
through 469.1082, as amended (the "EDA Act"); and
WHEREAS, within the Development District the City and the Authority have created certain tax
increment financing districts pursuant to Minnesota Statutes, Sections 469.174 through 469.1794, as
amended (the "TIF Act"); and
WHEREAS, the City and the Authority have determined to modify the Development Plan for the
Development District and approve a tax increment financing plan (the "TIF Plan") relating to the creation of
a new tax increment financing district within the Development District designated as the Tax Increment
Financing (Economic Development) District No. 1-12 (the "TIF District"), all as described in a plan
document presented to the Board of Commissioners of the Authority (the "Board") on the date hereof, and
WHEREAS, the City and the Authority have determined to consider an additional modification
of the Development Plan to expand the boundaries of the Development District to be coterminous with
the City's boundaries; and
WHEREAS, the TIF Plan was, in accordance with the TIF Act, referred to the Lino Lakes Planning
and Zoning Board (the "Planning and Zoning Board") and by resolution adopted by the Board of
Commissioners of the Planning and Zoning Board on July 13, 2016, the Planning and Zoning Board found
that the TIF Plan conforms to the general plan for the development of the City as a whole; and
WHEREAS, pursuant to Section 469.175, subdivision 2 of the TIF Act, the proposed TIF Plan and
the estimates of the fiscal and economic implications of the TIF Plan were presented to the School Board of
Independent School District No. 12 and to the County Board of Commissioners of Anoka County,
Minnesota; and
WHEREAS, on the date hereof, the City Council of the City (the "City Council") conducted a
public hearing relating to the modified Development Plan, the TIF Plan, and the establishment of the TIF
District, at the views of all interested parties were heard at the public hearing; and
WHEREAS, following the public hearing, the City Council approved the modified Development
Plan and the TIF Plan; and
WHEREAS, the Board has reviewed the contents of the modified Development Plan and the TIF
Plan, as approved by the City Council; and
483314v1 JAE LN140-116
NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Lino Lakes
Economic Development Authority that:
1. The modified Development Plan, including the expansion of the boundaries of the
Development District to be coterminous with the boundaries of the City, and the TIF Plan for the TIF
District are hereby approved.
2. The Board hereby makes all the findings set forth in the Development Plan and the TIF
Plan, which documents are incorporated herein by reference.
3. Authority staff and consultants are authorized to take all actions necessary to implement the
TIF Plan.
Adopted by the Board of Commissioners of the Lino Lakes Economic Development Authority
this 25t' day of July, 2016.
The motion for the adoption of the foregoing resolution was introduced by Board Member
and was duly seconded by Board Member and upon vote
being taken thereon, the following voted in favor thereof:
The following voted against same:
William Kusterman, President
ATTEST:
Jeff Karlson, Executive Director
483314v1 JAE LN140-116 2
Springsted
MEMORANDUM
TO: Michael Grochala, Community Development Director
FROM: Mikaela Huot, Vice President/Consultant
DATE: July 1, 2016
Springsted Incorporated
380 Jackson Street, Suite 300
Saint Paul, MN 55101-2887
Tel: 651-223-3000
Fax: 651-223-3002
www.springsted.com
SUBJECT Proposed Tax Increment Financing (Economic Development) District No. 1-12
Project Summary Memo
The City of Lino Lakes received an application for financial assistance through Tax Increment Financing (TIF) with
financing a portion of the extraordinary development costs related to the development of a large 402,000 square foot,
office headquarters and warehouse building for Distribution Alternatives. The developer, United Properties, is
proposing the construction of the project as the tenant (Distribution Alternatives) has outgrown its current space and
needs expansion. The purpose of this memorandum is to provide a summary of Springsted's review of the
development project costs and operating pro forma as provided by the developer in order to assist the City with
making a determination if the project as proposed would be unlikely to proceed "but -for" the requested Tax Increment
Financing (TIF) assistance.
Background
The developer submitted a request for TIF assistance with the purpose of using tax increment to finance
extraordinary costs associated with construction of the project. The new assessed value of the building has been
estimated to be approximately $18.2 million upon completion based on an approximate 402,000 square foot facility.
Developer Request for Assistance
Assistance has been requested for financing a portion of the costs associated with construction of the project. The
developer has proposed the $24 million project will be funded by an estimated $6.5 million of equity and $15.3 million
of private financing with a TIF request of $2.088 million to finance extraordinary project costs. The City's preference
would be to provide any financial assistance through pay -as -you -financing as reimbursement for extraordinary
development costs. The developer has indicated the receipt of City financial assistance is necessary for the project to
proceed and meet debt coverage and value assumptions. The developer's request for assistance ($2.088 million) is
equal to approximately 8.67% of total project costs. See complete sources and uses (current information as
presented to Springsted by the developer) below from the application:
City of Lino Lakes, Minnesota
Summary of TIF District No. 1-12
July 1, 2016
Page 2
Sources
Amount
Uses
Amount
Equity
$6,598,543
Acquisition
$2,181,162
Debt
$15,396,600
Site Improvements
$2,800,000
TIF
$2,088,481
Public Infrastructure Costs
$977,373
Building Costs
$14,153,101
Soft Costs
$3,006,441
Financing Costs
$565,547
Contingencies
$400,000
Total
$24,083,624
Total
$24,083,624
Following initial conversations with the developer, the amount of project costs eligible for reimbursement for tax
increment could include the following:
Uses
Amount
Land Acquisition
$2,181,162
Offsite Improvements Public Infrastructure Costs
$977,373
Grading/Excavating/Soil Corrections
$2,800,000
Total
$5,958,535
Based on the City's past practice and financing need and gap for this project, the estimated total amount of
assistance for public infrastructure and extraordinary site improvement costs related to construction of the project will
be limited to $1,200,000.
Tax Increment Assumptions
Springsted made certain assumptions to calculate the estimated amount of tax increment revenue generated by the
proposed new project. Those assumptions include the following:
• Maximum TIF District term — 8 years after receipt of first increment
o 9 total years of collection
• Base value of land:
o PID:24-31-22-34-0001: 155,800
o PID:24-31-22-34-0002: $3,400
o PID:24-31-22-31-0001: $173,600
o PI D: 24-31-22-31-0002: $100
o PID: 24-31-22-31-0003: $100
• Total new value includes land and building
■ $18,200,000
0 Based on County value estimate
City of Lino Lakes, Minnesota
Summary of TIF District No. 1-12
July 1, 2016
Page 3
• Construction commences in 2016
0 50% complete by December 31, 2016
■ Partial value as of January 2, 2017 for taxes payable 2018
0 100% complete prior to December 31, 2017
■ Full value as of January 2, 2018 for taxes payable 2019
• Payable 2016 tax rates remain constant through term (Rates Provided by Anoka County)
o City: 46.019%
o County: 38.894%
o School: 36.426%
o Other: 6.405%
o Total 127.744%
• Class rates remain constant through term
o Commercial -industrial
0 1.5% first $150,000 and 2% value above $150,000
• Fiscal disparities contribution
o Required to be from properties within district
0 37.589%
• 2% annual market value inflator assumed
Present Value assumptions
Tax Increment Revenue Estimates
Estimated Market Value
$18,200,000
Estimated Gross Revenue
$2,603,627
5% withheld for admin.
$130,181
15% withheld for pooling
$390,544
Estimated Net Revenue
$2,082,902
Developer Assistance
80% pledged to developer
$1,200,000
Number of Years
5.5 years
Surplus(remaining increment
$882,902
Project Qualifications
Tax Increment Financing (TIF) District — Economic Development
Economic development districts must consist of a project that is in the public interest because:
• It will discourage commerce, industry, or manufacturing from moving their operations to another state
• It will result in increased employment
City of Lino Lakes, Minnesota
Summary of TIF District No. 1-12
July 1, 2016
Page 4
• It will result in preservation and enhancement of the tax base
Revenue derived from tax increment from an economic development district may not be used to provide
improvements, loans, subsidies, grants, interest rate subsidies, or assistance in any form to developments consisting
of buildings and ancillary facilities, if more than 15 percent of the buildings and facilities (determined on the basis of
square footage) are used for a purpose other than:
• the manufacturing or production of tangible personal property, including processing resulting in the
• change in condition of the property;
• warehousing, storage, and distribution of tangible personal property, excluding retail sales;
• research and development related to the activities listed in clause (1) or (2);
• telemarketing if that activity is the exclusive use of the property;
• tourism facilities;
• qualified border retail facilities; or
• space necessary for and related to the activities listed in clauses (1) to (6).
In addition, if any of the property is currently within the property tax classification of `green acres' pursuant to MN
Statutes, Section 273.111, 273.112, 273.114, or chapter 473H, the following provisions apply:
• The authority may include in a tax increment financing district for taxes payable in any of the five calendar
years before the filing of the request for certification only for:
• a district in which 85 percent or more of the planned buildings and facilities (determined on the basis of
square footage) are a qualified manufacturing facility or a qualified distribution facility or a combination of
both; or
• a housing district.
• A distribution facility means buildings and other improvements to real property that are used to conduct
activities in at least each of the following categories:
o to store or warehouse tangible personal property;
o to take orders for shipment, mailing, or delivery;
o to prepare personal property for shipment, mailing, or delivery; and
o to ship, mail, or deliver property.
• A manufacturing facility includes space used for manufacturing or producing tangible personal property,
including processing resulting in the change in condition of the property, and space necessary for and
related to the manufacturing activities.
• To be a qualified facility, the owner or operator of a manufacturing or distribution facility must agree to pay
and pay 90 percent or more of the employees of the facility at a rate equal to or greater than 160 percent of
the federal minimum wage for individuals over the age of 20.
Thank you for the opportunity to be of assistance to the City of Lino Lakes. Please contact me at 651-223-3036 or
mhuot cDspringsted.com with any questions or to discuss.
City of Lino Lakes, Minnesota
Lino Lakes Economic Development Authority
Tax Increment Financing Plan
for
Tax Increment Financing (Economic Development)
District No. 1-12
Within
Development District No. 1
(Clearwater Creek Business Park Project)
Draft Dated: July 25, 2016
Public Hearing: Monday, July 25, 2016
Anticipated Approval Date: Monday, July 25, 2016
Prepared by:
SPRINGSTED INCORPORATED
380 Jackson Street, Suite 300
St. Paul, MN 55101-2887
(651) 223-3000
WWW.SPRINGSTED.COM
TABLE OF CONTENTS
Section
Page(s)
A.
Definitions.....................................................................................................................
1
B.
Statutory Authorization.....................................................................................................
1
C.
Statement of Need and Public Purpose................................................................................
1
D.
Statement of Objectives....................................................................................................
1
E.
Designation of Tax Increment Financing District as an Economic Development District ....................
2
F.
Duration of the TIF District.................................................................................................
3
G.
Property to be Included in the TIF District..............................................................................
3
H.
Property to be Acquired in the TIF District.............................................................................
4
I.
Specific Development Expected to Occur Within the TIF District .................................................
4
J.
Findings and Need for Tax Increment Financing.....................................................................
5
K.
Estimated Public Costs.....................................................................................................
6
L.
Estimated Sources of Revenue..........................................................................................
7
M.
Estimated Amount of Bonded Indebtedness..........................................................................
7
N.
Original Net Tax Capacity.................................................................................................
7
0.
Original Tax Capacity Rate................................................................................................
8
P.
Projected Retained Captured Net Tax Capacity and Projected Tax Increment ...............................
8
Q.
Use of Tax Increment.......................................................................................................
9
R.
Excess Tax Increment......................................................................................................
9
S.
Tax Increment Pooling and the Five Year Rule.....................................................................
10
T.
Limitation on Administrative Expenses...............................................................................
10
U.
Limitation on Property Not Subject to Improvements - Four Year Rule .......................................
11
V.
Estimated Impact on Other Taxing Jurisdictions...................................................................
11
W.
Prior Planned Improvements............................................................................................
12
X.
Development Agreements...............................................................................................
12
Y.
Assessment Agreements................................................................................................
12
Z.
Modifications of the Tax Increment Financing Plan................................................................
12
AA.
Administration of the Tax Increment Financing Plan..............................................................
13
AB.
Financial Reporting and Disclosure Requirements................................................................
13
Map
of the Tax Increment Financing District.......................................................................................
EXHIBIT I
AssumptionsReport
...........................................................................................................................
EXHIBIT II
Projected Tax Increment Report.........................................................................................................
EXHIBIT III
Estimated Impact on Other Taxing Jurisdictions Report......................................................................
EXHIBIT IV
Market
Value Analysis Report.............................................................................................................
EXHIBIT V
Lino Lakes Economic Development Authority, Minnesota
Section A Definitions
The terms defined in this section have the meanings given herein, unless the context in which they are used indicates
a different meaning:
"Authority" means the Lino Lakes Economic Development Authority.
"City" means the City of Lino Lakes, Minnesota; also referred to as a "Municipality".
"City Council" means the City Council of the City; also referred to as the "Governing Body".
"County„ means Anoka County, Minnesota
"Development District" means Development District No. 1 in the City, which is described in the corresponding
Development Program.
"Development Program" means the Development Program for the Development District.
"Project Area" means the geographic area of the Development District.
"School District" means Independent School District No. 12, Minnesota.
"State" means the State of Minnesota.
"TIF Act" means Minnesota Statutes, Sections 469.174 through 469.1794, both inclusive.
"TIF District" means Tax Increment Financing (Economic Development) District No. 1-12.
"TIF Plan" means the tax increment financing plan for the TIF District (this document).
Section B Statutory Authorization
The Development District Act authorizes the City and Authority, upon certain public purpose findings by the City
Council, to establish and designate development districts within the City and to develop and administer development
programs therefore to meet the needs and accomplish the public purposes specified in Section C. In accordance with
the purposes set forth in Section 469.124 of the Development District Act, the City Council and Authority have
established the Development District comprising the area described in Section E and have adopted this Development
Program.
Section C Statement of Need and Public Purpose
The City Council and Authority have determined that there is a need for the City to take certain actions they deem
necessary in order to encourage, ensure and facilitate development and redevelopment by the private sector of
underutilized, inappropriately used and unused land located within the corporate limits of the City. Such actions are
necessary in order to provide additional employment opportunities for residents of the City and the surrounding area;
to improve the tax base of the City, the County and the School District, thereby enabling them to better provide
needed public services; and to improve the general economy of the City, the County and the State.
Section D Statement of Objectives
The Authority seeks to achieve the following objectives through the establishment of TIF District No. 1-12;
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Lino Lakes Economic Development Authority, Minnesota
1. redevelop blighted areas as identified
2. provide employment opportunities within the community.
3. improve the tax base of Lino Lakes and the general economy of the City and State;
4. implement relevant portions of the Comprehensive Plan.
The Authority's specific purpose in establishing TIF District No. 1-12 is to aid in the construction of a large
warehousing/distribution facility that will comprise of 402,000 square feet. The Authority intends to use increment
generated by the new development to assist with financing a portion of the extraordinary site improvements and soil
correction costs and significant offsite improvements that include streets, public utilities, and public improvements to
gain access to the site.
Section E Designation of Tax Increment Financing District as an
Economic Development District
Economic development districts are a type of tax increment financing district which consist of any project, or portions
of a project, which the Authority finds to be in the public interest because:
(1) it will discourage commerce, industry, or manufacturing from moving their operations to
another state or municipality;
(2) it will result in increased employment in the state; or
(3) it will result in preservation and enhancement of the tax base of the state.
The TIF District qualifies as an economic development district in that the proposed development described in this TIF
Plan (see Section 1) meets the criteria listed above in (1), (2) and (3). Without establishment of the TIF District, the
proposed development would not occur within the City. The proposed development will also result in increased
employment and enhancement of the tax base in both the City and the State.
Tax increments from an economic development district must be used to provide improvements, loans, subsidies,
grants, interest rate subsidies, or other assistance in which at least 85% of the square footage of the facilities to be
constructed are used for any of the following purposes:
(1) manufacturing or production of tangible personal property, including processing, resulting in the
change of the condition of the property;
(2) warehousing, storage and distribution of tangible personal property, excluding retail sales;
(3) research and development related to the activities listed in (1) or (2) above;
(4) telemarketing if that activity is the exclusive use of the property;
(5) tourism facilities (see M.S. Section 469.174, Subd. 22);
(6) qualified border retail facilities (see M.S. Section 469.176, Subd. 4c); or
(7) space necessary for and related to the activities listed in (1) through (6) above.
Tax increments from the TIF District will be used to provide financial assistance to the proposed development (see
Section 1), in which over 85% of the square footage of the facilities to be constructed will be used for warehousing,
storage and distribution of tangible personal property, excluding retail sales as listed in (2) above. In addition, the
parcels to be included within the district have qualified for inclusion under the provisions of chapter 473H in the
SPRINGSTED Page 2
Lino Lakes Economic Development Authority, Minnesota
previous five calendar years before the filing of the request for certification only and therefore the project must meet
the following qualifications:
(1) a district in which 85 percent or more of the planned buildings and facilities (determined on the basis of
square footage) are a qualified manufacturing facility or a qualified distribution facility or a combination of both; or
(2) a housing district.
A distribution facility means buildings and other improvements to real property that are used to conduct activities in at
least each of the following categories:
(i) to store or warehouse tangible personal property;
(ii) to take orders for shipment, mailing, or delivery;
(iii) to prepare personal property for shipment, mailing, or delivery; and
(iv) to ship, mail, or deliver property.
A manufacturing facility includes space used for manufacturing or producing tangible personal property, including
processing resulting in the change in condition of the property, and space necessary for and related to the
manufacturing activities.
To be a qualified facility, the owner or operator of a manufacturing or distribution facility must agree to pay and pay 90
percent or more of the employees of the facility at a rate equal to or greater than 160 percent of the federal minimum
wage for individuals over the age of 20.
The proposed project will be a qualified distribution facility.
Section F Duration of the TIF District
Economic development districts may remain in existence 8 years from the date of receipt by the Authority of the first
tax increment. The Authority anticipates that the TIF District may remain in existence the maximum duration allowed
by law (projected to be through the year 2026). However the Authority will decertify the TIF District earlier upon
fulfillment of all District obligations.
Section G Property to be Included in the TIF District
The TIF District is an approximate 42 acre area of land located within the Project Area. A map showing the location
of the TIF District is shown in Exhibit I. The boundaries and area encompassed by the TIF District are described
below:
Parcel ID Number Legal Description
24-31-22-34-0001 THE SE1/4 OF SW1/4 OF SEC 24 TWP 31 RGE 22, EX THAT PRT OF FOL
DESC TRACT LYG WITHIN SD 1/4 1/4: A STRIP OF LAND 25 FT IN WIDTH
ON EACH SIDE OF FOL DESC C/L: BEG AT A STAKE ON E LINE OF SD
SEC 2421.5 FT S OF E1/4 COR THEREOF, TH S 52 DEG 27 MIN W 4599.2
FT TO A STAKE ON S LINE OF SD SEC 1592.7 FT E OF SW COR THEREOF
& THERE TERM, EX RDS, SUBJ TO EASE OF REC
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Lino Lakes Economic Development Authority, Minnesota
24-31-22-34-0002
TTH PRT OF SE1/4 OF SW1/4 OF SEC 24-31-22 LYG WITHIN A 50 FT WIDE
STRIP WITH A C/L DESC AS FOL: BEG AT A PT ON E LINE OF SD SEC
21.5 FT S OF E1/4 COR THEREOF, TH S 52 DEG 27 MIN W 4599.2 FT TO A
PT ONS LINE OF SD SEC 1592.7 FT E OF SW COR THEREOF & THERE
TERM; EX RDS; SUBJ TO EASE OF RECHE SE1/4 OF SW1/4 OF SEC 34
TWP 31 RGE 22, EX THAT PRT OF SD 1/4 1/4 LYG SELY OF CSAH NO 32,
ALSO EX E 594 FT OF N 885.5 FT THEREOF, EX RD, SUBJ TO EASE OF
REC
24-31-22-31-0001 *
THE NE1/4 OF SW1/4 OF SEC 24 TWP 31 RGE 22, EX THAT PRT THEREOF
LYG WLY OF FOL DESC LINE: BEG AT A PT ON N LINE OF SD 1/4 1/4 16.5
FT ELY OF NW COR THEREOF, TH SLY TO SW COR OF SD 1/4 1/4 & SD
LINETHERE TERM, EX RD, SUBJ TO EASE OF REC
24-31-22-31-0002
THAT PRT OF NE1/4 OF SW1/4 OF SEC 24 TWP 31 RGE 22 LYG S OF ELY
EXTN OF N LINE OF S 662.45 FT OF NW1/4 OF SD 1/4 & LYG WLY OF FOL
DESC LINE: BEG AT A PT ON N LINE OF SD NE1/4 16.5 FT ELY OF NW
COR THEREOF, TH SLY TO SW COR OF SD 1/4 1/4 & THERE TERM, SUBJ
TO EASE OF REC
24-31-22-31-0003
THAT PRT OF NE1/4 OF SW1/4 OF SEC 24 TWP 31 RGE 22 LYG NLY OF
ELY EXTN OF N LINE OF S 662.45 FT OF NW1/4 OF SD 1/4 & LYG WLY OF
FOL DESC LINE: BEG AT A PT ON N LINE OF SD NE1/4 16.5 FT ELY OF
NW COR THEREOF, TH SLY TO SW COR OF SD 1/4 1/4 & THERE TERM,
SUBJ TO EASE OF REC
`* parcel will be split and only a portion will be included within the TIF District.
The area encompassed by the TIF District shall also include all street or utility right-of-ways located upon or adjacent
to the property described above.
Section H Property to be Acquired in the TIF District
The Authority may acquire and sell any or all of the property located within the TIF District; however, the Authority
does not anticipate acquiring any such property at this time.
Section I Specific Development Expected to Occur Within the TIF District
The proposed development is expected to consist of the construction of a new 402,000 square foot warehousing and
distribution facility for Distribution Alternatives within the City of Lino Lakes. The development will result in increased
tax base and retained employment within the City, in compliance with statutory requirements. It is anticipated tax
increment will be used to finance a portion of the extraordinary site development, soil correction, public
improvements, and infrastructure costs related to the project. In addition, the Authority anticipates using available tax
increment for related administrative expenses and any other eligible expenditures associated with the development of
the site.
Construction of the facility is projected to start in summer/fall of 2016 and is expected to be fully constructed by
December 31, 2017, and be 100% assessed and on the tax rolls as of January 2, 2018 for taxes payable in 2019.
At the time this document was prepared there were no signed construction contracts with regards to the above
described development.
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Lino Lakes Economic Development Authority, Minnesota
Section J Findings and Need for Tax Increment Financing
In establishing the TIF District, the City makes the following findings:
(1) The TIF District qualifies as an economic development district;
See Section E of this document for the reasons and facts supporting this finding.
(2) The proposed development, in the opinion of the City, would not reasonably be expected to occur solely
through private investment within the reasonably foreseeable future, and the increased market value of
the site that could reasonably be expected to occur without the use of tax increment would be less than
the increase in market value estimated to result from the proposed development after subtracting the
present value of the projected tax increments for the maximum duration of the TIF District permitted by
the TIF Plan.
Factual basis:
Proposed development not expected to occur:
The project includes the development of a new large 402,000 warehouse and distribution facility in an
undeveloped area of the City. The proposed developer of the site has submitted information to the city
demonstrating that the development of this site is not financially feasible without the assistance provided in
this TIF Plan.
The City has determined that the proposed development would not occur but for the financial assistance
provided in this TIF Plan because of the high cost of construction at the site due to the need for significant
site development and public improvement infrastructure costs necessary for development to occur.
Specifically, site preparation on the site requires the construction of a crossing over a creek and flood
mitigation along the creek. The extension of a city road will also be required to serve the development. Due
to the high costs of investment for the proposed project, including site improvements, public improvements,
soil correction, and infrastructure costs that would be incurred by the developer in conjunction with
development of the project, the developer has stated that the project as proposed would not occur without
the financial assistance provided by the City, as it would not be economically feasible without financial
assistance. The City finds the use of tax increment necessary to finance a portion of the site improvement,
public infrastructure, soil correction and infrastructure costs to facilitate development of the project and
developer investment. The City anticipates providing financial assistance on a pay-as-you-go basis.
No higher market value expected:
The increased market value of the site that could reasonably be expected to occur without the use of tax
increment financing would be less than the increase in market value estimated to result from the proposed
development after subtracting the present value of the projected tax increments for the maximum duration of
the TIF District permitted by the TIF Plan. Without the improvements the City has no reason to expect that
significant development would occur without assistance similar to that provided in this plan. For the same
reasons that the desired development described above is not feasible without tax increment assistance, the
City believes that no alternative development is likely to occur without similar assistance.
To summarize the basis for the City's findings regarding alternative market value, in accordance with
Minnesota Statutes, Section 469.175, Subd. 3(d), the City makes the following determinations:
a. The City's estimate of the amount by which the market value of the site will increase without the
use of tax increment financing is $0 (for the reasons described above), except some unknown
amount of appreciation.
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Lino Lakes Economic Development Authority, Minnesota
b. If the proposed development to be assisted with tax increment occurs in the District, the
total increase in market value would be approximately $20,782,140 including the value of the
building (See Exhibit V).
C. The present value of tax increments from the District for the maximum duration of the
district permitted by the TIF Plan is estimated to be $2,025,557 (See Exhibit V).
d. Even if some development other than the proposed development were to occur, the City
finds that no alternative would occur that would produce a market value increase greater than
$18,756,583 (the amount in clause b less the amount in clause c) without tax increment assistance.
(3) The TIF Plan would afford maximum opportunity, consistent with the sound needs of the City as a
whole, for development of the Project Area by private enterprise.
Factual basis: The proposed development is the construction of a new large warehousing and distribution
facility in the Project Area that is expected to retain existing jobs as well as create new jobs in the City, plus
create new tax base for the City and the State. The development meets the City's economic development
goals in terms of tax base expansion, job retention, and wage levels.
(4) The TIF Plan conforms to general plans for development of the City as a whole.
Factual basis: The City has determined that the development proposed in the TIF Plan conforms to the
City comprehensive plan.
Section K Estimated Public Costs
The estimated public costs of the TIF District are listed below. Such costs are eligible for reimbursement from tax
increments of the TIF District.
Land/Building Acquisition
Site Improvements/Preparation Costs
Installation of Public Infrastructure Improvements
Other Qualifying Improvements
Administrative Costs
Loan Interest Costs
Total
$0
$1,105,529
$977,373
$390,544
$130,181
$0
$2,603,627
The City anticipates using tax increment to the extent available to assist with financing a portion of the site
improvements and infrastructure costs, related administrative expenses, and other TIF-eligible expenditures as
necessary and related to development of the project.
The City reserves the right to administratively adjust the amount of any of the items listed above or to incorporate
additional eligible items, so long as the total estimated public cost is not increased.
SPRINGSTED Page 6
Lino Lakes Economic Development Authority, Minnesota
Section L Estimated Sources of Revenue
Tax increment revenue
$2,603,627
Interest on invested funds
0
Loan proceeds
0
Special assessments
0
Rent/lease revenue
0
Grants
0
Total $2,603,627
The Authority anticipates providing financial assistance on a pay-as-you-go basis for site improvement and
infrastructure costs, as well as other TIF-eligible expenses related to the proposed development. As tax increments
are collected from the TIF District in future years, a portion of these taxes will be used by the Authority to reimburse
the developer/owner for public costs incurred (see Section K).
The Authority reserves the right to finance any or all public costs of the TIF District using pay-as-you-go assistance,
internal funding, general obligation or revenue debt (referred to together as "TIF Bonds"), or any other financing
mechanism authorized by law. The Authority also reserves the right to use other sources of revenue legally
applicable to the Project Area to pay for such costs including, but not limited to, special assessments, utility revenues,
federal or state funds, and investment income.
Section M Estimated Amount of Bonded Indebtedness
The maximum principal amount of bonds (as defined in the TIF Act) secured in whole or part with tax increment from
the TIF District is 2 603 627. The Authority currently plans to finance the improvement costs in the form of a pay -as -
you go revenue note, but reserves the right to issue bonds in any form, including without limitation any interfund loan
with interest not to exceed the maximum permitted under Section 469.178, subd. 7 of the TIF Act.
Section N Original Net Tax Capacity
The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal to the total net
tax capacity of all property in the TIF District as certified by the State Commissioner of Revenue. For districts certified
between January 1 and June 30, inclusive, this value is based on the previous assessment year. For districts
certified between July 1 and December 31, inclusive, this value is based on the current assessment year.
The Estimated Market Value of all property within the TIF District as of January 2, 2016, for taxes payable in 2017, is
$333,000 and the estimated tax capacity is $5,910, which is estimated to be the original net tax capacity of the TIF
District upon establishment and subsequent certification. This also includes an anticipated lot split with partial value
included within the district and reclassification of the property to commercial -industrial.
Each year the County Auditor shall certify the amount that the original net tax capacity has increased or decreased as
a result of:
(1) changes in the tax-exempt status of property;
(2) reductions or enlargements of the geographic area of the TIF District;
(3) changes due to stipulation agreements or abatements; or
(4) changes in property classification rates.
SPRINGSTED Page 7
Lino Lakes Economic Development Authority, Minnesota
Section 0 Original Tax Capacity Rate
The County Auditor shall also certify the original tax capacity rate of the TIF District. This rate shall be the sum of all
local tax rates that apply to property in the TIF District. This rate shall be for the same taxes payable year as the
original net tax capacity.
In future years, the amount of tax increment generated by the TIF District will be calculated using the lesser of (a) the
sum of the current local tax rates at that time or (b) the original tax capacity rate of the TIF District.
The request for certification of the District is expected to occur after June 30, 2016 and prior to July 1, 2017. As a
result, the local tax rates for taxes payable 2017 will be applicable. Since the rates are not available, for purposes of
estimating the tax increment generated by the TIF District, the sum of all local tax rates that apply to property within
the District, for taxes levied in 2015 and payable in 2016 is 127.744%. The County Auditor shall certify the applicable
year's amount as the original tax capacity rate of the TIF District.
2015/2016
Taxing Jurisdiction Local Tax Rate
City of Lino Lakes 46.019%
Anoka County 38.894%
ISD #12 36.426%
Other 6.405%
Total 127.744%
Section P Projected Retained Captured Net Tax Capacity and
Projected Tax Increment
The Authority anticipates that the project will begin construction in summer/fall 2016 and be 100% completed by
December 31, 2017, creating a total tax capacity for TIF District No. 1-12 of $366,890 as of January 2, 2018. The
captured tax capacity as of that date is estimated to be $225,291 and the first year of tax increment is estimated to be
$287,796 payable in 2019. A complete schedule of estimated tax increment from the TIF District is shown in Exhibit
IV.
The estimates shown in this TIF plan assume that commercial class rates remain at 1.5% of the estimated market
value up to $150,000 and 2.0% of the estimated market value over $150,000, and assume 2% annual increases in
market values.
Each year the County Auditor shall determine the current net tax capacity of all property in the TIF District. To the
extent that this total exceeds the original net tax capacity, the difference shall be known as the captured net tax
capacity of the TIF District.
The County Auditor shall certify to the Authority the amount of captured net tax capacity each year. The City may
choose to retain any or all of this amount. It is the Authority's intention to retain 100% of the captured net tax capacity
of the TIF District. Such amount shall be known as the retained captured net tax capacity of the TIF District.
Exhibit II gives a listing of the various information and assumptions used in preparing a number of the exhibits
contained in this TIF Plan, including Exhibit III which shows the projected tax increment generated over the
anticipated life of the TIF District.
SPRINGSTED Page 8
Lino Lakes Economic Development Authority, Minnesota
Section Q Use of Tax Increment
Each year the County Treasurer shall deduct 0.36% of the annual tax increment generated by the TIF District and pay
such amount to the State's General Fund. Such amounts will be appropriated to the State Auditor for the cost of
financial reporting and auditing of tax increment financing information throughout the state. Exhibit III shows the
projected deduction for this purpose over the anticipated life of the TIF District.
The Authority has determined that it will use 100% of the remaining tax increment generated by the TIF District for
any of the following purposes:
(1) pay for the estimated public costs of the TIF District (see Section K) and County administrative
costs associated with the TIF District (see Section T);
(2) pay principal and interest on tax increment bonds or other bonds issued to finance the estimated
public costs of the TIF District;
(3) accumulate a reserve securing the payment of tax increment bonds or other bonds issued to
finance the estimated public costs of the TIF District;
(4) pay all or a portion of the county road costs as may be required by the County Board under M.S.
Section 469.175, Subdivision 1 a; or
(5) return excess tax increments to the County Auditor for redistribution to the City, County and School
District.
Tax increments from property located in one county must be expended for the direct and primary benefit of a project
located within that county, unless the county board involved waives this requirement. Tax increments shall not be
used to circumvent levy limitations applicable to the Authority.
Tax increment shall not be used to finance the acquisition, construction, renovation, operation, or maintenance of a
building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any
other local unit of government or the State or federal government, or for a commons area used as a public park, or a
facility used for social, recreational, or conference purposes. This prohibition does not apply to the construction or
renovation of a parking structure or of a privately owned facility for conference purposes.
If there exists any type of agreement or arrangement providing for the developer, or other beneficiary of assistance, to
repay all or a portion of the assistance that was paid or financed with tax increments, such payments shall be subject
to all of the restrictions imposed on the use of tax increments. Assistance includes sale of property at less than the
cost of acquisition or fair market value, grants, ground or other leases at less then fair market rent, interest rate
subsidies, utility service connections, roads, or other similar assistance that would otherwise be paid for by the
developer or beneficiary.
Section R Excess Tax Increment
In any year in which the tax increments from the TIF District exceed the amount necessary to pay the estimated
public costs authorized by the TIF Plan, the Authority shall use the excess tax increments to:
(1) prepay any outstanding tax increment bonds;
(2) discharge the pledge of tax increments thereof;
(3) pay amounts into an escrow account dedicated to the payment of the tax increment bonds; or
SPRINGSTED Page 9
Lino Lakes Economic Development Authority, Minnesota
(4) return excess tax increments to the County Auditor for redistribution to the City, County and School
District. The County Auditor must report to the Commissioner of Education the amount of any
excess tax increment redistributed to the School District within 30 days of such redistribution.
Section S Tax Increment Pooling and the Five Year Rule
At least 80% of the tax increments from the TIF District must be expended on activities within the district or to pay for
bonds used to finance the estimated public costs of the TIF District (see Section E for additional restrictions). No
more than 20% of the tax increments may be spent on costs outside of the TIF District but within the boundaries of
the Project Area, except to pay debt service on credit enhanced bonds. All administrative expenses are considered to
have been spent outside of the TIF District. Tax increments are considered to have been spent within the TIF District
if such amounts are:
(1) actually paid to a third party for activities performed within the TIF District within five years after
certification of the district;
(2) used to pay bonds that were issued and sold to a third party, the proceeds of which are reasonably
expected on the date of issuance to be spent within the later of the five-year period or a reasonable
temporary period or are deposited in a reasonably required reserve or replacement fund.
(3) used to make payments or reimbursements to a third party under binding contracts for activities
performed within the TIF District, which were entered into within five years after certification of the
district; or
(4) used to reimburse a party for payment of eligible costs (including interest) incurred within five years
from certification of the district.
Beginning with the sixth year following certification of the TIF District, at least 80% of the tax increments must be used
to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds
have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District
must be decertified.
The Authority expects that allowable pooling expenditures will be made outside of the TIF District and within the
Project Area (along with allowable administrative expenses), and such expenditures are expressly authorized in this
TIF Plan.
Section T Limitation on Administrative Expenses
Administrative expenses are defined as all costs of the Authority other than:
(1) amounts paid for the purchase of land;
(2) amounts paid for materials and services, including architectural and engineering services directly
connected with the physical development of the real property in the project;
(3) relocation benefits paid to, or services provided for, persons residing or businesses located in the
project;
(4) amounts used to pay principal or interest on, fund a reserve for, or sell at a discount bonds issued
pursuant to section 469.178; or
(5) amounts used to pay other financial obligations to the extent those obligations were used to finance
costs described in clause (1) to (3).
SPRINGSTED Page 10
Lino Lakes Economic Development Authority, Minnesota
Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or
economic development consultants, and actual costs incurred by the County in administering the TIF District. Tax
increments may be used to pay administrative expenses of the TIF District up to the lesser of (a) 10% of the total tax
increment expenditures authorized by the TIF Plan or (b) 10% of the total tax increments received by the TIF District.
Section U Limitation on Property Not Subject to Improvements - Four Year Rule
If after four years from certification of the TIF District no demolition, rehabilitation, renovation, or qualified
improvement of an adjacent street has commenced on a parcel located within the TIF District, then that parcel shall
be excluded from the TIF District and the original net tax capacity shall be adjusted accordingly. Qualified
improvements of a street are limited to construction or opening of a new street, relocation of a street, or substantial
reconstruction or rebuilding of an existing street. The Authority must submit to the County Auditor, by February 1 of
the fifth year, evidence that the required activity has taken place for each parcel in the TIF District.
If a parcel is excluded from the TIF District and the Authority or owner of the parcel subsequently commences any of
the above activities, the Authority shall certify to the County Auditor that such activity has commenced and the parcel
shall once again be included in the TIF District. The County Auditor shall certify the net tax capacity of the parcel, as
most recently certified by the Commissioner of Revenue, and add such amount to the original net tax capacity of the
TIF District.
Section V Estimated Impact on Other Taxing Jurisdictions
Exhibit IV shows the estimated impact on other taxing jurisdictions if the maximum projected retained captured net tax
capacity of the TIF District was hypothetically available to the other taxing jurisdictions. The Authority believes that
there will be no adverse impact on other taxing jurisdictions during the life of the TIF District, since the proposed
development would not have occurred without the establishment of the TIF District and the provision of public
assistance. A positive impact on other taxing jurisdictions will occur when the TIF District is decertified and the
development therein becomes part of the general tax base.
The fiscal and economic implications of the proposed tax increment financing district, as pursuant to Minnesota
Statutes, Section 469.175, Subdivision 2, are listed below.
1. The total amount of tax increment that will be generated over the life of the district is estimated to be
$2,613,034.
2. To the extent the facility in the proposed TIF District generates any public cost impacts on city -provided
services such as police and fire protection, public infrastructure, and borrowing costs attributable to the
district, such costs will be levied upon the taxable net tax capacity of the City, excluding that portion captured
by the District. The City does not anticipate issuing bonds in conjunction with this project.
3. The amount of tax increments over the life of the district that would be attributable to school district levies,
assuming the school district's share of the total local tax rate for all taxing jurisdictions remained the same, is
estimated to be $745,102.
The amount of tax increments over the life of the district that would be attributable to county levies,
assuming the county's share of the total local tax rate for all taxing jurisdictions remained the same is
estimated to be $795,585.
5. No additional information has been requested by the county or school district that would enable it to
determine additional costs that will accrue to it due to the development proposed for the district.
Section W Prior Planned Improvements
SPRINGSTED Page 11
Lino Lakes Economic Development Authority, Minnesota
The Authority shall accompany its request for certification to the County Auditor (or notice of district enlargement),
with a listing of all properties within the TIF District for which building permits have been issued during the 18 months
immediately preceding approval of the TIF Plan. The County Auditor shall increase the original net tax capacity of the
TIF District by the net tax capacity of each improvement for which a building permit was issued.
There have been no building permits issued in the last 18 months in conjunction with any of the properties within the
TIF District.
Section X Development Agreements
If within a project containing an economic development district, more than 10% of the acreage of the property to be
acquired by the Authority is purchased with tax increment bonds proceeds (to which tax increment from the property
is pledged), then prior to such acquisition, the Authority must enter into an agreement for the development of the
property. Such agreement must provide recourse for the Authority should the development not be completed.
The Authority anticipates entering into an agreement for development, but does not anticipate acquiring any property
located within the TIF District.
Section Y Assessment Agreements
The Authority may, upon entering into a development agreement, also enter into an assessment agreement with the
developer, which establishes a minimum market value of the land and improvements for each year during the life of
the TIF District.
The assessment agreement shall be presented to the County or City Assessor who shall review the plans and
specifications for the improvements to be constructed, review the market value previously assigned to the land, and
so long as the minimum market value contained in the assessment agreement appears to be an accurate estimate,
shall certify the assessment agreement as reasonable. The assessment agreement shall be filed for record in the
office of the County Recorder of each county where the property is located. Any modification or premature
termination of this agreement must first be approved by the City, County and School District.
The Authority does not anticipate entering into an assessment agreement.
Section Z Modifications of the Tax Increment Financing Plan
Any reduction or enlargement in the geographic area of the Project Area or the TIF District; increase in the
amount of bonded indebtedness to be incurred; a determination to capitalize interest on the debt if that
determination was not part of the original TIF Plan, increase in the amount of capitalized interest; increase in
that portion of the captured net tax capacity to be retained by the Authority; increase in the total estimated
public costs; or designation of additional property to be acquired by the Authority shall be approved only after
satisfying all the necessary requirements for approval of the original TIF Plan. This paragraph does not
apply if:
(1) the only modification is elimination of parcels from the TIF District; and
(2) the current net tax capacity of the parcels eliminated equals or exceeds the net tax capacity of
those parcels in the TIF District's original net tax capacity, or the Authority agrees that the TIF
District's original net tax capacity will be reduced by no more than the current net tax capacity of the
parcels eliminated.
SPRINGSTED Page 12
Lino Lakes Economic Development Authority, Minnesota
The Authority must notify the County Auditor of any modification that reduces or enlarges the geographic area of the
TIF District. The geographic area of the TIF District may be reduced but not enlarged after five years following the
date of certification.
Section AA Administration of the Tax Increment Financing Plan
Upon adoption of the TIF Plan, the Authority shall submit a copy of such plan to the Minnesota Department of
Revenue. The Authority shall also request that the County Auditor certify the original net tax capacity and net tax
capacity rate of the TIF District. To assist the County Auditor in this process, the Authority shall submit copies of the
TIF Plan, the resolution establishing the TIF District and adopting the TIF Plan, and a listing of any prior planned
improvements. The Authority shall also send the County Assessor any assessment agreement establishing the
minimum market value of land and improvements in the TIF District, and shall request that the County Assessor
review and certify this assessment agreement as reasonable.
The County shall distribute to the Authority the amount of tax increment as it becomes available. The amount of tax
increment in any year represents the applicable property taxes generated by the retained captured net tax capacity of
the TIF District. The amount of tax increment may change due to development anticipated by the TIF Plan, other
development, inflation of property values, or changes in property classification rates or formulas. In administering and
implementing the TIF Plan, the following actions should occur on an annual basis:
prior to July 1, the Authority shall notify the County Assessor of any new development that has
occurred in the TIF District during the past year to insure that the new value will be recorded in a
timely manner.
(2) if the County Auditor receives the request for certification of a new TIF District, or for modification of
an existing TIF District, before July 1, the request shall be recognized in determining local tax rates
for the current and subsequent levy years. Requests received on or after July 1 shall be used to
determine local tax rates in subsequent years.
(3) each year the County Auditor shall certify the amount of the original net tax capacity of the TIF
District. The amount certified shall reflect any changes that occur as a result of the following:
(a) the value of property that changes from tax-exempt to taxable shall be added to the
original net tax capacity of the TIF District. The reverse shall also apply;
(b) the original net tax capacity may be modified by any approved enlargement or reduction of
the TIF District;
(c) if laws governing the classification of real property cause changes to the percentage of
estimated market value to be applied for property tax purposes, then the resulting increase
or decrease in net tax capacity shall be applied proportionately to the original net tax
capacity and the retained captured net tax capacity of the TIF District.
The County Auditor shall notify the Authority of all changes made to the original net tax capacity of the TIF District.
Section AB Filing TIF Plan, Financial Reporting and Disclosure Requirements
The Authority will file the TIF Plan, and any subsequent amendments thereto, with the Commissioner of Revenue and
the Office of the State Auditor pursuant to Minnesota Statutes, Section 469.175, subdivision 4A. The Authority will
comply with all reporting requirements for the TIF District under Minnesota Statutes, Section 469.175, subdivisions 5
and 6.
SPRINGSTED Page 13
Exhibit 1
Map of Tax Increment Financing (Economic Development) District No. 1-12
Proposed TIF District
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` Proposed Tax Increment District "
I 'r c� I learwater Creek Busfwss Park
Feat
C =v] rv] 1.2010
SPRINGSTED Page 14
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Exhibit 11
Assumptions Report
City of Lino Lakes, Minnesota
Tax Increment Financing (Economic Development) District No. 1-12
Clearwater Creek Business Park Project
TIF Plan Exhibits: Based on EMV of $18.2M - Construct 2016-2017
Type of Tax Increment Financing District Economic Development
Maximum Duration of TIF District 8 years from 1st increment
Projected Certification Request Date
Decertification Date
Base Estimated Market Value *
PID: 24-31-22-34-0001
PID: 24-31-22-34-0002
PID: 24-31-22-31-0001
PID: 24-31-22-31-0002
PID: 24-31-22-31-0003
Original Net Tax Capacity
06/30/16
12/31/26 (9 Years of Increment)
$333,000
$5,910
Assessment/Collection Year
2016/2017
2017/2018
2018/2019
2019/2020
Base Estimated Market Value
$333,000
$333,000
$333,000
$333,000
Increase in Estimated Market Value
0
8,767,000
18,049,000
18,416,640
Total Estimated Market Value
333,000
9,100,000
18,382,000
18,749,640
Total Net Tax Capacity
$5,910
$181,250
$366,890
$374,243
City of Lino Lakes
46.019%
Anoka County
38.894%
ISD # 12
36.426%
Other
6.405%
Local Tax Capacity Rate 127.744% Payable 2016
Frozen Tax Capacity Rate
Fiscal Disparities Contribution From TIF District 37.5890%
Administrative Retainage Percent (maximum = 10%) 5.00%
Pooling Percent 15.00%
Bonds
Bonds Dated NA
Bond Issue @ 0.00% (NIC) NA
Eligible Project Costs NA
Present Value Date & Rate 02/01/17
Note Dated 02/01/17
Note Rate 4.00%
Note Amount $1,695,909
4.00% Net PVAmour 1,695,909
Notes
* Base EMV 2017 market values for 5 parcels. Tax capacity calculated at 1.5%/2% class rate.
Assume property will be classified as commercial/industrial upon project completion.
Projections assume no future changes to class rates or tax rates,
and include 2% annual market value inflator.
Development includes construction of in 2016/17.
Valuation estimates provided by County and include improved land value of $1.2M.
Fiscal disparities contribution from properties within the proposed TIF District.
SPRINGSTED Page 16
Projected Tax Increment Report
City of Lino Lakes, Minnesota
Tax Increment Financing (Economic Development) District No. 1-12
Clearwater Creek Business Park Project
TIF Plan Exhibits: Based on EMV of $18.2M - Construct 2016-2017
Annual
Period
Ending
(1)
Total
Market
Value *
(2)
Total
Net Tax
Capacity
(3)
Less:
Original
Net Tax
Capacity **
(4)
Less:
Fiscal
Disp. @
37.5890%
(5)
Retained
Captured
Net Tax
Capacity
(6)
Times:
Tax
Capacity
Rate ***
(7)
12/31/16
333,000
5,910
5,910
0
0
127.744%
12/31/17
333,000
5,910
5,910
0
0
127.744%
12/31/18
9,100,000
181,250
5,910
65,909
109,431
127.744%
12/31/19
18,382,000
366,890
5,910
135,689
225,291
127.744%
12/31/20
18,749,640
374,243
5,910
138,453
229,880
127.744%
12/31/21
19,124,633
381,743
5,910
141,272
234,561
127.744%
12/31/22
19,507,125
389,393
5,910
144,147
239,336
127.744%
12/31/23
19,897,268
397,195
5,910
147,080
244,205
127.744%
12/31/24
20,295,213
405,154
5,910
150,072
249,172
127.744%
12/31/25
20,701,118
413,272
5,910
153,123
254,239
127.744%
12/31/26
21,115,140
421,553
5,910
156,236
259,407
127.744%
Exhibit ///
Annual
Gross Tax
Increment
8
Less:
State Aud.
Deduction
0.360%
9
Annual
Revenue
Net of
OSA Deductior
10
Less: Less:
Admin. Pooling
Retainage Retainage
5.00% 15.00%
11 12
Annual
Net
Revenue
13
0
0
0
0 0
0
0
0
0
0 0
0
139,792
503
139,289
6,964 20,893
111,432
287,796
1,036
286,760
14,338 43,014
229,408
293,658
1,057
292,601
14,630 43,890
234,081
299,637
1,079
298,558
14,928 44,784
238,846
305,737
1,101
304,636
15,232 45,695
243,709
311,958
1,123
310,835
15,542 46,625
248,668
318,303
1,146
317,157
15,858 47,574
253,725
324,776
1,169
323,607
16,180 48,541
258,886
331,3771
1,1931
330,1841
16,509 49,5281
264,147
$2,613,034
1 $9,407
1 $2,603,627
$130,181 $390,544
$2,082,902
* Total Market Value based on newestimated land and building value of $18,200,000 (preliminary and subject to change)
** Original net tax capacity based on existing taxable land value of five properties and calculated based on reclassification to commercial -industrial class rates
*** Total Combined Local Tax Capacity Rate of City, County, School District and other taxing jurisdictions for payable 2016
SPRINGSTED Page 17
Exhibit IV
Estimated Impact on Other Taxing Jurisdictions Report
City of Lino Lakes, Minnesota
Tax Increment Financing (Economic Development) District No. 1-12
Clearwater Creek Business Park Project
TIF Plan Exhibits: Based on EMV of $18.2M - Construct 2016-2017
Without
Project or TIF District
With Project and TIF District
Projected
Hypothetical
2015/2016
2015/2016
Retained
New
Hypothetical
Hypothetical
Tax Generated
Taxable 2015/2016
Taxable
Captured
Taxable
Adjusted
Decrease In
by Retained
Taxing Net Tax Local
Net Tax
Net Tax
Net Tax
Local
Local
Captured
Jurisdiction Capacity (1) Tax Rate
Capacity (1)
+ Capacity
= Capacity
Tax Rate (*)
Tax Rate (*)
N.T.C. (*)
City of Lino Lakes 17,063,470 46.019%
17,063,470
$259,407
17,322,877
45.330%
0.689%
117,589
Anoka County 265,016,460 38.894% 265,016,460 259,407 265,275,867 38.856% 0.038% 100,795
ISD # 12 25,985,579 36.426% 25,985,579 259,407 26,244,986 36.066% 0.360% 93,558
Other (2) --- 6.405% --- 259,407 --- 6.405% --- ---
Totals 127.744% 126.657% 1.087%
* Statement 1: If the projected Retained Captured Net Tax Capacity of the TIF District was hypothetically available to each of
the taxing jurisdictions above, the result would be a lower local tax rate (see Hypothetical Adjusted Tax Rate above)
which would produce the same amount of taxes for each taxing jurisdiction. In such a case, the total local tax rate
would decrease by 1.087% (see Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that the
Retained Captured Net Tax Capacity of the TIF District would generate is also shown above.
Statement 2: Since the projected Retained Captured Net Tax Capacity of the TIF District is not available to the taxing jurisdictions,
then there is no impact on taxes levied or local tax rates.
(1) Taxable net tax capacity = total net tax capacity - captured TIF - fiscal disparity contribution, if applicable.
(2) The impact on these taxing jurisdictions is negligible since they represent only 5.01 % of the total tax rate.
SPRINGSTED Page 18
Exhibit V
Market Value Analysis Report
City of Lino Lakes, Minnesota
Tax Increment Financing (Economic Development) District No. 1-12
Clearwater Creek Business Park Project
TIF Plan Exhibits: Based on EMV of $18.2M - Construct 2016-2017
Assumptions
Present Value Date
P.V. Rate - Gross T.I.
06/30/16
4.00%
Increase in EMV With TIF
District
$20,782,140
Less: P.V of Gross Tax
Increment
2,025,557
Subtotal
$18,756,583
Less: Increase in EMV Without TIF
0
Difference
$18,756,583
Annual
Present
Gross Tax
Value @
Year
Increment
4.00%
1
2018
139,792
127,971
2
2019
287,797
253,327
3
2020
293,659
248,545
4
2021
299,638
243,851
5
2022
305,738
239,246
6
2023
311,959
234,725
7
2024
318,304
230,287
8
2025
324,777
225,933
9
2026
331,378
221,659
$2,613,066
$2,025,557
SPRINGSTED Page 19
DEVELOPMENT PROGRAM
DEVELOPMENT DISTRICT NO.1
LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY
Date Modified: July 25, 2046
This document drafted by:
KENNEDY & GRAVEN, CHARTERED
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, MN 55402
(612)337-9300
483508v2 JAE LN140-116
TABLE OF CONTENTS
Page
MODIFIED DEVELOPMENT DISTRICT PROGRAM FOR DEVELOPMENT DISTRICT NO. I
Subsection A.
Subsection B.
Subsection C.
Subsection D.
Subsection E.
Subsection F.
Subsection G.
Subsection H.
Subsection I.
Subsection J.
Subsection K.
Subsection L.
Definitions.........................................................................................................1
StatutoryAuthority........................................................................................... 2
Statement of Public Purpose............................................................................ 2
Statement of Objectives....................................................................................2
Environmental Controls................................................................................... 3
Open Space to be Created................................................................................ 3
Public Facilities to be Constructed.................................................................. 3
Proposed Reuse of Property............................................................................. 3
Development District Financing......................................................................4
Relocation........................................................................................................4
Administration of Development District......................................................... 4
Map of Development District.......................................................................... 4
483508v2 JAE LN140-116
MODIFIED DEVELOPMENT DISTRICT PROGRAM FOR DEVELOPMENT DISTRICT NO. 1
A. Definitions
For the purposes of the modified Program for Development District No. 1 the following
terms shall have the meanings specified below, unless the context otherwise requires:
"Administrative Expenses" means all expenditures of the Authority other than amounts paid
for the purchase of land or amounts paid to contractors or others providing materials and services,
including architectural and engineering services, directly connected with the physical development
of real property in the District, relocation benefits paid to or services provided for persons residing
or businesses located in the District, or amounts used to pay interest on, fund a reserve for, or sell at
a discount bonds issued pursuant to section 469.178 of the TIF Act. Administrative Expenses
includes amounts paid for services provided by bond counsel, fiscal consultants and planning or
economic development consultants;
"Administrator" means the executive director of the Authority or his or her designee;
"Authority" or "EDA" means the Lino Lakes Economic Development Authority, a public
body corporate and politic under the laws of Minnesota;
"City" means the City of Lino Lakes, a municipal corporation under the laws of Minnesota;
"City Council" or "Council" means the Lino Lakes City Council;
"City Development District Act" means Minnesota Statutes, sections 469.124 through
469.134, as amended;
"Comprehensive Plan" means the City's objectives, policies, standards and programs to
guide public and private land use, development, redevelopment and preservation for all lands and
water within the City;
"County" means Anoka County, Minnesota;
"Development District" or "District" means Development District No. 1, which was
established in 1987 by the City and is now under the control of the Authority;
"Development District Program" or "Program" means the Program for Development
District No. 1, which was adopted on January 26, 1987, as modified from time to time thereafter.
"EDA Act" means Minnesota Statutes, sections 469.090 through 469.108, as amended;
"Special Law" means 2011 Minnesota Laws, Ch. 112, Art. 11, Section 18.
"State" means the State of Minnesota;
483508v2 JAE LN140-116
"Tax Increment Bonds" means any general obligation or revenue tax increment bonds or
notes issued by the Authority or the City to finance the public costs associated with Development
District No. I as stated in the modified Program or in the Plan for any of the tax increment financing
districts within Development District No. 1 or any obligations issued to refund any Tax Increment
Bonds, and including any interfund loans or advances within the meaning of the TIF Act;
"Tax Increment Financing Act" or "TIF Act" means Minnesota Statutes, sections 469.174
through 469.1794, as amended;
"Tax Increment Financing District" or "TIF District" means any tax increment financing
district established or to be established within Development District No. 1 pursuant to the TIF Act;
and
"Tax Increment Financing Plan" or "Plan" means the Plan for any of the TIF Districts
within the Development District.
B. Statutory Authority
The Authority has determined that it is necessary, desirable and in the public interest to
modify the Program for Development District No. 1, pursuant to the provisions of the EDA Act and
the City Development District Act. The Authority has also determined that funding for the
necessary activities and improvements in Development District No. 1 will continue to be
accomplished in part or in whole through tax increment financing in accordance with the TIF Act.
C. Statement of Public Purpose
The Authority has previously determined there to be a need to offer assistance to encourage
development of the area of the community established as Development District No. 1 in order to
increase employment opportunities, improve the tax base and improve the general economy of Lino
Lakes and the State. The City established the Development District on January 26, 1987, and
subsequently transferred control and administration of the District to the Authority. The boundaries
of the Development District were most recently expanded on April 28, 1997 in connection with the
establishment of TIF District No. 1-8.
Within the District, the City and/or Authority have previously created eleven TIF Districts. The
purpose of this modification of the Program is to acknowledge the Authority's intent to establish
TIF District No. 1-12 and to create a TIF Plan therefor in order to assist with the development of an
approximate 402,000 square foot warehouse and distribution facility with associated office space.
Another purpose of this modification of the Program is to modify the boundaries of Development
District to be coterminous with the corporate limits of the City.
D. Statement of Objectives
The Authority will continue to seek to achieve the following objectives through the
modified Development District Program:
483508v2 JAE LN140-116
1. promote and secure the prompt development of property in Development District
No. 1 in a manner consistent with the Comprehensive Plan and with minimal
adverse impact on the environment, which property is currently less productive
because of the lack of proper utilization and lack of investment, thus promoting and
securing the development of other land in Lino Lakes;
2. encourage additional employment opportunities within Development District No. 1
and Lino Lakes for residents of the community and the surrounding area, thereby
improving living standards and preventing unemployment and the loss of skilled
labor and other human resources in the area;
3. secure the increase of property subject to taxation by the City, County, school
districts and other taxing jurisdictions in order to better enable such entities to pay
for public improvements and governmental services and programs required to be
provided by them;
4. secure the construction and provide moneys for the payment of the public costs
within Development District No. 1 which are necessary for the orderly and
beneficial development of the Development District;
5. promote the concentration of appropriate uses and related development within
Development District No. 1 in order to maintain the area in a manner compatible
with its highest and best use; and
6. encourage development within the District which is aesthetically pleasing and which
creates a positive visual image of the community.
7. promote redevelopment of property that is occupied by substandard buildings, which
will foster revitalization of that property, increase tax base, and facilitate
development of a range of housing types and commercial services in Development
District No. 1.
E. Environmental Controls
It is not anticipated that any development within the Development District will present
major environmental concerns. All actions by the Authority, public improvements and private
development will be carried out in compliance with applicable environmental standards.
F. Open Space to be Created
Any open space within the Development District will be created in accordance with the
development controls of the Authority and will be adequate for the needs of the residents of the
community.
483508v2 JAE LN140-116
G. Public Facilities to be Constructed
All public facilities constructed within the Development District will be financially feasible
and compatible with the City's long range development plans.
H. Proposed Reuse of Property
The Authority may acquire property within Development District No. 1 in order to resell the
land to a developer. Property within the Development District will be reused in accordance with the
City's ordinances and Comprehensive Plan as well as with this modified Program and the TIF Plan
for TIF District No. 1-12 or the Plan for any other tax increment financing district within
Development District No. 1.
I. Development District Financing
Within Development District No. 1, the Authority will establish TIF District No. 1-12 to
help finance a portion of the site development and offsite public infrastructure improvement costs
associated with the construction of an approximate 402,000 square foot warehouse and distribution
facility to be developed within the amended boundaries of the Development District.
Public development costs for TIF District No. 1-12 and for all previously established TIF
Districts within the Development Project are expected to be paid primarily through pledged tax
increment. For detailed development and financing plans for each TIF District, refer to the
individual TIF Plan for the relevant TIF District.
J. Relocation
In establishing TIF Districts, Authority may find it necessary to pay for relocation for
individuals or businesses displaced by public action. The Authority accepts its responsibility for
providing for relocation pursuant to section 469.133 of the City Development District Act. If
relocation is necessary, provisions will be made in accordance with Minnesota Statutes, sections
117.50 through 117.56, as amended.
K. Administration of Development District
Maintenance and operation of the public improvements is the responsibility of the
Administrator of Development District No. 1. Each year the Administrator will submit to the
Authority the maintenance and operation budget for the following year. The Administrator will
administer the Development District pursuant to the provisions of section 469.131 of the City
Development District Act; provided, however, that such powers may only be exercised at the
direction of the Authority. No action taken by the Administrator shall be effective without
authorization by the Authority. The Authority has not and does not anticipate the need to create an
advisory board to advise the Authority on the planning, construction or implementation of the
activities and improvements outlined in the Development Program.
483508v2 JAE LN140-116
L. Map of Development District
A map of the boundaries, as amended, of Development District No. 1 is attached to this
modified Program as Exhibit A, which is incorporated herein by reference.
483508v2 JAE LN140-116
EXHIBIT A
483508v2 JAE LN140-116
r/W
LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY
AGENDA ITEM 3B
STAFF ORIGINATOR: Michael Grochala, Community Development Director
MEETING DATE: July 25, 2016
TOPIC: Public Hearing. Consider Resolution No. 16-05, Approving
Contract for Private Development and Awarding Sale of Tax
Increment Revenue Note.
VOTE REQUIRED: 3/5
BACKGROUND
United Properties has made a request for tax increment financing on behalf of the tenant,
Distribution Alternatives, Inc. (DAI). United Properties will be constructing a 402,000 square
foot building in the proposed Clearwater Creek Business Park and leasing the building to DAI.
DAI is a third party distribution center that provides warehousing and administrative services
for a variety of clients.
In 2004, DAI consolidated its headquarters and distribution services in Lino Lakes, moving
into a 265,000 square foot facility in the Marshan Lake Industrial Park. The company has
continued to grow and is in need of a larger facility. DAI currently employs 120 full time
employees, plus additional temporary positions during the year.
The new facility will be the located in the southwest quadrant of the I-35E/CSAH 14
interchange. The location will allow utilization of the transportation improvements that have
been completed over the past 8 years. The estimated value of the new construction is
approximately $18,000,000. The estimated tax increment generated over the life of the district
is approximately $2,613,000.
Based on an analysis of information provided by United Properties, staff and the City's
financial consultants, are recommending providing $1.2 million in assistance over a period of
approximately 5.5 years. The assistance will be on a "pay as you go" basis for site
improvements and infrastructure costs. The EDA will issue a "note" in the amount of
$1,200,000 in exchange for the improvements identified in the agreement. The developer will
be reimbursed by tax increments generated by the development on an annual basis.
In addition to completion of the improvements, the developer will be responsible for ensuring
the tenant meets the following Job and Wage goal requirements over the term of the assistance:
(i) the retention of sixty (60) full-time equivalent jobs in the City on the Development
Property, and (ii) the hourly wage of the jobs to be retained under subdivision (i) to be at least
110% of the federal minimum wage, exclusive of benefits.
The developer will also be required to cause the tenant to pay ninety percent (90%) or more of
the employees at the facility at a rate equal to or greater than one hundred and sixty percent
(160%) of the federal minimum wage for individuals over the age of twenty (20).
The EDA Business Subsidy Criteria has been established for use in evaluating a request for
financial assistance. These include the following:
La) Public purpose. A business subsidy must meet a public purpose, including but
not limited to increasing the tax base. Job retention may only be considered a
public purpose if the loss of jobs is specific and demonstrable.
(b) Increase in tax base. While an increase in the tax base cannot be the sole rounds
for granting a subsidy, the City and the EDA believe it is a necessary condition
for any subsidy.
(c) Jobs and Wages. In instances in which job creation is determined to be a goal,
the City and the EDA will review all of the unique circumstances surrounding
the proposed development to determine how many jobs should be required in
exchange for the proposed subsidy. If job creation is determined to be one of
the main goals of a proposed development, it is the City's and the EDA's intent
that the recipient create the maximum number of livable wage jobs at the site
with no fewer than 5 jobs. This may include jobs to be retained but only if
retention is specific and demonstrable. The job and wage goal must be attained
within two years of the benefit date (as defined in the Business Subsidy Act).
The City and the EDA may, after a public hearing, extend for up to one year the
period for meeting the job and wage goal. Qualifying jobs are those which pay,
at a minimum, 110 percent of the federal minimum wage, plus benefits. Any
deviation from the established wage level must be documented in conformity
with the requirements set forth in the Business Subsidy Act. If the City or the
EDA, following a public hearing, determines that job creation or retention is not
part of the public purpose of the subsidy, the wage and job goal may be set at
zero.
(d) Economic Development. Projects should promote one or more of the following:
1. Encourage economic and commercial diversity within the
community;
2. Contribute to the establishment of a critical mass of commercial
development within an area;
3. Increase the range of goods and services available or encourage
fast growing or other desirable businesses to locate or expand
within the community;
4. Promote redevelopment objectives and removal of blight,
including pollution cleanup;
5. Promote the retention or adaptive reuse of buildings of historical
or architectural significance;
6. Promote additional or spin-off development within the
community;
7. Development of safe and affordable housing; or
8. Encourage full utilization of existing or planned infrastructure
improvements.
The City's Economic Development Advisory Committee reviewed the project and
recommended that the EDA support the project.
The proposed project will increase the City's tax base, retain existing jobs and provide for new
job creation. Local job and wage goals will be met per the agreement. Development of the
Clearwater Creek Business Park will create new economic development opportunities within
the I-35E commercial corridor. The development will also encourage full utilization of existing
infrastructure improvements within this area.
Julie Eddington from Kennedy and Graven will be present at the meeting to address questions
from the board.
RECOMMENDATION
Staff is recommending approval of Resolution No. 16-05.
ATTACHMENTS
1. Resolution No. 16-05
2. Contract for Private Development
LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, MINNESOTA
RESOLUTION NO.16-05
RESOLUTION APPROVING CONTRACT FOR PRIVATE DEVELOPMENT AND AWARDING
THE SALE OF, AND PROVIDING THE FORM, TERMS, COVENANTS AND DIRECTIONS FOR
THE ISSUANCE OF ITS TAX INCREMENT REVENUE NOTE, SERIES 2016; IN THE
MAXIMUM PRINCIPAL AMOUNT OF $1,200,000.
BE IT RESOLVED BY the Board of Commissioners (`Board") of the Lino Lakes Economic
Development Authority, Minnesota (the "Authority") as follows:
Section 1. Authorization, Award of Sale.
1.01. Authorization. The Authority has heretofore approved the establishment of Tax Increment
Financing (Economic Development) District No. 1-12 (the "TIF District") within Development District No.
1 ("Project"), and has adopted a tax increment financing plan for the purpose of financing certain
improvements within the Project.
Pursuant to Minnesota Statutes, Section 469.178, the Authority is authorized to issue and sell its
bonds for the purpose of financing a portion of the public development costs of the Project. Such bonds are
payable from all or any portion of revenues derived from the TIF District and pledged to the payment of the
bonds. The Authority hereby finds and determines that it is in the best interests of the Authority that it issue
and sell its Tax Increment Revenue Note, Series 2016 (the "Note") in the maximum aggregate principal
amount of $1,200,000, for the purpose of financing certain public costs of the Project.
1.02. Business Subsidy. On the date hereof, the Board held a public hearing relating to the
Contract for Private Development (the "Agreement") between the Authority, United Properties
Development LLC (the "Owner"), and Distribution Alternatives, Inc. (the "Tenant"), incorporating a
business subsidy agreement and at the public hearing, the views of all interested parties were heard.
1.03. Agreement Approved; Issuance, Sale, and Terms of the Note. The Authority hereby
authorizes the President and Executive Director to execute such Agreement in substantially the form on file
with Authority, subject to modifications that do not alter the substance of the transaction and are approved
by such officials, provided that execution of the Agreement by such officials is conclusive evidence of their
approval. The Authority hereby delegates to the Executive Director the determination of the date on which
the Note is to be delivered, in accordance with Section 3.4 of the Agreement. Pursuant to the Agreement,
the Note shall be issued to the Owner. The Note shall be dated as of the date of delivery and shall not bear
any interest. The Authority shall receive in exchange for the delivery of the Note the payment by the Owner
of the Public Development Costs as defined in the Agreement. The Note will be delivered in accordance
with the terms of Section 3.3 of the Agreement.
Section 2. Form of Note. The Note shall be in substantially the form attached hereto as
EXHIBIT A, with the blanks to be properly filled in and the principal amount adjusted as of the date of
issue:
Section 3. Terms, Execution and Delivery.
3.01. Denomination, Payment. The Note shall be issued as a single typewritten note numbered
wo
483310v2 JAE LN140-116
The Note shall be issuable only in fully registered form. Principal of the Note shall be payable by
check or draft issued by the Registrar described herein.
3.02. Dates. Principal of the Note shall be payable by mail to the owner of record thereof as of
the close of business on the fifteenth day of the month preceding the Payment Date, whether or not such day
is a business day.
3.03. Registration. The Authority hereby appoints the Executive Director to perform the
functions of registrar, transfer agent and paying agent (the "Registrar"). The effect of registration and the
rights and duties of the Authority and the Registrar with respect thereto shall be as follows:
(a) Re ig ster. The Registrar shall keep at its office a bond register in which the Registrar shall
provide for the registration of ownership of the Note and the registration of transfers and exchanges of the
Note.
(b) Transfer of Note. Upon surrender for transfer of the Note duly endorsed by the registered
owner thereof or accompanied by a written instrument of transfer, in form reasonably satisfactory to the
Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered
owner in writing, the Registrar shall authenticate and deliver, in the name of the designated transferee or
transferees, a new Note of a like aggregate principal amount and maturity, as requested by the transferor.
Notwithstanding the foregoing, the Note shall not be transferred to any person other than an affiliate, or
other related entity, of the Owner unless the Authority has been provided with a certificate of the transferor,
in a form reasonably satisfactory to the Authority, that such transfer is exempt from registration and
prospectus delivery requirements of federal and applicable state securities laws. The Registrar may close
the books for registration of any transfer after the fifteenth day of the month preceding each Payment Date
and until such Payment Date.
(c) Cancellation. The Note surrendered upon any transfer shall be promptly cancelled by the
Registrar and thereafter disposed of as directed by the Authority.
(d) Improper or Unauthorized Transfer. When the Note is presented to the Registrar for
transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on such Note
or separate instrument of transfer is legally authorized. The Registrar shall incur no liability for its refusal,
in good faith, to make transfers which it, in its judgment, deems improper or unauthorized.
(e) Persons Deemed Owners. The Authority and the Registrar may treat the person in whose
name the Note is at any time registered in the bond register as the absolute owner of the Note, whether the
Note shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of such
Note and for all other purposes, and all such payments so made to any such registered owner or upon the
owner's order shall be valid and effectual to satisfy and discharge the liability of the Authority upon such
Note to the extent of the sum or sums so paid.
(f) Taxes, Fees and Charges. For every transfer or exchange of the Note, the Registrar may
impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax, fee, or other
governmental charge required to be paid with respect to such transfer or exchange.
(g) Mutilated, Lost, Stolen or Destroyed Note. In case any Note shall become mutilated or be
lost, stolen, or destroyed, the Registrar shall deliver a new Note of like amount, maturity dates and tenor in
exchange and substitution for and upon cancellation of such mutilated Note or in lieu of and in substitution
for such Note lost, stolen, or destroyed, upon the payment of the reasonable expenses and charges of the
483310v2 JAE LN140-116 2
Registrar in connection therewith; and, in the case of such Note lost, stolen, or destroyed, upon filing with
the Registrar of evidence satisfactory to it that such Note was lost, stolen, or destroyed, and of the
ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form,
substance, and amount satisfactory to it, in which both the Authority and the Registrar shall be named as
obligees. The Note so surrendered to the Registrar shall be cancelled by it and evidence of such
cancellation shall be given to the Authority. If the mutilated, lost, stolen, or destroyed Note has already
matured or been called for redemption in accordance with its terms, it shall not be necessary to issue a new
Note prior to payment.
3.04. Preparation and Delivery. The Note shall be prepared under the direction of the Executive
Director and shall be executed on behalf of the Authority by the signatures of its President and Executive
Director. In case any officer whose signature shall appear on the Note shall cease to be such officer before
the delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same
as if such officer had remained in office until delivery. When the Note has been so executed, it shall be
delivered by the Executive Director to the Owner in accordance with the Agreement.
Section 4. Security Provisions.
4.01. Pledge. The Authority hereby pledges to the payment of the principal on the Note all
Available Tax Increment as defined in the Note. Available Tax Increment shall be applied to payment of
the principal of the Note in accordance with the terms of the form of Note set forth in Section 2 of this
resolution.
4.02. Bond Fund. Until the date the Note is no longer outstanding and no principal thereof
remains unpaid, the Authority shall maintain a separate and special "Bond Fund" to be used for no purpose
other than the payment of the principal of the Note. The Authority irrevocably agrees to appropriate to the
Bond Fund in each year Available Tax Increment. Any Available Tax Increment remaining in the Bond
Fund shall be transferred to the Authority's account for TIF District No. 1-12 upon the payment of all
principal to be paid with respect to the Note.
Section 5. Certification of Proceedings.
5.01. Certification of Proceedings. The officers of the Authority are hereby authorized and
directed to prepare and furnish to the Owner of the Note certified copies of all proceedings and records of
the Authority, and such other affidavits, certificates, and information as may be required to show the facts
relating to the legality and marketability of the Note as the same appear from the books and records under
their custody and control or as otherwise known to them, and all such certified copies, certificates, and
affidavits, including any heretofore furnished, shall be deemed representations of the Authority as to the
facts recited therein.
Section 6. Effective Date. This resolution shall be effective upon full execution of the
Agreement.
Adopted by the Board of Commissioners of the Lino Lakes Economic Development Authority
this 25ffi day of July, 2016.
483310v2 JAE LN140-116
The motion for the adoption of the foregoing resolution was introduced by Board Member
and was duly seconded by Board Member and upon vote
being taken thereon, the following voted in favor thereof:
The following voted against same:
William Kusterman, President
ATTEST:
Jeff Karlson, Executive Director
483310v2 JAE LN140-116 4
No. R-1
UNITED STATE OF AMERICA
STATE OF MINNESOTA
COUNTY OF ANOKA
LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY
TAX INCREMENT REVENUE NOTE
SERIES 2016
Date
of Original Issue
, 20
The Lino Lakes Economic Development Authority, Minnesota (the "Authority"), for value
received, certifies that it is indebted and hereby promises to pay to United Properties Development LLC or
registered assigns (the "Owner"), the principal sum of $ solely from the sources and to the
extent set forth herein.
1. Payments. Principal ("Payments") shall be paid on August 1, and each February 1
and August 1 thereafter to and including February 1, ("Payment Dates") in the amounts and from
the sources set forth in Section 3 herein.
Payments are payable by mail to the address of the Owner or such other address as the Owner may
designate upon 30 days written notice to the Authority. Payments on this Note are payable in any coin or
currency of the United States of America which, on the Payment Date, is legal tender for the payment of
public and private debts.
2. Interest. No interest shall accrue on this Note.
3. Available Tax Increment. Payments on this Note are payable on each Payment Date in the
amount of and solely payable from "Available Tax Increment," which shall mean, on each Payment Date,
eighty percent (80%) of the Tax Increment attributable to the Development Property and paid to the
Authority by Anoka County in the six months preceding the Payment Date, all as such terms are defined in
the Contract for Private Development between the Authority, Owner, and Distribution Alternatives, Inc.
dated as of , 2016 (the "Agreement"). Available Tax Increment shall not include any Tax
Increment if, as of any Payment Date, there is an uncured Event of Default under the Agreement.
The Authority shall have no obligation to pay principal of this Note on each Payment Date from any
source other than Available Tax Increment, and the failure of the Authority to pay the entire amount of
principal on this Note on any Payment Date shall not constitute a default hereunder as long as the Authority
pays principal hereon to the extent of Available Tax Increment. The Authority shall have no obligation to
pay unpaid balance of principal that may remain after the final Payment on February 1,
4. Optional Prepayment. The principal sum payable under this Note is prepayable in whole or
in part at any time by the Authority without premium or penalty. No partial prepayment shall affect the
amount or timing of any other regular payment otherwise required to be made under this Note.
483310v2 JAE LN140-116
5. Default. If on any Payment Date there has occurred and is continuing any Event of Default
under the Agreement, the Authority may withhold from payments hereunder all Available Tax Increment. If
the Event of Default is thereafter cured in accordance with the Agreement, the Available Tax Increment
withheld under this Section shall be deferred and paid, without interest thereon, within 30 days after the
Event of Default is cured. If the Event of Default is not cured in the manner the Agreement describes, the
Authority may terminate this Note by written notice to the Owner in accordance with the Agreement.
Notwithstanding this Section 5, the Note may also be terminated pursuant to Section 3.5 of the Agreement.
6. Nature of Obli ag tion. This Note is one of an issue in the total principal amount of
$1,200,000 all issued to aid in financing certain public development costs and administrative costs of a
Project undertaken by the Authority pursuant to Minnesota Statutes, Sections 469.124 through 469.133, and
is issued pursuant to an authorizing resolution (the "Resolution") duly adopted by the Authority on July 25,
2016, and pursuant to and in full conformity with the Constitution and laws of the State of Minnesota,
including Minnesota Statutes, Sections 469.174 to 469.1794. This Note is a limited obligation of the
Authority which is payable solely from Available Tax Increment pledged to the payment hereof under the
Resolution. This Note hereon shall not be deemed to constitute a general obligation of the State of
Minnesota or any political subdivision thereof, including, without limitation, the Authority. Neither the
State of Minnesota, nor any political subdivision thereof shall be obligated to pay the principal of this Note
or other costs incident hereto except out of Available Tax Increment, and neither the full faith and credit nor
the taxing power of the State of Minnesota or any political subdivision thereof is pledged to the payment of
the principal of this Note or other costs incident hereto.
7. Estimated Tax Increment Payments. Any estimates of Tax Increment prepared by the
Authority or its financial advisors in connection with the TIF District or the Agreement are for the
benefit of the Authority, and are not intended as representations on which the Developer may rely.
THE AUTHORITY MAKES NO REPRESENTATION OR WARRANTY THAT THE
AVAILABLE TAX INCREMENT WILL BE SUFFICIENT TO PAY THE PRINCIPAL OF THIS
NOTE.
8. Registration and Transfer. This Note is issuable only as a fully registered note without
coupons. As provided in the Resolution, and subject to certain limitations set forth therein, this Note is
transferable upon the books of the Authority kept for that purpose at the principal office of the Executive
Director, by the Owner hereof in person or by such Owner's attorney duly authorized in writing, upon
surrender of this Note together with a written instrument of transfer satisfactory to the Authority, duly
executed by the Owner. Upon such transfer or exchange and the payment by the Owner of any tax, fee, or
governmental charge required to be paid by the Authority with respect to such transfer or exchange, there
will be issued in the name of the transferee a new Note of the same aggregate principal amount and
maturing on the same dates.
This Note shall not be transferred to any person other than an affiliate, or other related entity, of the
Owner unless the Authority has been provided with an investment letter in a form substantially similar to
the investment letter submitted by the Owner or a certificate of the transferor, in a form reasonably
satisfactory to the Authority, that such transfer is exempt from registration and prospectus delivery
requirements of federal and applicable state securities laws.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the
Constitution and laws of the State of Minnesota to be done, to exist, to happen, and to be performed in order
to make this Note a valid and binding limited obligation of the Authority according to its terms, have been
done, do exist, have happened, and have been performed in due form, time and manner as so required.
483310v2 JAE LN140-116 2
IN WITNESS WHEREOF, the Board of Commissioners of the Lino Lakes Economic Development
Authority, Minnesota has caused this Note to be executed with the manual signatures of its President and
Executive Director, all as of the Date of Original Issue specified above.
LINO LAKES ECONOMIC
DEVELOPMENT AUTHORITY,
MINNESOTA
Executive Director President
REGISTRATION PROVISIONS
The ownership of the unpaid balance of the within Note is registered in the bond register of the
Executive Director, in the name of the person last listed below.
Date of Signature of
Registration Registered Owner Executive Director
United Properties Development LLC
Federal Tax ID No:
483310v2 JAE LN140-116
EXECUTION DRAFT
CONTRACT FOR PRIVATE DEVELOPMENT
By and Between
LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, MINNESOTA,
UNITED PROPERTIES DEVELOPMENT LLC,
AND
DISTRIBUTION ALTERNATIVES, INC.
Dated as of: July 25, 2016
This document was drafted by:
KENNEDY & GRAVEN, Chartered (JAE)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, Minnesota 55402
Telephone: (612) 337-9300
Error! Bookmark not defined.
TABLE OF CONTENTS
Page
PREAMBLE.............................................................................................................................1
ARTICLE I
Definitions
Section1.1. Definitions...........................................................................................................2
ARTICLE II
Representations and Warranties
Section 2.1. Representations by the Authority........................................................................ 5
Section 2.2. Representations and Warranties by the Developer ............................................. 5
Section 2.3 Representations and Warranties by the Tenant ................................................... 6
ARTICLE III
Development Property; Public Development Costs
Section 3.1.
Status of Property................................................................................................ 7
Section 3.2.
Environmental Conditions..................................................................................
7
Section 3.3.
Public Development Costs; Issuance of Note ..................................................... 7
Section 3.4.
Business Subsidy Agreement..............................................................................
8
Section 3.5.
Maintenance of Minimum Improvements as Qualified Facility .......................
10
Section 3.6
City Development Agreement..........................................................................
10
Section 3.7.
Payment of Administrative Costs.....................................................................
1 1
ARTICLE IV
Construction of Minimum Improvements
Section 4.1. Construction of Minimum Improvements........................................................ 12
Section4.2. Construction Plans............................................................................................12
Section 4.3. Commencement and Completion of Construction............................................13
Section 4.4. Certificate of Completion.................................................................................13
ARTICLE V
Insurance
Section5.1. Insurance...........................................................................................................15
Section5.2. Subordination....................................................................................................16
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ARTICLE VI
Delinquent Taxes and Review of Taxes
Section 6.1. Right to Collect Delinquent Taxes....................................................................17
Section 6.2. Review of Taxes............................................................................................... 17
Section 6.3 Action to Reduce Taxes....................................................................................17
ARTICLE VII
Financing
Section7.1. Financing........................................................................................................... 18
Section 7.2. Authority's Option to Cure Default on Mortgage.............................................18
Section 7.3. Subordination and Modification for the Benefit of Mortgagee ........................18
ARTICLE VIII
Prohibitions Against Assignment and Transfer; Indemnification
Section 8.1. Representation as to Development....................................................................19
Section 8.2. Prohibition Against Developer's Transfer of Property and
Assignmentof Agreement................................................................................ 19
Section 8.3. Release and Indemnification Covenants...........................................................20
ARTICLE IX
Events of Default
Section 9.1. Events of Default Defined................................................................................ 22
Section 9.2. Remedies on Default......................................................................................... 22
Section 9.3. No Remedy Exclusive....................................................................................... 23
Section 9.4. No Additional Waiver Implied by One Waiver ................................................ 23
Section9.5. Attorney Fees.................................................................................................... 23
ARTICLE X
Additional Provisions
Section 10.1.
Conflict of Interests; Authority Representatives Not Individually Liable........
24
Section 10.2.
Equal Employment Opportunity.......................................................................24
Section 10.3.
Restrictions on Use...........................................................................................
24
Section 10.4.
Titles of Articles and Sections..........................................................................
24
Section 10.5.
Notices and Demands.......................................................................................
24
Section 10.6.
Counterparts......................................................................................................25
Section10.7.
Recording..........................................................................................................25
Section10.8
Amendment.......................................................................................................25
Section 10.9
Authority Approvals.........................................................................................
25
Section10.10
Termination.......................................................................................................25
Section 10.11
Choice of Law and Venue.................................................................................
25
Section 10.12
Tenant's Obligations Under Contract...............................................................
25
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TESTIMONIUM....................................................................................................................... S-1
SIGNATURES......................................................................................................................... S-1
EXHIBIT A
Description of Development Property
EXHIBIT B
Authorizing Resolution
EXHIBIT C
Certificate of Completion
EXHIBIT D
Investor Letter
EXHIBIT E
Public Development Costs
482405v6
CONTRACT FOR PRIVATE DEVELOPMENT
THIS CONTRACT FOR PRIVATE DEVELOPMENT (the "Agreement"), made as of
the 251h day of July, 2016, by and between the LINO LAKES ECONOMIC DEVELOPMENT
AUTHORITY, a public body corporate and politic under the laws of the State of Minnesota (the
"Authority"), and UNITED PROPERTIES DEVELOPMENT LLC, a Minnesota limited liability
company (the "Developer"), and DISTRIBUTION ALTERNATIVES, INC., a Minnesota
corporation (the "Tenant").
WITNESSETH:
WHEREAS, the Authority and the City of Lino Lakes, Minnesota (the "City") have
undertaken a program to promote economic development and job opportunities and to promote
the development of land which is underutilized within the City, and in connection created a
Development District known as Development District No. 1 (the "Development District")
pursuant to Minnesota Statutes, Sections 469.124 to 469.133, as amended (the "Municipal
Development Act") which is administered by the Authority; and
WHEREAS, the Authority has approved a Tax Increment Financing Plan for Tax
Increment Financing (Economic Development) District No. 1-12 (the "TIF District") pursuant to
Minnesota Statutes, Sections 469.174 to 469.1794, as amended (the "Tax Increment Act"), made
up of certain property within the Development District (the "Development Property"); and
WHEREAS, pursuant to the Municipal Development Act, the Authority is authorized to
undertake certain activities to facilitate the development of real property by private enterprise;
and
WHEREAS, the Developer proposes to develop certain improvements on certain
property described in EXHIBIT A (the "Development Property") within the Development
District and TIF District; and
WHEREAS, in order to achieve the objectives of the Development Program (the
"Development Program") for the Development District, the Authority is prepared to reimburse
the Developer for certain public improvement and site preparation costs, including soil
correction and road construction in order to bring about development in accordance with the
Development Program and this Agreement; and
WHEREAS, the Authority believes that the development of the Development Property
pursuant to this Agreement, and fulfillment generally of this Agreement, are in the vital and best
interests of the public and the health, safety, morals, and welfare of the City's residents, and in
accord with the public purposes and provisions of the applicable State and local laws and
requirements under which the Project has been undertaken and is being assisted.
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:
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ARTICLE I
Definitions
Section 1.1. Definitions. In this Agreement, unless a different meaning clearly appears
from the context:
"Agreement" means this Contract for Private Development, as the same may be from
time to time modified, amended, or supplemented.
"Authority" means the Lino Lakes Economic Development Authority, Minnesota.
"Authority Representative" means the Executive Director of the Authority, or any person
designated by the Executive Director to act as the Authority Representative for the purposes of
this Agreement.
"Authorizing Resolution" means the resolution of the Authority, substantially in the form
attached as EXHIBIT B, adopted by the Authority on July 25, 2016, approving this Agreement
and authorizing the issuance of the Note.
"Available Tax Increment" means, on each Payment Date, 80% of the Tax Increment
derived from the TIF District, and paid to the Authority by the County in the six months
preceding the Payment Date.
"Business Subsidy Act" means Minnesota Statutes, Sections 116J.993 to 116J.995, as
amended.
"Certificate of Completion" means the certification, in substantially the form attached as
Exhibit C, provided to the Developer pursuant to Section 4.4 of this Agreement.
"City" means the City of Lino Lakes, Minnesota.
"Construction Plans" means the plans, specifications, drawings and related documents on
the construction work to be performed by the Developer on the Development Property which (a)
shall be as detailed as the plans, specifications, drawings and related documents which are
submitted to the appropriate building officials of the City, and (b) shall include at least the
following for each building: (1) site plan; (2) foundation plan; (3) floor plan for each floor; (4)
elevations (all sides); (5) landscape plan; and (6) such other plans or supplements to the
foregoing plans as the City may reasonably request to allow it to ascertain the nature and quality
of the proposed construction work.
"County" means the County of Anoka, Minnesota.
"Developer" means United Properties Development LLC, a limited liability company, or
its permitted successors and assigns.
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"Development District" means the Development District No. 1.
"Development Property" means the real property described in EXHIBIT A of this
Agreement.
"Development Program" means the Authority's Development Program for the
Development District, as amended.
` EDA Act" means Minnesota Statutes, Sections 469.090 to 469.1082, as amended
"Event of Default" means an action by the Developer listed in Article IX of this
Agreement.
"Holder" means the owner of a Mortgage.
"Lease" means the lease between Developer and Tenant whereby Tenant leases the
Minimum Improvements and other improvements on the Development Property.
"Minimum Improvements" means an approximately 400,000 square foot warehouse and
distribution facility with related office space and other improvements to be constructed on the
Development Property for use by the Tenant in its distribution business.
"Mortgage" means any mortgage made by the Developer which is secured, in whole or in
part, by the Development Property.
"Municipal Development Act" means Minnesota Statutes, Sections 469.124 to 469.134,
as amended.
"Note" means the Tax Increment Revenue Note, substantially in the form contained in
the Authorizing Resolution attached hereto as Exhibit B, to be delivered by the Authority to the
Developer in accordance with Section 3.3 hereof to reimburse Developer for Public
Development Costs.
"Payment Date" means each August 1 and February 1 during the term of the Note.
"Public Development Costs" means those costs to be paid or reimbursed to the Developer
by the Authority in connection with the development hereunder as set forth in Section 3.3.
"Qualified Facility" means a distribution, warehouse or manufacturing facility, including
office space necessary for and related to those activities, all within the meaning of Sections 469.176,
subd. 4c and 469.176, subd. 7(b) of the TIF Act. The Minimum Improvements will be a Qualified
Facility as long as the Minimum Improvements are operated for the aforementioned qualified uses
and remain compliant with the provisions of Section 3.5.
"State" means the State of Minnesota.
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"Tax Increment" means that portion of the real property taxes which is paid with respect
to the TIF District and which is remitted to the Authority as tax increment pursuant to the Tax
Increment Act.
"Tax Increment Act" or "TIF Act" means the Tax Increment Financing Act, Minnesota
Statutes, Sections 469.174 to 469.1794, as amended.
"Tax Increment District" or "TIF District" means the Authority's Tax Increment
Financing (Economic Development) District No. 1-12.
"Tax Increment Plan" or "TIF Plan" means the Tax Increment Financing Plan for the TIF
District, as approved by the Authority on July 25, 2016, and as it may be amended from time to
time.
"Tax Official" means any County assessor; County auditor; County or State board of
equalization, the commissioner of revenue of the State, or any State or federal district court, the
tax court of the State, or the State Supreme Court.
"Tenant" means Distribution Alternatives, Inc., a Minnesota corporation, or its successors
and assigns.
"Termination Date" means the earlier of (a) the date of the Authority's last receipt of Tax
Increment from the TIF District in accordance with Section 469.176, subd. lb(3) of the TIF Act;
(b) the date the Note has been paid in full, defeased, or terminated in accordance with its terms;
or (c) the date of termination of the Note and this Agreement by the Authority due to an Event of
Default as set forth in Section 9.2 hereof.
"Unavoidable Delays" means delays beyond the reasonable control of the party seeking
to be excused as a result thereof which are the direct result of war, terrorism, strikes, other labor
troubles, fire or other casualty to the Minimum Improvements, litigation commenced by third
parties which, by injunction or other similar judicial action, directly results in delays, or acts of
any federal, State or local governmental unit (other than the Authority in exercising its rights
under this Agreement) which directly result in delays. Unavoidable Delays shall not include
delays in the Developer's obtaining of permits or governmental approvals necessary to enable
construction of the Minimum Improvements by the dates such approval and construction is
required under Sections 4.2 and 4.3 of this Agreement, unless such delay results from the City's
or Authority's failure to respond to Developer within any time period required by this
Agreement.
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ARTICLE II
Representations and Warranties
Section 2.1. Representations by the Authority. (a) The Authority is a public body
corporate and politic under the laws of the State of Minnesota. Under the provisions of the
Municipal Development Act and the EDA Act, the Authority has the power to enter into this
Agreement and carry out its obligations hereunder.
(b) The Authority proposes to assist in financing certain Public Development Costs
necessary to serve the Development Property and Minimum Improvements in accordance with
the terms of this Agreement.
(c) The activities of the Authority are undertaken to foster the development of certain
real property which for a variety of reasons is presently underutilized, to prevent the emergence
of blight, to create increased tax base and employment in the Authority, and to stimulate further
development of the Development District as a whole.
Section 2.2. Representations, Warranties and Certain Covenants by the Developer
Only. The Developer represents, warrants and covenants that:
(a) The Developer is a limited liability company duly established and in good
standing under the laws of the State, is not in violation of any provisions of its articles of
incorporation and bylaws, is duly authorized to transact business within the State, has power to
enter into this Agreement and has duly authorized the execution, delivery and performance of
this Agreement by proper action of its officers.
(b) The Developer will construct, operate and maintain the Minimum Improvements
in accordance with the terms of this Agreement, the Development Program and all local, State
and federal laws and regulations (including, but not limited to, environmental, zoning, building
code and public health laws and regulations).
(c) The Developer has received no notice or communication from any local, State or
federal official that the activities of the Developer or the Authority in the Development District
may be or will be in violation of any environmental law or regulation (other than those notices or
communications of which the Authority is aware). The Developer is aware of no facts the
existence of which would cause it to be in violation of or give any person a valid claim under any
local, State or federal environmental law, regulation or review procedure.
(d) The Developer will obtain all required permits, licenses and approvals, and will
meet all requirements of all applicable local, State and federal laws and regulations which must
be obtained or met before the Minimum Improvements may be lawfully constructed.
(e) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
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conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provisions of any partnership or company restriction or any evidences of
indebtedness, agreement or instrument of whatever nature to which the Developer is now a party
or by which it is bound, or constitutes a default under any of the foregoing.
(f) The Developer shall promptly advise the Authority in writing of all litigation or
claims affecting any part of the Minimum Improvements and all written complaints and charges
made by any governmental authority materially affecting the Minimum Improvements or
materially affecting the Developer or its business which may delay or require changes in the
construction of the Minimum Improvements.
(g) The proposed development by the Developer hereunder would not occur but for
the tax increment financing assistance being provided by the Authority hereunder.
Section 2.3. Representations, Warranties and Certain Covenants by the Tenant Only.
The Tenant represents, warrants and covenants that:
(a) The Tenant is a corporation duly established and in good standing under the laws
of the State, is not in violation of any provisions of its articles of incorporation and bylaws, is
duly authorized to transact business within the State, has power to enter into this Agreement and
has duly authorized the execution, delivery and performance of this Agreement by proper action
of its officers.
(b) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provisions of any corporate restriction or any evidences of indebtedness,
agreement or instrument of whatever nature to which the Tenant is now a party or by which it is
bound, or constitutes a default under any of the foregoing, which default or breach might prevent
the Tenant from performing its obligations under this Agreement.
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ARTICLE III
Development Property; Public Development Costs
Section 3.1. Status of PropertX. As of the date of this Agreement, the Developer has
entered into a purchase agreement to acquire the Development Property (the "Purchase
Agreement"). On or before the closing of its purchase of the property and construction of the
Project, Developer, as owner of the Development Property, will enter into the Lease under which
the Tenant will operate the Minimum Improvements. The Authority shall have no obligation to
acquire the Development Property or any portion thereof.
Section 3.2. Environmental Conditions. (a) The Developer acknowledges that the
Authority makes no representations or warranties as to the condition of the soils on the
Development Property or the fitness of the Development Property for construction of the Minimum
Improvements or any other purpose for which the Developer may make use of such property, and
that the assistance provided to the Developer under this Agreement neither implies any
responsibility by the Authority for any contamination of the Development Property nor imposes any
obligation on such parties to participate in any cleanup of the Development Property.
(b) Without limiting its obligations under Section 8.3 hereof the Developer further
agrees that it will indemnify, defend, and hold harmless the Authority and its governing body
members, officers, and employees, from any claims or actions arising out of the presence, if any, of
hazardous wastes or pollutants existing on or in the Development Property, unless and to the extent
that such hazardous wastes or pollutants are present as a result of the actions or omissions of the
indemnitees. Nothing in this Section will be construed to limit or affect any limitations on liability
of the Authority under State or federal law, including without limitation Minnesota Statutes,
Sections 466.04 and 604.02.
Section 3.3. Public Development Costs; Issuance of Note. (a) Generally. The Authority
has determined that, in order to make development of the Minimum Improvements financially
feasible, it is necessary to reimburse Developer for a portion of the cost of land acquisition, site
preparation, including soil correction, public infrastructure improvements, and other qualified costs
(collectively referred to as "Public Development Costs"), related to the Development Property,
subject to the terms of this Section. The Authority has determined that the Public Development
Costs described in the attached EXHIBIT E are eligible to be reimbursed with Tax Increment
pursuant to the TIF Act.
(b) Terms. To reimburse a portion of the Public Development Costs incurred by
Developer, the Authority shall issue and the Developer shall purchase the Note in the maximum
principal amount of $1,200,000. The Note shall not bear interest. The Authority shall issue and
deliver the Note to the Developer when the Developer has:
(i) delivered to the Authority written evidence reasonably satisfactory to the
Authority that Developer has incurred Public Development Costs in an amount at least equal
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to the principal amount of the Note, which evidence must include copies of the paid invoices
or other comparable evidence for costs of allowable Public Development Costs;
(ii) submitted and obtained Authority approval of financing in accordance with
Section 7.1;
(iii) submitted an executed lease with the Tenant to the Authority for a term
equal to or greater than the term of the Note; and
(iv) delivered to the Authority an investment letter in substantially the form
attached hereto as EXHIBIT D.
The terms of the Note will be substantially those set forth in the form of the Note shown in
EXHIBIT B, and the Note will be subject to all terms of the Authorizing Resolution, which is
incorporated herein by reference.
(c) Termination of right to Note. All conditions for delivery of the Note must be met by
no later than the date five (5) years after the date of certification of the TIF District by the County.
If the conditions for delivery of the Note are not satisfied by the date described in this paragraph, the
Authority has no further obligations under this Section 3.3.
(d) Assignment of Note. The Authority acknowledges that the Developer may assign the
Note to a third party. The Authority consents to such an assignment, conditioned upon receipt of an
investment letter from such third party in substantially the form set forth in EXHIBIT D.
(e) Qualifications. The Developer understands and acknowledges that all Public
Development Costs must be paid by the Developer and will be reimbursed from Available Tax
Increment pursuant to the terms of the Note. The Authority makes no representations or warranties
regarding the amount of Available Tax Increment, or that revenues pledged to the Note will be
sufficient to pay the principal of the Note. Any estimates of available Tax Increment prepared by
the Authority or its financial advisors in connection with the TIF District or this Agreement are for
the benefit of the Authority, and are not intended as representations on which the Developer may
rely. Public Development Costs exceeding the principal amount of the Note are the sole
responsibility of Developer.
Section 3.4. Business Subsidy Agreement. The financial assistance provided hereunder
is a business subsidy. As a result, the Developer must comply with the requirements of the Business
Subsidy Act and the Authority's Business Subsidy Policy. For such purposes, the provisions of this
Section constitute the "business subsidy agreement."
(a) General Terms. The Developer and the Authority agree and represent to each other
as follows:
(1) The subsidy provided to the Developer under this Agreement consists of the
reimbursement of Public Development Costs for the Development Property described in
Section 3.3 in the maximum aggregate principal amount of $1,200,000.
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(2) The public purposes of the subsidy are to maintain an existing business in the
City that would relocate without the subsidy, facilitate expansion of a viable business in the
City, retain jobs in the City and the State, and increase the tax base of the City and the State.
(3) The goals for the subsidy are: to secure development of the Minimum
Improvements on the Development Property; to maintain such improvements as a
warehouse and distribution facility with related office space for the time period described in
clause (6) below; and to retain the jobs and wage levels in accordance with Section 3.4(b)
hereof.
(4) The subsidy is needed to induce Tenant to maintain and expand its business
in the City, and to mitigate the costs of public improvements and soil corrections costs, all as
determined by the Authority upon approval of the TIF Plan.
(5) If the goals described in clause (3) are not met, the Developer must make the
payments to the City described in Section 3.4(c).
(6) The Developer must continue (or cause to be continued) operation of the
Minimum Improvements (as hereinafter defined) as a warehouse and distribution facility
with related office space for at least five years after the Benefit Date. The Improvements
will meet this requirement so long as the Minimum Improvements are used by Tenant for
the aforementioned uses. During any period when the Minimum Improvements are vacant
and not operated for the aforementioned qualified uses, the Minimum Improvement will not
meet the requirements of this Section 3.4(a)(6).
(7) The Developer's parent company is United Properties Investment LLC.
(8) The Developer has not received and does not expect to receive financial
assistance from any other "grantor" as defined in the Business Subsidy Act in connection
with the Development Property or the construction of the Minimum Improvements other
than the tax increment financing described in Section 3.3 hereof.
(b) Job and Wage Goals. Within two years after the Benefit Date (the "Compliance
Date"), the Developer shall cause (i) the retention of sixty (60) full-time equivalent jobs in the City
on the Development Property, and (ii) the hourly wage of the jobs to be retained under subdivision
(i) to be at least 110% of the federal minimum wage, exclusive of benefits. The "Benefit Date" is
the earlier of. (i) the date of issuance of the Certificate of Completion for the Minimum
Improvements, or (ii) the date the Developer or Tenant occupies the Minimum Improvements as
evidence by the Developer's receipt of a certificate of occupancy for the Minimum Improvements.
Notwithstanding anything to the contrary herein, if the wage and job goals described in this
paragraph are met within the Compliance Date, those goals are deemed satisfied despite the
Developer's continuing obligations under Sections 3.4(a)(6) and 3.4(d). The Authority may, after
public hearings held by the Board of Commissioners of the Authority and approval by both bodies,
extend the date for compliance with these job and wage covenants by up to one year, provided that
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nothing in this Section will be construed to limit the Authority's legislative discretion regarding this
matter.
(c) Remedies. If the Developer fails to meet or maintain (or cause to be met or
maintained) the goals described in Section 3.4(a)(3), the Note and this Agreement will be deemed
terminated, and the Developer shall repay to the Authority upon written demand from the Authority
a "pro rata share" of prior payments under the Note, if any, together with interest on such amounts
at the implicit price deflator as defined in Section 116J.994, subdivision 6 of the Business Subsidy
Act, accrued from the date of issuance of the Certificate of Completion to the date of payment. The
term "pro rata share" means percentages calculated as follows:
(1) if the failure relates to the number of jobs, the jobs required less the jobs
retained, divided by the jobs required;
(2) if the failure relates to wages, the number of jobs required less the number of
jobs that meet the required wages, divided by the number of jobs required;
(3) if the failure relates to operation of the Minimum Improvements in
accordance with Section 3.4(a)(6), sixty (60) less the number of months of operation of the
Minimum Improvements (where any month in which the facility is in operation for at least
fifteen (15) days constitutes a month of operation), commencing on the date of the
certificate of completion and ending with the date the facility ceases operation as determined
by the Authority, divided by sixty (60); and
(4) if more than one of clauses (1) through (3) apply, the sum of the applicable
percentages, not to exceed 100%.
Nothing in this Section shall be construed to limit the Authority's remedies under Article IX
hereof. In addition to the remedy described in this Section and any other remedy available to the
Authority for failure to meet the goals stated in Section 3.4(a)(3), the Developer agrees and
understands that it may not receive a business subsidy from the Authority or any other grantor (as
defined in the Business Subsidy Act) for a period of five (5) years from the date of the failure or
until the Developer satisfies its repayment obligation under this Section, whichever occurs first.
(d) Reports. The Developer shall cause the Tenant to submit to the Authority a written
report regarding business subsidy goals and results by no later than March 1 of each year,
commencing March 1, 2017 and continuing until the later of (i) the date the goals stated in
Section 3.4 (a)(3) are met; (ii) thirty (30) days after expiration of the five-year period described in
Section 3.4(a)(6); or (iii) if the goals are not met, the date the subsidy is repaid in accordance with
Section 3.4(c). The report must comply with Section 116J.994, subdivision 7 of the Business
Subsidy Act. The Authority will provide information to the Developer regarding the required
forms. If the Developer fails to timely file any report required under this Section, the Authority will
mail the Developer a warning within one week after the required filing date. If, after fourteen (14)
days of the postmarked date of the warning, the Developer fails to provide a report, the Developer
must pay to the Authority a penalty of $100 for each subsequent day until the report is filed. The
maximum aggregate penalty payable under this Section is $1,000.
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Section 3.5. Maintenance of Minimum Improvements as Qualified Facility. The Developer
understands and acknowledges that until the Termination Date, the Developer, and its successors
and assigns, shall use or cause the Tenant to use the Development Property and the Minimum
Improvements thereon only as a Qualified Facility. The Developer agrees to pay or cause the
Tenant to pay ninety percent (90%) or more of the employees at the Qualified Facility at a rate
equal to or greater than one hundred and sixty percent (160%) of the federal minimum wage for
individuals over the age of twenty (20). If the Developer fails to comply with the requirements
of this Section 3.5, the Authority will decertify the TIF District and cease payments to the
Developer under the TIF Note. The Developer shall cause the Tenant to submit to the Authority a
written report regarding the requirements of this Section 3.5 by no later than March 1 of each year,
commencing March 1, 2017. The written report required by this Section 3.5 may be combined with
the written report required for business subsidy reporting described in Section 3.4(d).
Section 3.6. City Development Agreement. As set forth in the Development Agreement
entered into between the City and the Developer (the "Development Agreement"), the Developer
agrees as follows:
(a) to construct an extension of 2 1 ' Avenue in the City; and
(b) to construct all utilities necessary to serve the Minimum Improvements.
Section 3.7. Payment of Administrative Costs. The Developer will deposit with the
Authority $7,500 to pay Administrative Costs. The Authority will use such deposit to pay
"Administrative Costs," which term means out of pocket costs incurred by the Authority, together
with staff and consultant costs of the Authority, all attributable to or incurred in connection with the
negotiation, preparation or modification of this Agreement, the TIF Plan, and other documents and
agreements in connection with the establishment of the TIF District and development of the
Development Property, and not previously paid by Developer. If at any time the Authority
determines that the deposit is insufficient to pay Administrative Costs, the Developer is obligated to
pay such shortfall within 30 days after receipt of a written notice from the Authority containing
evidence of the unpaid costs. If Administrative Costs incurred, and reasonably anticipated to be
incurred are less than the deposit by the Developer, the Authority shall return to the Developer any
funds not anticipated to be needed.
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ARTICLE IV
Construction of Minimum Improvements
Section 4.1. Construction of Minimum Improvements. The Developer agrees that it
will construct the Minimum Improvements on the Development Property in accordance with the
approved Construction Plans in all material respects and will cause Tenant to operate and
maintain, preserve and keep the Minimum Improvements or cause the Minimum Improvements
to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in
good repair and condition, ordinary wear and tear and damage by casualty excepted.
Section 4.2. Construction Plans. (a) Before commencing construction of the Minimum
Improvements, the Developer shall submit to the Authority completed Construction Plans.
Developer satisfies this obligation by submitting such Construction Plans to the City. The
Construction Plans shall provide for the construction of the Minimum Improvements and shall be
in conformity with the Development Program, the TIF Plan, this Agreement, and all applicable
State and local laws and regulations in all material respects. The Authority will approve the
Construction Plans in writing if. (i) the Construction Plans conform to the terms and conditions
of this Agreement in all material respects; (ii) the Construction Plans conform to the
Development Program in all material respects; (iii) the Construction Plans conform to all
applicable federal, State and local laws, ordinances, rules and regulations; (iv) the Construction
Plans are adequate (in the Authority's reasonable discretion) to provide for construction of the
Minimum Improvements; and (v) no Event of Default has occurred and is continuing. No
approval by the Authority shall relieve the Developer of the obligation to comply with the terms
of this Agreement or of the Development Program in all material respects, applicable federal,
State and local laws, ordinances, rules and regulations, or to construct the Minimum
Improvements in accordance therewith. Approval may be based upon a review by the City's
Building Official of the Construction Plans. No approval by the Authority shall constitute a
waiver of an Event of Default. Such Construction Plans shall be deemed approved unless
rejected in writing by the Authority, in whole or in part. Such rejections shall set forth in detail
the reasons therefore, and shall be made within 30 days after the date of their receipt by the City.
If the Authority rejects any Construction Plans in whole or in part, the Developer shall submit
new or corrected Construction Plans within 30 days after written notification to the Developer of
the rejection. The provisions of this Section relating to approval, rejection and resubmission of
corrected Construction Plans shall continue to apply until the Construction Plans have been
approved by the Authority, except that the Authority's rejection period for any resubmitted
Construction Plans shall be 10 days instead of 30 days. The Authority's approval shall not be
unreasonably withheld. Said approval shall constitute a conclusive determination that the
Construction Plans (and the Minimum Improvements, constructed in accordance with said plans)
comply to the Authority's satisfaction with the provisions of this Agreement relating thereto.
(b) If the Developer desires to make any material change in the Construction Plans
after their approval by the Authority, the Developer shall submit the proposed change to the
Authority for its approval. If the Construction Plans, as modified by the proposed change,
conform to the requirements of this Section 4.2 of this Agreement with respect to such
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previously approved Construction Plans, the Authority shall approve the proposed change and
notify the Developer in writing of its approval. Such change in the Construction Plans shall, in
any event, be deemed approved by the Authority unless rejected, in whole or in part, by written
notice by the Authority to the Developer, setting forth in detail the reasons therefor. Such
rejection shall be made within ten (10) days after receipt of the notice of such change. The
Authority's approval of any such change in the Construction Plans will not be unreasonably
withheld.
Section 4.3. Commencement and Completion of Construction. Subject to Unavoidable
Delays, the Developer must commence construction of the Minimum Improvements by no later
than October 31, 2016. Subject to Unavoidable Delays, the Developer must substantially
complete construction of the Minimum Improvements by December 31, 2017. All work with
respect to the Minimum Improvements to be constructed or provided by the Developer on the
Development Property shall be in conformity in all material respects with the Construction Plans
as submitted by the Developer and approved by the City.
The Developer agrees for itself, its successors and assigns, and every successor in interest
to the Development Property, or any part thereof, that the Developer, and such successors and
assigns, shall promptly begin and diligently prosecute to substantial completion the development
of the Development Property through the construction of the Minimum Improvements thereon,
and that such construction shall in any event be commenced and substantially completed within
the period specified in this Section 4.3 of this Agreement. Subsequent to conveyance of the
Development Property, or any part thereof, to the Developer, and until construction of the
Minimum Improvements has been substantially completed, the Developer shall make reports, in
such detail and at such times as may reasonably be requested by the Authority, as to the actual
progress of the Developer with respect to such construction.
Section 4.4. Certificate of Completion. (a) Promptly after substantial completion of
the Minimum Improvements in accordance with those provisions of the Agreement relating
solely to the obligations of the Developer to construct the Minimum Improvements (including
the dates for beginning and substantial completion thereof), the Authority will furnish the
Developer with a Certificate of Completion in substantially the form provided in EXHIBIT C.
Such certification by the Authority shall be (and it shall be so provided in the deed and in the
certification itself) a conclusive determination of satisfaction and termination of the agreements
and covenants in the Agreement with respect to the obligations of the Developer, and its
successors and assigns, to construct the Minimum Improvements and the dates for the beginning
and completion thereof. Such certification and such determination shall not constitute evidence
of compliance with or satisfaction of any obligation of the Developer to any Holder of a
Mortgage, or any insurer of a Mortgage, securing money loaned to finance the Minimum
Improvements, or any part thereof.
(b) The certificate provided for in this Section 4.4 of this Agreement shall be in such
form as will enable it to be recorded in the proper office for the recordation of deeds and other
instruments pertaining to the Development Property. If the Authority shall refuse or fail to
provide any certification in accordance with the provisions of this Section 4.4 of this Agreement,
the Authority shall, within 10 (ten) days after written request by the Developer, provide the
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Developer with a written statement, indicating in adequate detail in what respects the Developer
has failed to complete the Minimum Improvements in accordance with the provisions of the
Agreement, or is otherwise in default, and what measures or acts it will be necessary, in the
opinion of the Authority, for the Developer to take or perform in order to obtain such
certification. The Authority will provide Developer with the Certificate of Completion described
in Section 4.4(a) within 10 days after Developer has made the required corrections.
(c) The construction of the Minimum Improvements shall be deemed to be
commenced upon beginning of excavation for the building, and shall be deemed to be
substantially completed when the Developer has received a certificate of occupancy issued by
the City for the Minimum Improvements.
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ARTICLE V
Insurance
Section 5.1. Insurance. The Developer will provide and maintain at all times during
the process of constructing the Minimum Improvements an All Risk Broad Form Basis Insurance
Policy and, from time to time during that period, at the request of the Authority, furnish the
Authority with proof of payment of premiums on policies covering the following:
(i) builder's risk insurance, written on the so-called "Builder's Risk --
Completed Value Basis," in an amount equal to one hundred percent (100%) of the
insurable value of the Minimum Improvements at the date of completion, and with
coverage available in nonreporting form on the so-called "all risk" form of policy. The
interest of the Authority shall be protected in accordance with a clause in form and
content satisfactory to the Authority;
(ii) comprehensive general liability insurance (including operations,
contingent liability, operations of subcontractors, completed operations and contractual
liability insurance) together with an Owner's Policy with limits against bodily injury and
property damage of not less than $1,000,000 for each occurrence (to accomplish the
above -required limits, an umbrella excess liability policy may be used); and
(iii) workers' compensation insurance, with statutory coverage.
(b) Upon completion of construction of the Minimum Improvements and prior to the
Termination Date, the Developer shall maintain, or cause to be maintained, at its cost and expense,
and from time to time at the request of the Authority shall furnish proof of the payment of premiums
on, insurance as follows:
(i) insurance against loss and/or damage to the Minimum Improvements under a
policy or policies covering such risks as are ordinarily insured against by similar businesses.
(ii) comprehensive general public liability insurance, including personal injury
liability (with employee exclusion deleted), against liability for injuries to persons and/or
property, in the minimum amount for each occurrence and for each year of $1,000,000, and
shall be endorsed to show the Authority as additional insured.
(iii) such other insurance, including workers' compensation insurance respecting
all employees of the Developer, in such amount as is customarily carried by like
organizations engaged in like activities of comparable size and liability exposure; provided
that the Developer may be self -insured with respect to all or any part of its liability for
workers' compensation.
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(c) All insurance required in Article V of this Agreement shall be taken out and
maintained in responsible insurance companies selected by the Developer or the Tenant that are
authorized under the laws of the State to assume the risks covered thereby. Upon request, the
Developer will deposit annually with the Authority policies evidencing all such insurance, or a
certificate or certificates or binders of the respective insurers stating that such insurance is in force
and effect. Unless otherwise provided in this Article V of this Agreement each policy shall contain
a provision that the insurer shall not cancel nor modify it in such a way as to reduce the coverage
provided below the amounts required herein without giving written notice to the Developer and the
Authority at least 30 days before the cancellation or modification becomes effective. In lieu of
separate policies, the Developer may maintain a single policy, blanket or umbrella policies, or a
combination thereof, having the coverage required herein, in which event the Developer shall
deposit with the Authority a certificate or certificates of the respective insurers as to the amount of
coverage in force upon the Minimum Improvements.
(d) The Developer agrees to notify the Authority immediately in the case of damage
exceeding $100,000 in amount to, or destruction of, the Minimum Improvements or any portion
thereof resulting from fire or other casualty. In such event the Developer will forthwith repair,
reconstruct, and restore the Minimum Improvements to substantially the same or an improved
condition or value as it existed prior to the event causing such damage and, to the extent necessary
to accomplish such repair, reconstruction, and restoration, the Developer will apply the net proceeds
of any insurance relating to such damage received by the Developer to the payment or
reimbursement of the costs thereof.
The Developer shall complete the repair, reconstruction and restoration of the Minimum
Improvements, regardless of whether the net proceeds of insurance received by the Developer for
such purposes are sufficient to pay for the same. Any net proceeds remaining after completion of
such repairs, construction, and restoration shall be the property of the Developer.
(e) In lieu of its obligation to reconstruct the Minimum Improvements as set forth in this
Section, the Developer shall have the option of paying to the Authority an amount that is sufficient
to pay or redeem the outstanding principal on the Note, or (ii) so long as the Developer is the owner
of the Note, waiving its right to receive subsequent payments under the Note.
(f) The Developer and the Authority agree that all of the insurance provisions set forth
in this Article V shall terminate upon the termination of this Agreement.
Section 5.2. Subordination. Notwithstanding anything to the contrary contained in this
Article V, the rights of the Authority with respect to the receipt and application of any proceeds
of insurance shall, in all respects, be subject and subordinate to the rights of any lender under a
Mortgage with respect to the Property.
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ARTICLE VI
Delinquent Taxes and Review of Taxes
Section 6.1. Right to Collect Delinquent Taxes. The Developer acknowledges that the
Authority is providing substantial aid and assistance in furtherance of the development through
issuance of the Note. The Developer understands that the Tax Increments pledged to payment on
the Note are derived from real estate taxes on the Development Property, which taxes must be
promptly and timely paid. To that end, Developer agrees for itself, its successors and assigns, in
addition to the obligation pursuant to statute to pay real estate taxes, that it is also obligated by
reason of this Agreement to pay before delinquency all real estate taxes assessed against the
Development Property and the Minimum Improvements. The Developer acknowledges that this
obligation creates a contractual right on behalf of the Authority through the Termination Date to
sue the Developer or its successors and assigns to collect delinquent real estate taxes and any
penalty or interest thereon and to pay over the same as a tax payment to the county auditor. In
any such suit in which the Authority is the prevailing party, the Authority shall also be entitled to
recover its costs, expenses and reasonable attorney fees.
Section 6.2. Review of Taxes. The Developer agrees that prior to the Termination
Date it will not cause a reduction in the real property taxes paid in respect of the Development
Property through: (a) willful destruction of the Development Property or any part thereof; or (b)
willful refusal to reconstruct damaged or destroyed property pursuant to Section 5.1 of this
Agreement, except as otherwise provided in Section 5.1(e). The Developer also agrees that it
will not, prior to the Termination Date, apply for a deferral of property tax on the Development
Property pursuant to any law, or transfer or permit transfer of the Development Property to any
entity whose ownership or operation of the property would result in the Development Property
being exempt from real estate taxes under State law (other than any portion thereof dedicated or
conveyed to the City in accordance with platting of the Development Property), or apply for a
deferral of property tax on the Development Property pursuant to any law.
Section 6.3. Action to Reduce Taxes. The Developer may seek through petition or
other means to have the Assessors Estimated Market Value for the Development Property
reduced. Until the Note is fully paid, such activity must be preceded by written notice from the
Developer to the Authority indicating its intention to do so. Upon receiving such notice, or
otherwise learning of the Developer's intentions, the Authority may suspend payments due under
the Note until the actual amount of the reduction is determined, whereupon the Authority will
make the suspended payments less any amount that the Authority is required to repay the County
as a result any reduction in market value of the Development Property. During the period that
the payments are subject to suspension, the Authority may make partial payments on the Note if
it determines, in its sole and absolute discretion that the amount retained will be sufficient to
cover any repayment which the County may require. The Authority's suspension of payments
on the Note pursuant to this Section shall not be considered a default under Section 9.1 hereof.
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