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Home My WebLink About07-01-2019 Council PacketCITY COUNCIL WORK SESSION AGENDA CITY OF LINO LAKES Monday, July 1, 2019 Community Room 6:00 P.M. 1. Lyngblomsten TIF Discussion, Michael Grochala, Mikaela Huot 2. Council Updates on Boards/Commissions, City Council 3. Review Regular Agenda 4. Adjourn WS – Item 1 WORK SESSION STAFF REPORT Work Session Item No. 1 Date: July 1, 2019 To: City Council From: Michael Grochala, Community Development Director Re: Lyngblomsten – Draft TIF Plan and Contract for Private Development Background Staff presented the draft TIF Plan and Contract for Private Development at the June 24, 2019 special work session. The public hearing, and consideration of the TIF plan is scheduled for July 8, 2019. The EDA will also hold a meeting on July 8, 2019 for both the TIF Plan and the Contract for Private Development. The intersection of 49 & J is a major gateway into the city and has been a high priority redevelopment objective over the past 20 years. The site has been the focus of several proposed commercial/residential development proposals. However it has proven to be a challenge for development/redevelopment due to a number of factors including: • lack of public utilities • inadequate transportation infrastructure • multiple property owners/businesses • meeting neighborhood/community expectations • development timing Over the past year Lyngblomsten has been working to overcome these challenges, as well as address comments received from residents, advisory boards, and the City Council. The project received Preliminary Plat/PUD Development Stage approval from the City Council on April 8, 2019. Tax Increment Financing has been discussed over the past 5 months to help facilitate this project. The 49/J master plan did contemplate the possible need for assistance to facilitate redevelopment of the area. The project, as proposed, addresses a number of City goals related to this area and will significantly reshape the NW quadrant of the 49/J intersection: • Demolition and consolidation of existing underutilized properties including removal of four existing buildings. • Consolidation of multiple vacant or underutilized parcels and development of new commercial pad sites generating new commercial tax base. • Provides new right-of-way for both proposed and future County road improvements for both Hodgson and County Road J. • Constructs new turn lanes on Hodgson Road including the southbound approach to County Road J. • New public street improvements and consolidation of access points to Hodgson and CRJ to improve circulation, capacity and safety along the corridor. • Construction of nearly a ½ mile of new trail linking residents west of Hodgson Road with the existing trail system to the east. • Relocate and bury existing power lines running along the corridor. • Catalyst for addition roadway improvements by Anoka County and Ramsey County including striping and turn lane improvements on County Road J to increase capacity of roadway. • Extension of public water and sanitary sewer to areas currently without service. Will include main lines to service areas east of Hodgson Road. • Extension of trunk water main through development area shortening remaining looping needs for southwest area. • Creation of approximately 130 FTE jobs with average hourly wages of $22.50/hour. • Provision of variety of senior housing options not previously provided for in the City by a well-established twin city care provider. • The applicant will still be subject to all city fees including building permits, trunk utility and park dedication requirements. Mikaela Huot, BakerTilly, has provided an updated memo addressing questions regarding reduction of the TIF term as well as a recap of the proposal. An updated TIF Plan and Contract for Private Development, with resolutions, will be included in the Monday distribution of the regular agenda packet for the July 8, 2019 meeting. Requested Council Direction Discussion and comment only. Attachments 1. BakerTilly Memo, dated July 1, 2019 2. TIF District Map The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP Memo To: Michael Grochala, Community Development Director, City of Lino Lakes Sarah Cotton, Finance Director, City of Lino Lakes From: Mikaela Huot, Director Date: July 1, 2019 Subject: Review of Financial Assistance through Tax Increment Financing (TIF) for Proposed Lyngblomsten Senior Care Campus Housing Project Updated Information for July 1 Work Session following June 24 City Council Work Session The purpose of this memorandum is to provide additional information for Council consideration following the June 24 City Council Work Session. There were two items the Council requested additional information for: 1) Illustration of possible ways to reduce term of the TIF District 2) Construction cost audit – pre and post construction TIF District Term The following chart provides an illustration of several scenarios that may impact the duration of the TIF District. We focused on an annual market value inflator and overall increase in starting valuation of the project. Scenario 1 Scenario 2 Scenario 3 Scenario 4 Total Estimated Taxable Value $28,991,000 $28,991,000 $31,890,100 $34,789,200 (10% increase) (20% increase) Annual Market Value Inflator 0% 3% 3% 3% Total Number of Years 8.5 7.5 7 6+ Estimated Gross Annual Increment $411,237 $411,237 $453,691 $496,145 Estimated Annual City Retained (5%) $20,562 $20,562 $22,685 $24,807 Estimated Net Annual Increment (95%) $390,675 $390,675 $431,006 $471,338 Total Gross Tax Increment $3,701,133 $3,668,729 $3,485,203 $3,810,504 City Retainage (5%) $185,058 $183,437 $174,262 $190,524 Net Amount Available (95%) $3,516,075 $3,485,292 $3,310,941 $3,619,980 Maximum Amount to Developer $3,218,000 $3,218,000 $3,218,000 $3,218,000 Estimated Surplus $298,075 $267,292 $92,941 $401,980 The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP Construction cost audit The City Council has requested additional information on possible options for reviewing the estimated construction costs of the project. There are two general approaches that can be used to achieve this outcome. The City could have an independent review of the costs occur prior to construction to test the estimates as compared to market standards. The City could also hire an independent third party to review and audit the total construction costs following completion of the project. Either approach would be intended to provide the City Council with an understanding of the developer’s assumption of construction costs and actual investment in the project. Background The City of Lino Lakes received an application for financial assistance through tax increment financing (TIF) to assist with financing a portion of the extraordinary development costs related to the construction of a senior care building with approximately 143 independent and assisted living units and approximately 56 skilled care units with 20 detached rental town homes. The project also includes acquisition of several properties on the corner of County Road J and CSAH 49 for demolition and installation of new infrastructure, and where the senior housing development will not occur but will present future development opportunities following redevelopment. The creation of a tax increment financing (housing) district would facilitate the development with the requirement that at least 20% of the units would be occupied by individuals at 50% of the area median income. We have reviewed the application and performed financial analysis for the project, including numerous discussions with the City Council at work sessions to review the financing components of this project and to understand the developer’s request and need for financial assistance. The purpose of this memorandum is to provide an overview of the anticipated financing package to the developer following those discussions, as well as a summary of the draft Tax Increment Financing (TIF) plan or the proposed Tax Increment Financing (Housing) District No. 1-13. Proposed Financial Assistance to Developer The application for financial assistance as submitted by the developer included $5.3 million over 15 years for acquisition and development of the project site, followed by subsequent construction of a senior care campus. Through submission of the tax increment financing application and supporting financial information, the developer indicated that the project as proposed would not occur on the current site without financial assistance from the City due to extraordinary costs associated with acquisition of the additional properties and site development/infrastructure improvements. Following thorough review of the project financing components, we have determined that tax increment financing assistance is necessary for the project to proceed as proposed. The developer is not able to obtain the maximum financing amount without the additional revenue stream provided through tax increment necessary to finance the entire project cost and the projected returns are not anticipated to be feasible. The work sessions provided framework to us and City staff that the goal of the City Council was to reduce the duration of assistance to as short of a term as possible. We have been working with City staff following those meetings to diligently meet that request. The following table provides a summary of the proposed financing package to the developer. Financial Assistance Package Initial request $5,300,000 Reduction of request based on financial review $(1,400,000) Reduction based on fee credits $(300,000) Net Assistance through TIF (est. 9.5 years) $3,600,000 Pooled TIF from Housing District 1-5 $382,000 Proposed TIF Assistance to Developer from TIF 1-13 (New Housing TIF District) over 8.5 years $3,218,000 The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP We were able to reduce the original request of assistance from 15 years to lesser term by lowering the total reimbursable amount of eligible costs. We further reduced the term through the provision of City fee credits, as standard practice. And lastly, by including the value of the town homes (additional $6.0M) and utilizing pooled TIF dollars already on-hand resulted in a further reduced term estimated to be 8.5 years. In summary the following steps were followed to meet the Council directives: 1. Review and application of fee credits through City policy 2. Including town homes in boundaries of TIF District 3. Use of pooled TIF from existing Housing District 1-5 1. Review and application of fee credits  Using information submitted by the developer in the development application, City staff was able to determine the estimated fee credit amount that is consistent with City policy. The City will provide credit in the amount of approximately $300,000 to the developer for park dedication and trunk utility fees for work on public trail and trunk utility oversizing improvements. This number is an estimate and may change based on actual improvements and contract costs. 2) Including town homes in boundaries of TIF District  At the May 6 City Council work session, there was a request to include the town home development within the boundaries of the TIF district to increase the projected revenues and ultimately result in a reduced term of assistance. The total estimated value of the taxable portion as provided by the County for the senior care building is approximately $22.9M. The preliminary value estimates for the town homes is about $300,000/unit resulting in an additional $6.0M of value. This provides more revenues in the TIF District as it captures all incremental taxes of the taxing entities, as opposed to the City’s share only should the town homes not be included in the TIF District and go on the general tax rolls. The inclusion results in one less year of needed tax increment assistance reducing the term from an original 10.5 years to 9.5 years to meet the recommended total of $3.6M. Use of pooled TIF from existing Housing District 1-5  We did additional due diligence to understand potential alternate funding sources that may be available to reduce the term of the TIF District and determined the City has existing funds from its’ Housing TIF District No. 1-5 (Willow Ponds). The available amount is approximately $382,000. The funds from TIF 1-5 may only be used on other eligible affordable housing projects within the City. If the funds are not used, they will be redistributed to the County and the city could expect to receive only its share of the total (approximately 1/3). By using these funds for the proposed project, the amount of TIF from the new housing district is further reduced to $3.218M and the term of assistance is projected to be a maximum of 8.5 years. Tax Increment Financing Plan Included with the packet is the draft Tax Increment Financing Plan for the proposed Tax Increment Financing (Housing) District No. 1-13. Adoption of the TIF Plan for the TIF District will provide the City with the authority to use tax increment revenues for specific eligible projects related to the housing project. The main components of the TIF Plan include the following:  Public purpose o Implementation of approximately 200 senior housing units o Mix of independent and assisted living with memory care and detached town homes o All rental units  Qualification as housing TIF District o At least 20% of the units will be occupied by individuals/persons at 50% of area median income o Required for term of assistance The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP  Term of district o Estimated maximum 8.5 years o May be less with future value growth  Boundaries of proposed district o 1 parcel with parcel id 31-31-22-43-0018 o Will be split and portion in district (removal of future commercial site)  Budget of projected revenues and expenditures o Total estimated increment of $3,701,133 o Finance TIF note of $3,218,000 (subject to approval of pooling) o City withholding (admin or other) of $185,058 o May be surplus that would be returned to County o Based on 9 years (only collect full years)  Estimated Impact to other taxing entities o County share of revenues: $1,089,103 o School share of revenues: $1,136,840 o City share of revenues: $1,321,21  Estimated total decrease in combined tax rate upon district decertification o (1.110%) The projected tax increment revenues that may be generated from the TIF District are shown in the chart below. The boundaries of the TIF District only include the residential properties (senior building and detached townhomes) following a split of the existing property. The future restaurant and commercial pad sites are not within the boundaries of the TIF District. Therefore, the estimated new taxable values and projected tax increment revenues included in this analysis do not account for any taxes or increment from the future restaurant and commercial properties. Contract for Private Development As stated, adoption of the TIF Plan for the TIF District provides the City with the authority to use tax increment revenues for implementation of the proposed project but does not obligate the City to use tax increment. The Contract for Private Development provides the terms for which the City and developer need to comply. Meeting those terms will allow the developer to receive tax increment financing as reimbursement for certain projects. A brief summary of the terms of the Contract are stated below: 1. Purchase of Land  Developer to purchase 17 acres of property required for the Minimum Improvements (which includes future restaurant location.  Purchase of two existing businesses Liquor store and Insurance, 49 Club property  Developer shall also purchase house on County Road J west of the proposed development site. 2. Minimum Improvements  Developer to build senior housing building with approximately 93 units of independent living, 50 units of assisted living, and 56 units of skilled nursing units.  Developer to build 20 detached town homes adjacent to the senior housing building.  Developer to build club house (TIF assistance will not be provided for club house).  The skilled nursing units must consist of no more than 20% of the senior housing building.  The assisted living units must have kitchen facilities and bathrooms.  The assisted living units must not have 24-hour nursing care.  Entry monument sign at SE quadrant of site with Provision for City of Lino Lakes entrance sign. 3. Public Improvements  Developer to dedicate all required County Road right-of-way to public at no cost (to be dedicated on plat).  Developer to construct County Road turn lane improvements, as shown on approved PUD development stage plan, subject to review and modification by City/County. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP  Developer to arrange for relocation of Xcel power lines - relocated lines will be relocated underground.  Developer to provide public utility easement for sanitary sewer, lift station, water main.  Developer to provide County and City right of way over Parcel 5 as necessary for realignment of public road.  Developer must construct public road (as shown on preliminary plat) to County Road J and put in all utilities and complete grading. 4. Declaration of Restrictive Covenants  20% of the town homes and 20% of the independent living and assisted living must be affordable to individuals or families earning 50% or less of area median income OR 40% of the town homes and 40% of the independent living and assisted living must be affordable to individuals or families earning 60% or less of area median income.  Declaration of restrictive covenants effective until the pay go note is paid in full. 5. Reduction of TIF Note  The principal amount of the TIF Note will be reduced by the amount of any additional trunk credits or fee reductions it receives from the City (not including credits already accounted for).  Within sixty (60) days of the completion of the construction of the Senior Building, the Developer shall provide the Authority with final construction costs of the Senior Building (including related Infrastructure Improvements). If the final construction costs are less than estimated by the Developer at the time it sought assistance from the Authority, the principal amount of the TIF Note shall be reduced by 5% of the difference between the initial estimated construction costs and the final construction costs. 6. Sale of Restaurant and Commercial Properties  In the first eight years following the date of this Agreement, if the Developer sells the restaurant and commercial properties for more than five percent (5%) of the Developer’s cost for such parcel (including purchase price and all fees related to the purchase), the Developer shall pay to the Authority 45% of the profit obtained by Developer for such parcel. The cost of each parcel sold by the Developer shall be determined by dividing the gross land price paid by the Developer by the net developable acreage of each parcel to determine a per square foot cost and multiplying the square footage cost by the number of square feet sold. Thank you for the opportunity to be of assistance to the City of Lino Lakes. Please contact me at 651.223.3036 or 651.368.2533 or mikaela.huot@bakertilly.com with any questions or comments. 0$7&+/,1(0$7&+/,1($&&(66,%/(6<0%2/7<3$&&(66,%/(6,*17<3'''%%%%%%%%%%%% ; 67$//67<33$,17675,3(# 2&:,7+:25'6123$5.,1*7<3$&&(66,%/(6<0%2/7<3123$5.,1 * 123$5.,1 * 123$5.,1 * 123$5.,1 *3$,17675,3(# 2&:,7+:25'6123$5.,1*7<3$&&(66,%/(6,*17<3 ; 67$//67<3 ; 67$//67<312.00':+,7(3$,17675,3( ; 67$//67<312 3$5.,1* 12 3$5.,1*3$,17675,3(# 2&:,7+:25'6123$5.,1*7<3$&&(66,%/(6<0%2/7<3$&&(66,%/(6,*17<33$5.,1*7<3,&$/19.01' (TYP) 16.00' (TYP) ; 67$//67<3&21&5(7((175$1&(&21&5(7((175$1&( ; 67$//67<3%&/8%+286(5(67$85$175()(572$5&+,7(&785$/)25/$<287$1'',0(16,2165()(572$5&+,7(&785$/)25/$<287$1'',0(16,216727$/67$//6$&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 727$/67$//6$&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 3$,17('',5(&7,21$/$552:7<3,&$/*$5'(1$5($14.00'0$,13$5.,1*&/8%+286(3$5.,1*727$/67$//6$&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 1257+:(673$5.,1*5(67$85$173$5.,1*727$/67$//6$&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 3$,17('',5(&7,21$/$552:7<3,&$/3$,17('',5(&7,21$/$552:7<3,&$/&21&5(7((175$1&(67236,*167236,*1123$5.,1*%0$,1%8,/',1*/27/27/27/27/27/27/27/27/27/27/27/27/27/27/27/27/27/27/27/27727$/67$//6$&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 1257+($673$5.,1*&21&5(7((175$1&(14.00'14.00'12.00'14.00'14.00'14.00'12.00'12.00'13.92'+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(17+($9<'87<3$9(0(170(',80'87<3$9(0(170(',80'87<3$9(0(170(',80'87<3$9(0(170(',80'87<3$9(0(170(',80'87<3$9(0(170(',80'87<3$9(0(1738.01' ; 67$//67<3$&&(66,%/(6,*17<3$&&(66,%/(6<0%2/7<33$,17675,3(# 2&:,7+:25'6123$5.,1*7<312 3$5.,1* 12 3$5.,1*6287+3$5.,1*727$/67$//6$&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 5(7$,1,1*:$//5(7$,1,1*:$//:(7/$1'(;,67,1*<5+:/ 352326('<5+:/ (;,67,1*<5+:/ 352326('<5+:/ (;,67,1*<5+:/ 352326('<5+:/ 5()(572$5&+,7(&785$/)25/$<287$1'',0(16,216352326('3523(57</,1(352326('3523(57</,1(352326('3523(57</,1(352326('3523(57</,1(352326('3523(57</,1(352326('3523(57</,1(352326('3523(57</,1(352326('3523(57</,1(352326('3523(57</,1(LANDSCAPE ARCHITECTURE SITE PLANNING CIVIL ENGINEERINGANDERSON - JOHNSONASSOCIATES,INC.7575 GOLDEN VALLEY ROAD SUITE 200 MINNEAPOLIS. MN 55427FAX (763) 544-0531 PH (763) 544-7129DateRegistration NumberCheckDrawnDate:CommI hereby certify that this plan, specification or report was prepared byme or under my direct supervision and that I am a duly Licensedunder the laws of the State ofRevisionsDescription Date NumScale:North6,7(3/$129(5$//'$9,'$5(<;;;;;;;;;;;%-''$5 &0,11(627$352)(66,21$/(1*,1((5/<1*%/2067(11415 ALMOND AVE WST. PAUL, MN 55108HODGSON ROADLINO LAKES, MN 55014/<1*%/2067(16(1,25&20081,7,(66,*1$*(.(<127(60Q087&'5[$0Q087&'5[%6,0,/$5720Q087&'5[3$5.,1*&127(6 5()(5726+((7&6,7(3/$11257+)25127(6 5()(5726+((7&*5$',1*$1''5$,1$*(3/$11257+)25*(1(5$/127(6/(*(1'5()(5(1&(.(<726,7('(7$,/6'(7$,/,'180%(5723'(7$,/6+((7180%(5%27720352326('&21&5(7(:$/.352326('&21&5(7(6/$%352326('/,*+7'87<%,780,12863$9(0(17352326('0(',80'87<%,780,12863$9(0(17352326('+($9<'87<%,780,12863$9(0(17352326('75$)),&&21752/6,*16,*1$*(.(<127(352326('%2//$5'3$,17('$&&(66,%/(6<0%2/352326('0$1+2/(0+352326('&$7&+%$6,1&%352326(')/$5('(1'6(&7,21)(6352326('+<'5$17+<'352326('*$7(9$/9(*9352326('3267,1',&$7259$/9(3,9352326(')/$*32/(5()(572$5&+,7(&785$/3/$16352326('%8,/',1*672235()(572$5&+,7(&785$/3/$16352326('/,*+732/(5()(572(/(&75,&$/3/$163523(57</,1($1C2.111257+($673$5.,1*727$/67$//6 $&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 1257+:(673$5.,1*727$/67$//6 $&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' &/8%+286(3$5.,1*727$/67$//6 $&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 5(67$85$173$5.,1*727$/67$//6 $&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 6287+3$5.,1*727$/67$//6 $&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 0$,13$5.,1*727$/67$//6 $&&(66,%/(67$//65(48,5(' $&&(66,%/(67$//63529,'(' 6,7(67$7,67,&6030 60 City of Lino Lakes, Minnesota Lino Lakes Economic Development Authority Tax Increment Financing Plan for Tax Increment Financing (Housing) District No. 1-13 (Lyngblomsten Senior Housing Project) Within Development District No. 1 Dated: June 24, 2019 Public Hearing Scheduled: July 8, 2019 Approval by City Council: July 8, 2019 Lino Lakes Economic Development Authority, Minnesota 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 a Housing 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 ..................................................................... 3 I. Specific Development Expected to Occur Within the TIF District ................................... 3 J. Findings and Need for Tax Increment Financing ........................................................... 4 K. Estimated Public Costs .................................................................................................. 4 L. Estimated Sources of Revenue ..................................................................................... 5 M. Estimated Amount of Bonded Indebtedness .................................................................. 5 N. Original Net Tax Capacity .............................................................................................. 5 O. Original Tax Capacity Rate ............................................................................................ 6 P. Projected Retained Captured Net Tax Capacity and Projected Tax Increment ............. 6 Q. Use of Tax Increment ..................................................................................................... 7 R. Excess Tax Increment ................................................................................................... 8 S. Tax Increment Pooling and the Five-Year Rule ............................................................. 8 T. Limitation on Administrative Expenses .......................................................................... 8 U. Limitation on Property Not Subject to Improvements - Four Year Rule ......................... 8 V. Estimated Impact on Other Taxing Jurisdictions ............................................................ 9 W. Prior Planned Improvements ......................................................................................... 9 X. Development Agreements ............................................................................................. 10 Y. Assessment Agreements ............................................................................................... 10 Z. Modifications of the Tax Increment Financing Plan ....................................................... 10 AA. Administration of the Tax Increment Financing Plan ...................................................... 10 AB. Filing TIF Plan, Financial Reporting and Disclosure Requirements ............................... 11 Map of the Tax Increment Financing District and Development District .............................................. EXHIBIT I TIF District Assumptions Report ......................................................................................................... EXHIBIT II Projected Tax Increment Report ......................................................................................................... EXHIBIT III Estimated Impact on Other Taxing Jurisdictions Report ..................................................................... EXHIBIT IV Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 1 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 (Housing) District No. 1-13. "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. 1-13: Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 2 1. redevelop blighted areas as identified 2. provide housing opportunities within the community 3. provide employment opportunities within the community. 4. improve the tax base of Lino Lakes and the general economy of the City and State; 5. implement relevant portions of the Comprehensive Plan. The Authority’s specific purpose in establishing TIF District No. 1-13 is to aid in the construction of a senior living care campus comprising of independent living, assisted living, memory care, skilled care and detached townhomes of which the intended age for occupants is 55+. The Authority intends to use increment generated by the new development to assist with financing a portion of the extraordinary onsite and offsite costs directly related to the senior care building including acquisition, underground and surface parking, streets, public utilities, and public improvements to gain access to the site. Section E Designation of Tax Increment Financing District as a Housing District Pursuant to the TIF Act, the City seeks to create Tax Increment Financing (Housing) District No. 1-13 and adopt a TIF Plan for the TIF District. The City will review the TIF Plan prior to City adoption. TIF District No. 1-13 is a housing district. Housing districts are a type of tax increment financing district that consist of a project intended for occupancy, in part, by persons or families of low and moderate income. Low and moderate income is defined in federal, state, and municipal legislation. A project does not qualify if more than 20% of the square footage of buildings that receive assistance from tax increments consist of commercial, retail or other nonresidential use. In addition, housing districts are subject to various income limitations and requirements for residential property. For owner occupied residential property, 95% of the housing units must be initially purchased and occupied by individuals whose family income is less than or equal to the income requirements for qualified mortgage bond projects under section 143(f) of the Internal Revenue Code. For residential rental property, the property must satisfy the income requirements for a qualified residential rental project as defined in section 142(d) of the Internal Revenue Code. The TIF District meets the above qualifications for these reasons: 1. The planned improvements consist of the following: a. Approximately 150 total units, for which the following will apply: o 150-unit senior housing building with at least 20% (30) of the rental units will be occupied by persons with incomes no greater than 50% of county median income 2. At least 80% of the proposed development will be used for residential purposes. 3. The City will require in the development agreement that the income limitations for the rental units in the senior building will apply for the duration of the TIF District. Tax increments derived from a housing district must be used solely to finance the cost of housing projects as defined in section 469.174, subd. II and 469.176 of the TIF Act. The cost of public improvements directly related to the housing projects and the allocated administrative expenses of the City may be included in the cost of a housing project. The City anticipates using tax increment revenues to finance a portion of the extraordinary costs associated with providing the affordable housing units. Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 3 Section F Duration of the TIF District Housing districts may remain in existence 25 years from the date of receipt of the first tax increment. Modifications of this plan (see Section Z) shall not extend these limitations. Pursuant to Minnesota Statutes, Section 469.175, subd. 1(b), the Authority specifies 2022 as the first year in which it elects to receive tax increment from the TIF District, which is no later than four years following the year of approval of the TIF District. Thus, the Authority may collect increment from the district through December 31, 2047; however, the Authority anticipates decertifying the TIF District as early as possible with a projected maximum term of 8.5 years. All tax increments from taxes payable in the year the TIF District is decertified shall be paid to the Authority. Section G Property to be Included in the TIF District The TIF District comprises 1 parcel that contains an underutilized building that will be demolished prior to development. The total area of the TIF district also includes adjacent streets and right-of-way located within the Project Area and are described below. A map showing the location of the TIF District is shown in Exhibit I. Parcel Number Legal Description 31-31-22-43-0018 LOT 4 AUDITORS SUBDIVISION NO 107 TOG/W ELY 50 FT OF LOT 22 SD AUD SUB LYG BET WLY EXTNS OF N & S LINES OF SD LOT 4 It is anticipated the parcel listed above will be replatted prior to development and a portion of the property will be included within the boundaries of 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, as illustrated in the boundary map included in Exhibit I. 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 project includes the development of property within the City to include a senior care campus with independent living, assisted living, memory care and skilled care units in one building with an underground parking structure. The skilled care portion of the building is a non-residential use that will be less than 20% of the square footage of the entire building. In addition to the senior building will be the construction of 20 detached townhomes and community clubhouse. In order to comply with Minnesota Statutes for designation of a Housing TIF District, at least 20% of the units will be restricted for persons or families with incomes at or below 50% of area median income. The Authority has identified significant costs related to construction of the project including acquisition, site development, infrastructure and public improvements that are deemed necessary for the project to proceed. The Authority anticipates providing financial assistance for the costs associated with the provision of affordable housing, acquisition and redevelopment of the entire property site and also to finance certain public improvements directly related to the housing development project. The Authority may also use available tax increment revenues to finance a portion of the eligible related administrative expenses. Demolition and subsequent construction of the new development on the project site is projected to start in late 2019. The project is expected to be fully constructed by December 31, 2020 and be 100% assessed and on the tax rolls as of January 2, 2021 for taxes payable 2022. Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 4 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 a housing district. See Section G 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. The proposed development is expected to consist of approximately 150 senior housing units comprising of independent living, assisted living and memory care units. The City’s finding that the proposed development would be unlikely to occur solely through private investment within the reasonably foreseeable future is based on an analysis of the project pro forma and other materials submitted to the City by the developer. These documents have indicated that due to the significant costs associated with assembling the project site and construction of the senior housing project will result in returns that are not sufficient to support development, thereby making this housing development infeasible without public assistance. There are significant development costs associated with acquisition, demolition, installation of new infrastructure and structured parking. Therefore, the developer has indicated in communications with the City and submitted financial data that the development as proposed would not move forward without tax increment assistance. (3) The TIF Plan conforms to the general plan for development or redevelopment of the City as a whole. The reasons and facts supporting this finding are that the City Council of the City has found the TIF plan consistent with the general plan for development of the city as a whole and will generally complement and serve to implement policies adopted in the City's comprehensive plan. (4) The TIF Plan will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development of the Project Area by private enterprise. Through the implementation of the TIF Plan, the City will provide an impetus for a new senior care campus, of which a portion of the units will be affordable, which complements the overall housing needs of the City and helps support other private types of development by providing a range of housing opportunities for residents and workers within the City. 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 888,000 Site Improvements/Preparation costs 2,330,000 Utilities 0 Other Housing Improvements 298,075 Administrative expenses 185,058 Subtotal Interest expenses 0 Total 3,701,133 Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 5 The Authority anticipates using tax increment to the extent available to finance affordable housing costs, site improvement/preparation costs, public improvement infrastructure costs, land acquisition and related administrative expenses, and other TIF-eligible expenditures as deemed necessary and related to redevelopment of the project site. The Authority 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 ($3,701,133) is not increased. The Authority also reserves the right to fund any of the identified costs with any other legally available revenues, such as grants and/or loans, but anticipates that such costs will be primarily financed with tax increments. Section L Estimated Sources of Revenue Tax Increment revenue 3,701,133 Interest on invested funds 0 Land Sale Proceeds 0 Other 0 Total 3,701,133 The Authority anticipates providing financial assistance on a pay-as-you-go basis for acquisition and 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, 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 $3,701,133. 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, 2018, for taxes payable in 2019, is $908,400. Upon establishment of the district and subsequent reclassification of property, the estimated original net tax capacity of the TIF District is expected to be $11,355. This assumes the property is classified as residential rental with a classification rate of 1.25%. 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; Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 6 (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. Section O 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 sum of all local tax rates that apply to property in the TIF District, for taxes levied in 2019 and payable in 2020, is not available at the time off drafting of this document. The County Auditor shall certify the amount for taxes payable 2020 as the original tax capacity rate of the TIF District once available assuming the request for certification is made between July 1, 2019 and June 30, 2020. For purposes of estimating the tax increment generated by the TIF District, the sum of the local tax rates for taxes levied in 2018 and payable in 2019, is 117.574% as shown below. 2018/2019 Taxing Jurisdiction Local Tax Rate City of Lino Lakes 41.817% Anoka County 34.473% ISD #12 35.984% Other 5.300% Total 117.574% Section P Projected Retained Captured Net Tax Capacity and Projected Tax Increment The Authority anticipates that the project will begin construction in fall 2019 and be 100% completed by December 31, 2020, creating a total tax capacity for TIF District No. 1-13 of $362,388 as of January 2, 2021. The captured tax capacity as of that date is estimated to be $351,033 and the first year of tax increment is estimated to be $390,675 payable in 2019. A complete schedule of estimated tax increment from the TIF District is shown in Exhibit III. The estimates shown in this TIF plan assume that residential rental class rates remain at 1.25% of the estimated taxable value and include 0% 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 City the amount of captured net tax capacity each year. The City may choose to retain any or all of this amount. It is the City'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. Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 7 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. 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 City 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 one or more pay-as-you-go notes, 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 1a; 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 City. Tax increment derived from the TIF District must be used solely to finance the cost of housing projects (including administrative expenses and public improvement costs) as defined in Section 469.174, Subdivision 11 of the Tax Increment Act and subject to the requirements set forth in Section 469.1761 of the Tax Increment Act. 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. Further, tax increments may not be used to finance: a commons area used as a public park; facilities used for social or recreational purposes (whether public or private); or publicly-owned facilities used for conference purposes; provided that tax increment may be used for a privately owned conference facility, and for parking structures whether public or privately owned and whether or not they are ancillary to one of the otherwise prohibited uses described above. 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. Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 8 Section R Excess Tax Increment Beginning with the sixth year after certification of the TIF District, 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 City 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 (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 As permitted under Minnesota Statutes, Section 469.1763, subdivision 2(b) and subdivision 3(a)(5), any expenditures of increment from the TIF District to pay the cost of a “housing project” as defined in Minnesota Statutes, Section 469.174, subd. 11 will be treated as an expenditure within the district for the purposes of the “pooling rules” and the “five-year rule”. The City does not currently anticipate that tax increments will be spent outside the TIF District (except allowable administrative expenses), but such expenditures are expressly authorized in this TIF Plan. The Authority does not expect that allowable pooling expenditures will be made outside of the TIF District, but 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 proposed development within the TIF District; (3) relocation benefits paid to, or services provided for, persons or businesses residing or located within the TIF District; or (4) amounts used to pay interest on, fund a reserve for, or sell at a discount, tax increment bonds. 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 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 Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 9 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 City 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 City or owner of the parcel subsequently commences any of the above activities, the City 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 City 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 $3,714,507. 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 plan to issue 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 $1,136,840. 4. 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 $1,089,103. 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 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. Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 10 Section X Development Agreements If within a project containing a housing 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 City may, upon entering into a development agreement, also enter into an assessment agreement with any person, 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 anticipates 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; increase in the amount of capitalized interest; increase in that portion of the captured net tax capacity to be retained by the City; increase in the total estimated capital and administrative costs; or designation of additional property to be acquired by the City 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 City 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. The City 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 City shall submit a copy of such plan to the Minnesota Department of Revenue and the Office of the State Auditor. The City 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 City 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 City shall also send the County Assessor any assessment agreement Lino Lakes Economic Development Authority, Minnesota BAKER TILLY Page 11 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 City 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: (1) prior to July 1, the City shall notify the County Assessor of any new development that has occurred in the TIF District during the past year to ensure 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 the TIF District is classified as an economic development district, then the original net tax capacity shall be increased by the amount of the annual adjustment factor; and (d) 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 City 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 City will comply with all reporting requirements for the TIF District under Minnesota Statutes, Section 469.175, subdivisions 5 and 6. Exhibit I BAKER TILLY Page 12 MAP OF PROPOSED TAX INCREMENT FINANCING (HOUSING) DISTRICT NO. 1-13 Exhibit II BAKER TILLY Page 13 Assumptions Report City of Lino Lakes, Minnesota Tax Increment Financing (Housing) District No. 1-13 Lyngblomsten Site: Senior Care Campus Draft TIF Plan Exhibits: Updated Revenue Projections with $28,991,000 new value Type of Tax Increment Financing District Housing Maximum Duration of TIF District 25 years from 1st increment Projected Certification Request Date 12/30/19 Decertification Date 12/31/30 (9 Years of Increment) 2017/2018 Base Estimated Market Value $908,400 Original Net Tax Capacity $11,355 Assessment/Collection Year 2019/2020 2020/2021 2021/2022 2022/2023 Base Estimated Market Value $908,400 $908,400 $908,400 $908,400 Estimated Increase in Value - New Construction 0 0 28,082,600 28,082,600 Total Estimated Market Value 908,400 908,400 28,991,000 28,991,000 Total Net Tax Capacity $11,355 $11,355 $362,388 $362,388 City of Lino Lakes 41.817% Anoka County 34.473% Centennial SD #12 35.984% Other 5.300% Local Tax Capacity Rate 117.5740% 2018/2019 Fiscal Disparities Contribution From TIF District 0.0000% Administrative Retainage Percent (maximum = 10%) 5.00% Pooling Percent 0.00% Present Value Date & Rate 02/01/20 5.00% PV Amount $2,726,536 Notes Projections assume no future changes to classification rates and current tax rates remain constant. Projections are based on final pay 2019 rates. Projections assume project 100% completed in 2020 Projections assume no market value inflation. Exhibit III BAKER TILLY Page 14 Projected Tax Increment ReportCity of Lino Lakes, MinnesotaTax Increment Financing (Housing) District No. 1-13Lyngblomsten Site: Senior Care CampusDraft TIF Plan Exhibits: Updated Revenue Projections with $28,991,000 new valueLess: Retained Times: Less: Less: P.V.Annual Total Total Original Captured Tax Annual State Aud. Subtotal CityAnnual AnnualPeriod Market Net Tax Net Tax Net Tax Capacity Gross Tax Deduction Net Tax Retainage Net Net Rev. ToEnding Value (1)Capacity (2)Capacity (3)Capacity Rate (4)Increment 0.360% Increment 5.00% Revenue 02/01/20(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) 5.00%12/31/19 908,400 11,355 11,355 0 117.574% 0 0 0 0 0 012/31/20 908,400 11,355 11,355 0 117.574% 0 0 0 0 0 012/31/21 908,400 11,355 11,355 0 117.574% 0 0 0 0 0 012/31/22 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 * 337,48012/31/23 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 321,40912/31/24 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 306,10412/31/25 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 291,52812/31/26 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 277,64512/31/27 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 264,42412/31/28 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 251,83312/31/29 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 239,84112/31/30 28,991,000 362,388 11,355 351,033 117.574% 412,723 1,486 411,237 20,562 390,675 228,420$3,714,507 $13,374 $3,701,133 $185,058 $3,516,075 $2,518,684* City has the election to opt delay receipt of first increment up to 4 years from approval date. Further discussions regarding first year collection(1) Total estimated market value based on information provided by County Assessor, subject to further review very preliminary and subject to further review. Includes 0% annual market value inflator(2) Total net tax capacity based on residential rental class rate of 1.25% (3) Original net tax capacity based on portion of existing land value for 1 parcel to be included in development (4) Total local tax capacity rate for taxes payable 2019 Exhibit IV BAKER TILLY Page 15 Estimated Impact on Other Taxing Jurisdictions ReportCity of Lino Lakes, MinnesotaTax Increment Financing (Housing) District No. 1-13Lyngblomsten Site: Senior Care CampusDraft TIF Plan Exhibits: Updated Revenue Projections with $28,991,000 new valueWithoutProject or TIF District With Project and TIF DistrictFinal Projected Hypothetical2018/2019 2018/2019 Retained New Hypothetical Hypothetical Tax GeneratedTaxable 2018/2019 Taxable Captured Taxable Adjusted Decrease In by RetainedTaxing Net Tax Local Net Tax Net Tax Net Tax Local Local CapturedJurisdiction Capacity (1) Tax Rate Capacity (1) + Capacity = Capacity Tax Rate (*) Tax Rate (*) N.T.C. (*)City of Lino Lakes 20,757,860 41.817% 20,757,860 $351,033 21,108,89341.122% 0.695% 144,350Anoka County 335,542,347 34.473% 335,542,347 351,033 335,893,380 34.437% 0.036% 120,885Centennial SD #12 33,044,600 35.984% 33,044,600 351,033 33,395,633 35.606% 0.378% 124,988Other - 5.300% - - - 5.300% - -Totals 117.574% 116.464% 1.110% * Statement 1: If the projected Retained Captured Net Tax Capacity of the TIF District was hypothetically available to each ofthe 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 ratewould decrease by 1.110% (see Hypothetical Decrease in Local Tax Rate above). The hypothetical tax that theRetained 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 4.51% of the total tax rate. Second Draft June 13, 2019 CONTRACT FOR PRIVATE DEVELOPMENT between LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY and LYNGBLOMSTEN SENIOR HOUSING, INC. Dated: _____________, 2019 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 i TABLE OF CONTENTS Page PREAMBLE ....................................................................................................................................... 1 ARTICLE I Definitions Section 1.1. Definitions .................................................................................................................... 3 ARTICLE II Representations and Warranties Section 2.1. Representations by the Authority ................................................................................. 7 Section 2.2. Representations and Warranties by the Developer ...................................................... 7 ARTICLE III Tax Increment Financing Assistance Section 3.1. Status of Development Property .................................................................................. 9 Section 3.2. Environmental Conditions ............................................................................................ 9 Section 3.3. Minimum Improvements .............................................................................................. 9 Section 3.4. Reimbursement of Senior Building Costs .................................................................. 10 Section 3.5. Issuance of TIF Note .................................................................................................. 10 Section 3.6. Reduction of TIF Note................................................................................................ 11 Section 3.7. Sale of Restaurant Parcel or Commercial Parcel ....................................................... 12 Section 3.8. City Development Agreement .................................................................................... 12 Section 3.9. Payment of Authority Costs ....................................................................................... 12 Section 3.10. Records ....................................................................................................................... 12 Section 3.11. Purpose of Assistance ................................................................................................. 12 ARTICLE IV Construction of Minimum Improvements Section 4.1. Construction of Improvements ................................................................................... 13 Section 4.2. Construction Plans ...................................................................................................... 13 Section 4.3. Commencement and Completion of Construction ..................................................... 14 Section 4.4. Certificate of Completion ........................................................................................... 14 Section 4.5. Affordability Covenants; Qualification of TIF District ............................................. 15 Section 4.6. Affordability Housing Reporting ............................................................................... 15 Section 4.7 Senior Housing Covenant ........................................................................................... 16 Section 4.8 Uniformity of Finishes, Amenities ............................................................................. 16 ii ARTICLE V Insurance Section 5.1. Insurance ..................................................................................................................... 17 Section 5.2. Subordination .............................................................................................................. 18 ARTICLE VI Tax Increment; Taxes Section 6.1. Right to Collect Delinquent Taxes ............................................................................. 19 Section 6.2. Reduction of Taxes ..................................................................................................... 19 Section 6.3. Qualifications .............................................................................................................. 19 Section 6.4. Minimum Assessment Agreement ............................................................................. 20 ARTICLE VII Other Financing Section 7.1. Generally ..................................................................................................................... 21 Section 7.2. Authority’s Option to Cure Default on Mortgage ...................................................... 21 Section 7.3. Modification; Subordination ...................................................................................... 21 Section 7.4. Termination ................................................................................................................ 21 ARTICLE VIII Prohibitions Against Assignment and Transfer; Indemnification Section 8.1. Representation as to Development ............................................................................. 23 Section 8.2. Prohibition Against Developer’s Transfer of Property and Assignment of Agreement .......................................................................................... 23 Section 8.3. Release and Indemnification Covenants .................................................................... 23 ARTICLE IX Events of Default Section 9.1. Events of Default Defined .......................................................................................... 25 Section 9.2. Remedies on Default .................................................................................................. 25 Section 9.3. Termination or Suspension of TIF Note .................................................................... 26 Section 9.4. No Remedy Exclusive ................................................................................................ 26 Section 9.5. No Additional Waiver Implied by One Waiver ........................................................ 26 Section 9.6. Attorneys’ Fees ........................................................................................................... 27 ARTICLE X Additional Provisions Section 10.1. Conflict of Interests; Representatives Not Individually Liable ................................. 28 Section 10.2. Equal Employment Opportunity ................................................................................ 28 Section 10.3. Restrictions on Use ..................................................................................................... 28 iii Section 10.4. Titles of Articles and Sections .................................................................................... 28 Section 10.5. Notices and Demands ................................................................................................. 28 Section 10.6. Counterparts ................................................................................................................ 29 Section 10.7. Recording .................................................................................................................... 29 Section 10.8. Amendment ................................................................................................................ 29 Section 10.9. Authority Approvals ................................................................................................... 29 Section 10.10. Termination ................................................................................................................ 29 Section 10.11. Choice of Law and Venue .......................................................................................... 20 TESTIMONIUM .............................................................................................................................. S-1 SIGNATURES ................................................................................................................................. S-1 EXHIBIT A DEVELOPMENT PROPERTY .............................................................................. A-1 EXHIBIT B CERTIFICATE OF COMPLETION ....................................................................... B-1 EXHIBIT C INFRASTRUCTURE IMPROVEMENTS ............................................................. C-1 EXHIBIT D LAND DEDICATION BY DEVELOPER ............................................................. D-1 EXHIBIT E FORM OF TIF NOTE .............................................................................................. E-1 EXHIBIT F FORM OF INVESTMENT LETTER ..................................................................... F-1 EXHIBIT G COMPLIANCE CERTIFICATE ............................................................................. G-1 EXHIBIT H FORM OF MINIMUM ASSESSMENT AGREEMENT ....................................... H-1 1 CONTRACT FOR PRIVATE DEVELOPMENT THIS CONTRACT FOR PRIVATE DEVELOPMENT, made as of the _____ day of _____________, 2019 (the “Agreement”), is between the LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, a public body corporate and politic under the laws of the State of Minnesota (the “Authority”), and LYNGBLOMSTEN SENIOR HOUSING, INC., a Minnesota limited liability company (the “Developer”). 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 approved Tax Increment Financing Plan for Tax Increment Financing (Housing) District No. 1-5 (the “Willow Ponds TIF District) on December 28, 1992 and the Authority has approximately $382,000 available from the Willow Ponds TIF District that may be used within the Development District for affordable housing; and WHEREAS, the City and the Authority have approved a Tax Increment Financing Plan for Tax Increment Financing (Housing) District No. 1-13 (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 and the Minnesota Statutes Sections 469.090 through 469.1082, as amended (the “EDA Act”), the Authority is authorized to undertake certain activities to facilitate the development of real property by private enterprise, including development of affordable housing within the City; and WHEREAS, the Developer proposes to acquire certain property described in EXHIBIT A attached hereto (the “Development Property”) within the TIF District and construct a senior rental housing facility with approximately 143 units, comprised of independent living and assisted living, with at least twenty percent (20%) of such units to be available to persons of low and moderate income, as described herein (the “Senior Building”); and WHEREAS, in order to achieve the objectives of the Development Program for the Development District and make the Senior Building economically feasible for the Developer to construct, the Authority is prepared to reimburse the Developer for a portion of the development costs related to the Senior Building; and WHEREAS, the Authority believes that the development of the Senior Building within the TIF District pursuant to this Agreement, and fulfillment generally of this Agreement, is in the vital 2 and best interests of the City and the health, safety, morals, and welfare of its residents, and in accord with the public purposes and provisions of the applicable State of Minnesota and local laws and requirements under which the Senior Building 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: (The remainder of this page is intentionally left blank.) 3 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, a public body corporate and politic under the laws of the State. “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 adopted by Authority Board on July 8, 2019, approving this Agreement and authorizing the issuance of the TIF Note. “Available Tax Increment,” means, on each Payment Date, ninety-five percent (95%) of the Tax Increment attributable to the Development Property and paid to the Authority by the County in the six months preceding the Payment Date. Available Tax Increment shall not include any Tax Increment if, as of any Payment Date, there is an uncured Event of Default under this Agreement. “Board” means the Board of Commissioners of the Authority. “Certificate of Completion” means the Certificate, in substantially the form attached as EXHIBIT B, provided to the Developer pursuant to Section 4.4 of this Agreement. “City” means the City of Lino Lakes, Minnesota. “Clubhouse” means an approximately __________ square feet clubhouse constructed on the Development Property to be open to residents of the Townhomes, the Senior Building, and the Skilled Nursing Units. “Construction Plans” means the plans, specifications, drawings and related documents related to the Minimum Improvements, 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: (1) site plan; (2) foundation plan; (3) floor plan for each floor; (4) elevations (all sides, including a building materials schedule); (5) landscape and grading 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. 4 “County” means Anoka County, Minnesota. “Developer” means Lyngblomsten Senior Housing, Inc., a Minnesota limited liability company, or its permitted successors and assigns. “Development District” means the Development District No. 1. “Development Program” means the Authority’s Development Program for the Development District, as amended. “Development Property” means the real property described in EXHIBIT A of this Agreement. “EDA Act” means Minnesota Statutes Sections 469.090 through 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. “Infrastructure Improvements” means the infrastructure improvements to be constructed, installed, and paid for by the Developer as described in EXHIBIT C of this Agreement. “Material Change” means a change in construction plans that adversely affects generation of tax increment or changes the number of units of rental housing. “Maturity Date” means the date that the TIF Note has been paid in full or terminated in accordance with its terms, whichever is earlier. “Minimum Assessment Agreement” means the Minimum Assessment Agreement described in Section 6.4 hereof and in substantially the form set forth in EXHIBIT H. “Minimum Improvements” means the construction by the Developer of the Senior Building, the Townhomes, the Clubhouse, the Infrastructure Improvements, and subject to the provisions of Section 3.3, the Skilled Nursing Units. “Minimum Market Value” means $________________, as set forth in the Minimum Assessment Agreement. “Mortgage” means any mortgage made by the Developer that is secured, in whole or in part, with the Development Property and that is a permitted encumbrance pursuant to the provisions of Article VII of this Agreement. “Municipal Development Act” means Minnesota Statutes, Sections 469.124 to 469.133, as amended. “Payment Date” has the meaning given such term in the TIF Note. 5 “Senior Building” means an approximately __________ square foot senior rental housing facility containing at least 143 rental units, comprised of approximately 93 independent living units and approximately 50 assisted living units, of which at least 20% of such units will be occupied by persons with incomes no greater than 50% of the area median gross income. “Senior Building 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 3.4(b). “Skilled Nursing Units” has the meaning given in Section 3.3 hereof. “State” means the State of Minnesota. “Tax Increment” means that portion of the real property taxes that is paid with respect to the TIF District and that 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 through 469.1794, as amended. “Tax Increment District” or “TIF District” means the Tax Increment Financing (Housing) District No. 1-13, a housing tax increment financing district created by the City and the Authority. “Tax Increment Plan” or “TIF Plan” means the Tax Increment Financing Plan for the Tax Increment Financing District 1-13 (Lyngblomsten Senior Housing Project), as approved by the City Council on July 8, 2019, and as it may be amended. “Tax Increment District Property” means the Development Property that is included in the TIF District. “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. “TIF Note” means a Tax Increment Revenue Note, substantially in the form attached hereto as EXHIBIT E, to be delivered by the Authority to the Developer in accordance with Section 3.5 hereof. “Townhomes” has the meaning given in Section 3.3 hereof. “Transfer” has the meaning set forth in Section 8.2(a) 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 strikes, other labor troubles, prolonged adverse weather or acts of God, fire or other casualty to the Minimum Improvements, litigation commenced by third parties which, by injunction or other similar judicial action, directly results in 6 delays, or acts of any federal, state or local governmental unit (other than the Authority in exercising its rights under this Agreement), including without limitation condemnation or threat of condemnation of any portion of the Development Property, which directly result in delays. Unavoidable Delays shall not include delays experienced by the Developer in obtaining permits or governmental approvals necessary to enable construction of the Minimum Improvements by the dates such construction is required under Section 4.3 hereof, so long as the Construction Plans have been approved in accordance with Section 4.2 hereof. “Willow Ponds TIF District” means the Tax Increment Financing (Housing) District No. 1-5 approved by the Authority on December 28, 1992. (The remainder of this page is intentionally left blank.) 7 ARTICLE II Representations and Warranties Section 2.1. Representations by the Authority. The Authority makes the following representations as the basis for the undertaking on its part herein contained: (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 the Senior Building Costs necessary to facilitate the construction of the Minimum Improvements in accordance with the terms of this Agreement to further the objectives of the Development Program. (c) The Authority finds that the Minimum Improvements are necessary to alleviate a shortage of, and maintain existing supplies of, decent, safe, and sanitary senior housing for persons of low or moderate income and their families as such income is determined pursuant to Section 4.5. Section 2.2. Representations and Warranties by the Developer. The Developer represents and warrants that: (a) The Developer is a nonprofit corporation, which is duly organized and in good standing under the laws of the State; the Developer is not in violation of any provisions of its bylaws or articles of incorporation; and the Developer 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 respective officers, directors, managers, governors or members (as applicable). (b) The Developer will construct the Minimum Improvements and cause the Minimum Improvements to be operated and maintained 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 Project Area 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 use its best efforts to obtain or cause to be obtained, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, 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. The Developer did not 8 obtain a building permit for any portion of the Minimum Improvements before July 8, 2019, the date of approval of the TIF Plan for the TIF District. (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 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 Developer 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 Developer from performing its obligations under this Agreement. (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 Developer or its business which may delay or require changes in construction of the Minimum Improvements. (g) The Developer represents that no more than twenty percent (20%) of the square footage of the Minimum Improvements will consist of commercial, retail or other nonresidential use. (h) The Developer represents that each independent care unit and each assisted living unit within the Senior Building has facilities to cook (such as a microwave) and a bathroom. Certain units in the Minimum Improvements will have access to 24-hour care from home health aides and a nurse on call service but none of the units in the Minimum Improvements will have 24- hour nursing care on-site. (The remainder of this page is intentionally left blank.) 9 ARTICLE III Tax Increment Financing Assistance Section 3.1. Status of Development Property. The Developer will acquire the Development Property. The Authority has no obligation to acquire the Development Property. 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 the Authority 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. Minimum Improvements. (a) The Developer shall cause to be constructed the following on the Development Property: (i) the Senior housing building with approximately 93 independent living units and approximately 50 assisted living units (the “Senior Building”); (ii) 20 detached townhomes on land adjacent to the Senior Building (the “Townhomes”); (iii) a clubhouse for use by residents of the Townhomes and the Senior Building (the “Clubhouse”); and (iv) the Infrastructure Improvements described in EXHIBIT C. (b) The Developer shall dedicate land to the City or the County, as applicable, Infrastructure Improvements as described in EXHIBIT D. 10 (c) The Developer intends to construct an addition to the Senior Building at some point in the future which will include approximately 56 units of skilled nursing units (the “Skilled Nursing Units”). The Developer shall build the Skilled Nursing Units if it is able to obtain the proper approvals needed from the State. If the Developer is unable to obtain the proper licensing from the State to operate the Skilled Nursing Units after diligent efforts to obtain such licensing, it shall not be a default hereunder if the Developer does not build the Skilled Nursing Units. (d) The Developer acknowledges and understands that all of the assisted living units within the Senior Building must include kitchen facilities and bathrooms. In addition, the Developer confirms that none of the assisted living units within the Senior Building will receive 24 hour medical care. (e) The Developer further acknowledges and understands that no more than twenty percent (20%) of the square footage of buildings that receive assistance from tax increments may consist of commercial, retail, or other nonresidential uses. If the Developer constructs the Skilled Nursing Units as an addition to the Senior Building, the Skilled Nursing Units and all other commercial, retail, or other nonresidential uses within the Senior Building must not be more than twenty percent (20%) of the Senior Building. If the Skilled Nursing Units are constructed more than three years after the construction of the Senior Building is completed, the expansion of the Skilled Nursing Units may be treated as a separate building and will not be counted toward the 20% limit for commercial, retail or other nonresidential uses in the Senior Building. Section 3.4. Reimbursement of Senior Building Costs. (a) The Developer shall take all commercially reasonable action necessary to acquire the Development Property and construct the Minimum Improvements. In order to make the development of the Senior Building economically feasible, the Authority shall reimburse the Developer for Senior Building Costs in the maximum amount of $3,600,000. (b) Senior Building Costs shall include acquisition of land within the TIF District in the maximum amount of $487,000, demolition and remediation costs directly related to the Senior Building, parking improvements related to the Senior Building, and costs of constructing the Senior Building. (c) The Developer will be reimbursed for Senior Building Costs with $382,000 from the Willow Ponds TIF District and the TIF Note described in Section 3.5 hereof. Section 3.5. Issuance of TIF Note. (a) Terms. In order to reimburse the Developer for a portion of the Senior Building Costs related to development of the Senior Building on the Development Property, the Authority shall issue and Developer shall purchase, for the consideration outlined herein, the TIF Note in the maximum principal amount of $3,218,000 in substantially the form set forth in EXHIBIT D attached hereto. The Authority and the Developer agree that the TIF Note shall be issued in consideration of the Developer paying the Senior Building Costs. Before delivery of the TIF Note, the Developer shall have: 11 (i) delivered to the Authority written evidence in a form satisfactory to the Authority that the Developer has paid Senior Building Costs in at least the principal amount of the TIF Note; (ii) submitted the Construction Plans to the Authority and obtained approval for the Construction Plans from the Authority; (iii) obtained all land use approvals necessary for the construction of the Minimum Improvements; (iv) submitted evidence that the Developer has obtained financing in accordance with Section 7.1 hereof; (v) completed construction of the Infrastructure Improvements; and (vi) delivered to the Authority an investment letter in a form set forth in EXHIBIT F attached hereto. (b) Qualifications. The Developer understands and acknowledges that the Authority makes no representations or warranties regarding the amount of Available Tax Increment, or that revenues pledged to the TIF Note will be sufficient to pay the principal and interest on the TIF Note. Any estimates of 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. If the total Senior Building Costs exceed the principal amount of the TIF Note, such excess is the sole responsibility of Developer. (c) The Authority acknowledges that the Developer may assign the TIF Note to any lender that provides part of the financing for the acquisition of the Development Property or the construction of the Minimum Improvements. The Authority consents to such assignment, conditioned upon receipt of an investment letter from such lender in substantially the form set forth in EXHIBIT E attached hereto. Section 3.6. Reduction of TIF Note. (a) The principal amount of the TIF Note will be reduced by the amount of any additional trunk credits or fee reductions it receives from the City (not including the credits described in Section 3.8(b) hereof). (b) Within sixty (60) days of the completion of the construction of the Senior Building, the Developer shall provide the Authority with final construction costs of the Senior Building (including related Infrastructure Improvements). If the final construction costs of constructing the Senior Building (including related Infrastructure Improvements) are less than estimated by the Developer at the time it sought assistance from the Authority, the Authority shall reduce the principal amount of the TIF Note by 5% of the difference between the initial estimated construction 12 costs of the Senior Building (including related Infrastructure Improvements) and the final construction costs of the Senior Building (including related Infrastructure Improvements). Section 3.7. Sale of Restaurant Parcel or Commercial Parcel. In the first eight years following the date of this Agreement, if the Developer sells Parcel 2, Parcel 3, Parcel 4a, Parcel 4b, and/or Parcel 4c (as described in EXHIBIT A) for more than five percent (5%) of the Developer’s cost for such parcel (including purchase price and all fees related to the purchase), the Developer shall pay to the Authority 45% of the profit obtained by Developer for such parcel. The cost of each parcel sold by the Developer shall be determined by dividing the gross land price paid by the Developer by the net developable acreage of each parcel to determine a per square foot cost and multiplying the square footage cost by the number of square feet sold. Section 3.8. City Development Agreement. (a) As set forth in the Development Agreement entered into between the City and the Developer (the “Development Agreement”), the Developer has agreed to construct the following public improvements for the City: public streets (including County road improvements), sanitary sewer, water main, storm sewer and ponds, trail and sidewalk. Pursuant to the Development Agreement, the Developer has also agreed to construct the following private improvements: private street, grading, storm ponds, and landscaping. (b) Pursuant to City policies, it is expected that the Developer will receive credits from the City in the amount of approximately $300,000 for the Developer’s park dedication fees, trunk utility fees, and surface water management fees related to the Minimum Improvements in exchange for the public trail improvements the Developer has agreed to pay for and construct and the Developer’s payment for and construction of oversized utility improvements for the Minimum Improvements. Section 3.9. Payment of Administrative Costs. The Developer will deposit with the Authority $__________ 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. Section 3.10. Records. The Authority and its representatives shall have the right at all reasonable times after reasonable notice to inspect, examine and copy all books and records of Developer relating to the Minimum Improvements and the costs for which the Developer has been reimbursed with Tax Increment. 13 Section 3.11. Purpose of Assistance. The parties agree and understand that the purpose of the Authority’s financial assistance to the Developer is to facilitate development of affordable residential senior rental housing for persons of low and moderate income, and is not a “business subsidy” within the meaning of Minnesota Statutes, Sections 116J.993 to 116J.995, as amended. (The remainder of this page is intentionally left blank.) 14 ARTICLE IV Construction of Minimum Improvements Section 4.1. Construction of Improvements. The Developer agrees that it will construct the Minimum Improvements on the Development Property substantially in accordance with the approved Construction Plans and at all times prior to the Maturity Date, will cause the Minimum Improvements to be operated and maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition. Section 4.2. Construction Plans. (a) Before commencing construction of the Minimum Improvements, the Developer shall submit to the Authority the Construction Plans for the Minimum Improvements. The Construction Plans shall provide for the construction of the Minimum Improvements and shall be in substantial conformity with the Development Program, this Agreement, and all applicable State and local laws and regulations. The Authority Representative will approve the Construction Plans in writing if: (i) the Construction Plans conform to all terms and conditions of this Agreement; (ii) the Construction Plans conform to the goals and objectives of the Development Program; (iii) the Construction Plans conform to all applicable federal, State and local laws, ordinances, rules and regulations; (iv) the Construction Plans are adequate to provide for construction of the Minimum Improvements; (v) the Construction Plans do not provide for expenditures in excess of the funds available to the Developer from all sources (including the Developer’s equity) for construction of the Minimum Improvements; and (vi) no Event of Default has occurred and is continuing. Approval may be based upon a review by the City’s building official of the Construction Plans. No approval by the Authority Representative shall relieve the Developer of the obligation to comply with the terms of this Agreement or of the Development Program, applicable federal, state and local laws, ordinances, rules and regulations, or to construct the Minimum Improvements in accordance therewith. No approval by the Authority Representative shall constitute a waiver of an Event of Default. If approval of the Construction Plans is requested by the Developer in writing at the time of submission, such Construction Plans shall be deemed approved unless rejected in writing by the Authority Representative, in whole or in part. Such rejections shall set forth in detail the reasons therefor, and shall be made within ten (10) days after the date of their receipt by the Authority. If the Authority Representative rejects any Construction Plans in whole or in part, the Developer shall submit new or corrected Construction Plans within ten (10) 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. The Authority Representative’s approval shall not be unreasonably withheld, delayed or conditioned. 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 or any component thereof after their approval by the Authority, the Developer shall submit the 15 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 with respect to such 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. (c) The requirements of this Section 4.2 do not have any effect on the City’s general planning process and the timelines for submitting various planning and land use applications. Section 4.3. Commencement and Completion of Construction. Subject to Unavoidable Delays, the Developer shall commence construction of the Independent Living Units, Assisted Living Units, and Townhomes on or before April 30, 2020 and complete construction of these components of the Minimum Improvements on or before December 31, 2024. Subject to Unavoidable Delays, the Developer shall commence construction of the Clubhouse on or before April 30, 2023 and complete construction of the Clubhouse on or before December 31, 2024. All work with respect to the Minimum Improvements to be constructed or provided by the Developer on the Development Property shall be in substantial conformity with the Construction Plans as submitted by the Developer and approved by the Authority. 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 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 completed within the period specified in this Section 4.3. After the date of this Agreement and until construction of the Minimum Improvements has been 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 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 completion thereof), the Authority Representative will furnish the Developer with a Certificate of Completion shown as EXHIBIT B attached hereto. (b) If the Authority Representative shall refuse or fail to provide any certification in accordance with the provisions of this Section 4.4, the Authority Representative shall, within thirty (30) days after written request by the Developer, provide the 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 16 what measures or acts will be necessary, in the opinion of the Authority, for the Developer to take or perform in order to obtain such certification. (c) Regardless of whether a Certificate of Completion is issued by the Authority, the construction of the Minimum Improvements shall be deemed to be complete upon issuance of a certificate of occupancy by the City. Section 4.5. Affordability Covenants; Qualification of TIF District. The Authority and the Developer understand and agree that the TIF District constitutes a “housing district” under Section 469.174, subdivision 11 and Section 469.1761 of the TIF Act. In that regard, the Developer agrees that the Minimum Improvements are subject to the following affordability covenants: (a) At all times from initial occupancy of the Minimum Improvements through the Maturity Date, the Minimum Improvements must comply with Section 469.1761, subdivision 3 of the TIF Act, which requires that the Minimum Improvements satisfy the income requirements for a qualified residential rental project as defined in Section 142(d) of the Internal Revenue Code. (b) In consideration of the financial assistance provided by this Agreement (from tax increment), the Developer represents and covenants that from the date the Minimum Improvements are initially occupied through the Maturity Date, at least twenty percent (20%) of the units in the Minimum Improvements, including any units designated as guest units, shall be available for occupancy by individuals or families whose income is fifty percent (50%) or less of the area median gross income. (c) If the Authority receives notice from the State Department of Revenue, the State Auditor, any Tax Official or any court of competent jurisdiction that the TIF District does not qualify as a “housing district,” due to the action or inaction of the Developer, such event shall be deemed an Event of Default under this Agreement; provided, however, that the Authority may not exercise any remedy under this Agreement so long as such determination is being contested and has not been finally adjudicated. In addition to any remedies available to the Authority under Article IX hereof, the Developer shall indemnify, defend and hold harmless the Authority for any damages or costs resulting therefrom, except with respect to damages or costs resulting from the gross negligence or willful misconduct of the Authority. (d) The Developer understands that if the Developer does not comply with the affordability covenants in this Section 4.5, the TIF Act requires the Authority to decertify the TIF District. Section 4.6. Affordable Housing Reporting. At least annually, no later than April 1 of each year commencing on the April 1 first following the issuance of the Certificate of Completion, the Developer shall provide a report to the Authority evidencing that the Developer complied with the affordability covenants set forth in Section 4.5 hereof during the previous calendar year. The Report shall include the compliance certificate set forth in EXHIBIT G and the income form entitled “Tenant Income Certificate” from the Minnesota Housing Finance Agency (MHFA HTC Form 14), or if unavailable, any similar form, for each residential unit meeting the affordability requirements under Section 4.5. The Authority may require the Developer to provide additional information in 17 order to access the accuracy of such certification. Unless earlier excused by the Authority, the Developer shall send affordable housing reports to the Authority from the date of this Agreement until the Maturity Date. Section 4.7. Senior Housing Covenant. At all times from initial occupancy of the Minimum Improvements through the Maturity Date, one hundred percent (100%) of the units in the Minimum Improvements shall be occupied by at least one occupant who is at least 55 years of age or older at the time of initial occupancy. Section 4.8. Uniformity of Finishes, Amenities. The affordable units in the Minimum Improvements shall have the same finishes and amenities as the market-rate units. (The remainder of this page is intentionally left blank.) 18 ARTICLE V Insurance Section 5.1. Insurance. (a) 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 Liability 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); the Authority shall be listed as an additional insured on the policy; and (iii) workers’ compensation insurance, with statutory coverage; provided that the Developer may be self-insured with respect to all or any part of its liability for workers’ compensation. (b) Upon completion of construction of the Minimum Improvements and prior to the Maturity 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 an additional insured; and (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 19 that the Developer may be self-insured with respect to all or any part of its liability for workers’ compensation. (c) All insurance required in this Article V shall be taken out and maintained in responsible insurance companies selected by the Developer 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 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 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 thirty (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 $1,000,000 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 promptly cause the repair, reconstruction and restoration of 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 cause to be completed 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 or its assignee (e) 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 herein, 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 Holder under a Mortgage allowed pursuant to Article VII hereof. (The remainder of this page is intentionally left blank.) 20 ARTICLE VI Tax Increment; 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 the issuance of the TIF Note. The Developer understands that the Tax Increments pledged to payment on the TIF Note are derived from real estate taxes on the Development Property, which taxes must be promptly and timely paid. To that end, the 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 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, the Authority shall also be entitled to recover its costs, expenses and reasonable attorney fees. Nothing in this Agreement in any way limits or prevents the Developer from contesting the assessor’s proposed market values for the Development Property or the Minimum Improvements, but the Developer recognizes that such action may affect the amount of Available Tax Increment. Section 6.2. Reduction of Taxes. The Developer agrees that after the date of certification of the Tax Increment District and prior to completion of the Minimum Improvements, it will not cause a reduction in the real property taxes paid in respect of the Tax Increment District Property through: (A) willful destruction of the Minimum Improvements, the Tax Increment District Property or any part thereof (except for the demolition of structures, if any, required to construct the Minimum Improvements); or (B) willful refusal to reconstruct damaged or destroyed property pursuant to Section 5.1 hereof. The Developer also agrees that it will not, prior to the Maturity Date, (i) seek exemption from property tax for the Tax Increment District Property; (ii) convey or transfer or allow conveyance or transfer of the Tax Increment District Property to any entity that is exempt from payment of real property taxes under State law; or (iii) seek or agree to any reduction of the assessor’s estimated market value to below the Minimum Market Value. The Developer may, at any time following the issuance of the Certificate of Completion, seek through petition or other means to have the Assessors Estimated Market Value for the Tax Increment District Property reduced to not less than the Minimum Market Value. Such activity must be preceded by written notice from the Developer to the Authority indicating its intention to do so. Section 6.3. Qualifications. Notwithstanding anything herein to the contrary, the parties acknowledge and agree that upon Transfer of the Development Property to another person or entity, the Developer will remain obligated under Sections 6.1 and 6.2 hereof, unless the Developer is 21 released from such obligations in accordance with the terms and conditions of Section 8.2(b) or 8.3 hereof. Section 6.4. Minimum Assessment Agreement. (a) On or before Closing, the Developer shall execute the Minimum Assessment Agreement pursuant to Minnesota Statutes, Section 469.177, subd. 8, specifying an assessor’s minimum market value for the Development Property with the Minimum Improvements constructed thereon. (b) The Minimum Assessment Agreement shall be substantially in the form attached hereto as EXHIBIT H. Nothing in the Assessment Agreement shall limit the discretion of the assessor to assign a market value to the property in excess of such assessor’s minimum market value nor prohibit the Developer from seeking through the exercise of legal or administrative remedies a reduction in such market value for property tax purposes, provided however, that the Developer shall not seek a reduction of such market value below the assessor’s minimum market value in any year so long as such Minimum Assessment Agreement shall remain in effect. The Assessment Agreement shall remain in effect for the period described in EXHIBIT H. (The remainder of this page is intentionally left blank.) 22 ARTICLE VII Other Financing Section 7.1. Generally. Before issuance of the TIF Note, the Developer shall submit to the Authority or provide access thereto for review by Authority staff, consultants, and agents, evidence reasonably satisfactory to the Authority that Developer has available funds, or commitments to obtain funds, whether in the nature of mortgage financing, equity, grants, loans, or other sources sufficient for paying the cost of developing the Minimum Improvements, provided that any lender or grantor commitments shall be subject only to such conditions as are normal and customary in the commercial lending industry. Section 7.2. Authority’s Option to Cure Default on Mortgage. In the event that any portion of the Developer’s funds is provided through mortgage financing, and there occurs a default under any Mortgage authorized pursuant to this Article VII, the Developer shall make commercially reasonable efforts to cause the Authority to receive copies of any notice of default received by the Developer from the Holder of such Mortgage. Thereafter, the Authority shall have the right, but not the obligation, to cure any such default on behalf of the Developer within such cure periods as are available to the Developer under the Mortgage documents. Section 7.3. Modification; Subordination. In order to facilitate the Developer obtaining financing for the development of the Minimum Improvements, the Authority agrees to subordinate its rights under this Agreement to the Holder of any Mortgage securing construction or permanent financing, under terms and conditions reasonably acceptable to the Authority. Any agreement to subordinate this Agreement must be approved by the Board of the Authority. Section 7.4. Termination. All the provisions of this Article VII shall terminate with respect to the Minimum Improvements upon delivery of the Certificate of Completion for the Minimum Improvements. The Developer or any successor in interest to the Minimum Improvements or portion thereof, may sell, assign, transfer or engage in financing or any other transaction creating a mortgage or encumbrance or lien on the Minimum Improvements or any portion thereof for which a Certificate of Completion has been obtained, without obtaining prior written approval of the Authority, provided that such sale, financing or other transaction creating a mortgage or encumbrance shall not be deemed as resulting in any subordination of the Authority’s rights under this Agreement unless the Authority expressly consents to such a subordination. (The remainder of this page is intentionally left blank.) 23 ARTICLE VIII Prohibitions Against Assignment and Transfer; Indemnification Section 8.1. Representation as to Development. The Developer represents and agrees that its purchase of the Development Property, and its other undertakings pursuant to the Agreement, are, and will be used, for the purpose of development of the Development Property and not for speculation in land holding. Section 8.2. Prohibition Against Developer’s Transfer of Property and Assignment of Agreement. The Developer represents and agrees that prior to issuance of a Certificate of Completion for the Minimum Improvements: (a) Except only by way of security for, and only for, the purpose of obtaining financing necessary to enable the Developer or any successor in interest to the Development Property, or any part thereof, to perform its obligations with respect to undertaking the development contemplated under this Agreement and except with respect to agreements customary to the development of new senior housing communities, and any other purpose authorized by this Agreement, the Developer has not made or created and will not make or create or suffer to be made or created any total or partial sale, assignment, conveyance, or lease, or any trust or power, or transfer in any other mode or form of or with respect to this Agreement or the Development Property or any part thereof or any interest therein, or any contract or agreement to do any of the same, to any person or entity whether or not related in any way to the Developer (collectively, a “Transfer”), without the prior written approval of the Authority (whose approval will not be unreasonably withheld, subject to the standards described in paragraph (b) of this Section) unless the Developer remains liable and bound by this Agreement in which event the Authority’s approval is not required. Any such Transfer shall be subject to the provisions of this Agreement. For the purposes of this Agreement, the term Transfer does not include acquisition of a controlling interest in Developer by another entity or merger of Developer with another entity or a lease with a resident of the Minimum Improvements. (b) In the event the Developer, upon Transfer of the Development Property or any portion thereof, seeks to be released from its obligations under this Agreement as to the portion of the Development Property that is transferred or assigned, the Authority shall be entitled to require, except as otherwise provided in the Agreement, as conditions to any such release that: (i) Any proposed transferee shall have the qualifications and financial responsibility, in the reasonable judgment of the Authority, necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer as to the portion of the Development Property to be transferred. (ii) Any proposed transferee, by instrument in writing satisfactory to the Authority shall, for itself and its successors and assigns, and expressly for the benefit of the Authority, have expressly assumed all of the obligations of the Developer under this Agreement as to the portion of the Development Property and Minimum Improvements to be transferred and agreed to be subject to all the conditions and restrictions to which the 24 Developer is subject as to such portion; provided, however, that the fact that any transferee of, or any other successor in interest whatsoever to, the Development Property and Minimum Improvements, or any part thereof, shall not, for whatever reason, have assumed such obligations or so agreed, and shall not (unless and only to the extent otherwise specifically provided in this Agreement or agreed to in writing by the Authority) deprive the Authority of any rights or remedies or controls with respect to the Development Property, the Minimum Improvements or any part thereof or the construction of the Minimum Improvements; it being the intent of the parties as expressed in this Agreement that (to the fullest extent permitted at law and in equity and excepting only in the manner and to the extent specifically provided otherwise in this Agreement) no transfer of, or change with respect to, ownership in the Development Property, the Minimum Improvements or any part thereof, or any interest therein, however consummated or occurring, and whether voluntary or involuntary, shall operate, legally, or practically, to deprive or limit the Authority of or with respect to any rights or remedies on controls provided in or resulting from this Agreement with respect to the Development Property and Minimum Improvements that the Authority would have had, had there been no such transfer or change. In the absence of specific written agreement by the Authority to the contrary, no such transfer or approval by the Authority thereof shall be deemed to relieve the Developer, or any other party bound in any way by this Agreement or otherwise with respect to the Development Property and Minimum Improvements, from any of its obligations with respect thereto. (iii) Any and all instruments and other legal documents involved in effecting the transfer of any interest in this Agreement or the Development Property governed by this Article VIII, shall be in a form reasonably satisfactory to the Authority. In the event the foregoing conditions are satisfied then the Developer shall be released from its obligation under this Agreement, as to the portion of the Development Property that is transferred, assigned, or otherwise conveyed. The restrictions under this Section terminate upon issuance of the Certificate of Completion. Section 8.3. Release and Indemnification Covenants. (a) The Developer releases from and covenants and agrees that the Authority and the governing body members, officers, agents, servants, and employees thereof (the “Indemnified Parties”) shall not be liable for and agrees to indemnify and hold harmless the Indemnified Parties against any loss or damage to property or any injury to or death of any person occurring at or about or resulting from any defect in the Development Property or the Minimum Improvements. (b) Except for any willful misrepresentation or any willful or wanton misconduct or negligence of the Indemnified Parties, and except for any breach by any of the Indemnified Parties of their obligations under this Agreement, the Developer agrees to protect and defend the Indemnified Parties, now and forever, and further agrees to hold the aforesaid harmless from any claim, demand, suit, action, or other proceeding whatsoever by any person or entity whatsoever arising or purportedly arising from this Agreement, or the transactions contemplated hereby or the acquisition, construction, installation, ownership, maintenance, and operation of the Development Property. 25 (c) Except for any willfull or wanton misconduct or negligence of the Indemnified Parties, the Indemnified Parties shall not be liable for any damage or injury to the persons or property of the Developer or its officers, agents, servants, or employees or any other person who may be about the Development Property or Minimum Improvements. (d) All covenants, stipulations, promises, agreements, and obligations of the Authority contained herein shall be deemed to be the covenants, stipulations, promises, agreements, and obligations of such entity and not of any governing body member, officer, agent, servant, or employee of such entities in the individual capacity thereof. (The remainder of this page is intentionally left blank.) 26 ARTICLE IX Events of Default Section 9.1. Events of Default Defined. The following shall be “Events of Default” under this Agreement and the term “Event of Default” shall mean, whenever it is used in this Agreement, any one or more of the following events: (a) If the Developer or the Authority fails to observe or perform any covenant, condition, obligation, or agreement on its part to be observed or performed under this Agreement. (b) If a receiver, trustee or liquidator of the Developer, or of the Development Property is appointed in any proceeding brought against the Developer or involving the Development Property, and is not discharged within ninety (90) days after such appointment, of if the Developer consents or acquiesces to such appointment; or (c) If the Developer shall: (i) file any petition in bankruptcy or for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act or under any similar federal or State law; or (ii) make an assignment for benefit of its creditors; or (iii) admit in writing its inability to pay its debts generally as they become due; or (iv) be adjudicated a bankrupt or insolvent. Section 9.2. Remedies on Default. Whenever any Event of Default referred to in Section 9.1 hereof occurs, the non-defaulting party may exercise its rights under this Section 9.2 after providing thirty (30) days ’ written notice to the defaulting party of the Event of Default, but only if the Event of Default has not been cured within said thirty (30) days or, if the Event of Default is by its nature incurable within thirty (30) days, the defaulting party does not provide assurances reasonably satisfactory to the non-defaulting party that the Event of Default will be cured and will be cured as soon as reasonably possible: (a) Suspend its performance under the Agreement until it receives reasonably satisfactory assurances that the defaulting party will cure its default and continue its performance under the Agreement. (b) Upon a default by the Developer, the Authority may suspend payments under the TIF Note or terminate the TIF Note and the TIF District, subject to the provisions of Section 9.3 hereof. 27 (c) Take whatever action, including legal, equitable, or administrative action, which may appear necessary or desirable to collect any payments due under this Agreement, or to enforce performance and observance of any obligation, agreement, or covenant of the Developer or the Authority under this Agreement. Section 9.3. Termination or Suspension of TIF Note. After the Authority has issued its Certificate of Completion for the Minimum Improvements, the Authority may exercise its rights under Section 9.2(c) hereof only for the following Events of Default: (a) if the Developer fails to pay real estate taxes or assessments on the Development Property or any part thereof when due, and such taxes or assessments shall not have been paid, or provision satisfactory to the Authority made for such payment, within thirty (30) days after written demand by the Authority to do so; or (b) if the Developer fails to comply with Developer’s obligation to cause such improvements to be maintained, preserved and kept with the appurtenances and every part and parcel thereof, in good repair and condition, pursuant to Sections 4.1 and 5.1(d) hereof; provided that, upon Developer’s failure to comply with Developer’s obligations under Sections 4.1 or 5.1(d) hereof, if uncured after thirty (30) days’ written notice to the Developer of such failure, the Authority may only suspend payments under the TIF Note until such time as Developer complies with said obligations. If the Developer fails to comply with said obligations for a period of eighteen (18) months, the Authority may terminate the TIF Note and the TIF District; or (c) if the Developer fails to comply with the income restrictions or to deliver annual rent and income reports as provided in Sections 4.5 and 4.6 hereof; provided that, upon the Developer’s failure to provide annual reports, if uncured after thirty (30) days’ written notice to the Developer of such failure, the Authority may only suspend payments under the TIF Note until such time as the Developer delivers said reports. If the Developer fails to deliver rent and income reports for a period of six months following the date such reports are due after written notice to the Developer of such failure, the Authority may terminate the TIF Note and the TIF District. Section 9.4. No Remedy Exclusive. No remedy herein conferred upon or reserved to any party is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it, it shall not be necessary to give notice, other than such notice as may be required in this Article IX . Section 9.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. 28 Section 9.6. Attorneys’ Fees. Whenever any Event of Default occurs and if the Authority shall employ attorneys or incur other expenses for the collection of payments due or to become due or for the enforcement of performance or observance of any obligation or agreement on the part of the Developer under this Agreement, the Developer agrees that it shall, within ten (10) days of written demand by the Authority, pay to Authority the reasonable fees of such attorneys and such other reasonable expenses so incurred. (The remainder of this page is intentionally left blank.) 29 ARTICLE X Additional Provisions Section 10.1. Conflict of Interests; Representatives Not Individually Liable. The Authority and the Developer, to the best of their respective knowledge, represent and agree that no member, official, or employee of the Authority shall have any personal interest, direct or indirect, in the Agreement, nor shall any such member, official, or employee participate in any decision relating to the Agreement that affects his personal interests or the interests of any corporation, partnership, or association in which he, directly or indirectly, is interested. No member, official, or employee of the Authority shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the Authority for any amount that may become due to the Developer or successor or on any obligations under the terms of the Agreement. Section 10.2. Equal Employment Opportunity. The Developer, for itself and its successors and assigns, agrees that during the construction of the Minimum Improvements provided for in the Agreement it will comply with all applicable federal, state and local equal employment and non- discrimination laws and regulations. Section 10.3. Restrictions on Use. The Developer agrees that, prior to the Maturity Date, the Developer, and such successors and assigns, shall use the Development Property solely for the development of residential rental housing in accordance with the terms of this Agreement, and shall not discriminate upon the basis of race, color, creed, sex or national origin in the sale, lease, or rental or in the use or occupancy of the Development Property or any improvements erected or to be erected thereon, or any part thereof. Section 10.4. Titles of Articles and Sections. Any titles of the several parts, Articles, and Sections of the Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of its provisions. Section 10.5. Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under the Agreement by either party to the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, to the following addresses (or to such other addresses as either party may notify the other): To Developer: Lyngblomsten Senior Housing, Inc. [Address] Attn: ___________________ To Authority: Lino Lakes Economic Development Authority 600 Town Center Parkway Lino Lakes, Minnesota 55014 Attn: Executive Director 30 Section 10.6. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Section 10.7. Recording. The Authority may record this Agreement and any amendments thereto with the County recorder or registrar of titles, as applicable. The Developer shall pay all costs for recording. Section 10.8. Amendment. This Agreement may be amended only by written agreement approved by the Authority and the Developer. Section 10.9. Authority Approvals. Unless otherwise specified, any approval required by the Authority under this Agreement may be given by the Authority Representative, except that final approval of issuance of the TIF Note shall be made by the Board of the Authority. Section 10.10. Termination. This Agreement terminates on the Termination Date. Within 30 days after the Termination Date, the Authority will deliver to Developer a written release in recordable form satisfactory to Developer, evidencing termination of this Agreement. This obligation survives the expiration or earlier termination of this Agreement. Section 10.11. Choice of Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State. Any disputes, controversies, or claims arising out of this Agreement shall be heard in the State or federal courts of Minnesota, and all parties to this Agreement waive any objection to the jurisdiction of these courts, whether based on convenience or otherwise. (The remainder of this page is intentionally left blank.) S-1 IN WITNESS WHEREOF, the Authority and the Developer have caused this Contract for Private Development to be duly executed by their duly authorized representatives as of the date first above written. LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY By: Its: President By: Its: Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this ____ day of _____________, 2019, by _______________________, the President of the Lino Lakes Economic Development Authority, a public body corporate and politic under the laws of the State of Minnesota, on behalf of the Authority. ____________________________________ Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this ____ day of __________, 2019, by Jeff Karlson, the Executive Director of the Lino Lakes Economic Development Authority, a public body corporate and politic under the laws of the State of Minnesota, on behalf of the Authority. ____________________________________ Notary Public S-2 Execution page of the Developer to the Contract for Private Development, dated as of the date and year first written above. LYNGBLOMSTEN SENIOR HOUSING, INC. By: Name: Its: STATE OF MINNESOTA ) ) SS. COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this ____ day of ____________, 2019, by _____________________, the President of Lyngblomsten Senior Housing, Inc., a Minnesota nonprofit corporation, on behalf of the Developer. ____________________________________ Notary Public A-1 EXHIBIT A DEVELOPMENT PROPERTY Insert legal descriptions of: Parcel 1 (17 acres for Minimum Improvements) Parcel 2 (liquor store) Parcel 3 (insurance business) Parcel 4a, 4b, and 4c (49 Club) Parcel 5 (House on County Road J West) B-1 EXHIBIT B CERTIFICATE OF COMPLETION The undersigned hereby certifies that Lyngblomsten Senior Housing, Inc. (the “Developer”), has fully complied with its obligations under Articles III and IV of that document titled “Contract for Private Development,” dated _______________, 2019 (the “Agreement”), between the Lino Lakes Economic Development Authority (the “Authority”) and the Developer, with respect to construction of the Minimum Improvements in accordance with Article IV of the Agreement, and that the Developer is released and forever discharged from its obligations with respect to construction of the Minimum Improvements under Articles III and IV of the Agreement. Dated: _______________, 20___. LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY By Authority Representative C-1 EXHIBIT C INFRASTRUCTURE IMPROVEMENTS TO BE CONSTRUCTED BY DEVELOPER The Developer shall be responsible for constructing, installing, and/or paying for the following infrastructure improvements related to the Minimum Improvements: • Entry monument sign at Southeast quadrant of Development Property with provision for City of Lino Lakes entrance sign • Construction of County Road turn lane improvements, as shown on approved PUD development stage plan, subject to review and modification by City and/or County • Relocation of Xcel power lines - relocated lines will be relocated underground • Construction of public road (as shown on preliminary plat) to County Road J, installation of all utilities, and complete grading D-1 EXHIBIT D LAND DEDICATION BY DEVELOPER The Developer shall provide the following right-of-way or easements for the Infrastructure Improvements: • Dedicate on plat all required County Road right-of-way to public at no cost • Provide public utility easement for sanitary sewer, lift station, and water main across Parcel 5 (as described in EXHIBIT A) and Parcel 4a (as described in EXHIBIT A) • Provide County and City right-of-way over Parcel 5 as necessary for realignment of public road E-1 EXHIBIT E FORM OF TIF NOTE UNITED STATE OF AMERICA STATE OF MINNESOTA COUNTIES OF ANOKA No. R-1 $3,218,000 LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY TAX INCREMENT REVENUE NOTE SERIES 20___ Date Rate of Original Issue 5.00% __________ The Lino Lakes Economic Development Authority (the “Authority”), for value received, certifies that it is indebted and hereby promises to pay to Lyngblomsten Senior Housing, Inc., or registered assigns (the “Owner”), the principal sum of $3,218,000 and to pay interest thereon at the rate of 5.00% per annum, as and to the extent set forth herein. 1. Payments. Principal and interest (the “Payments”) shall be paid commencing on August 1, 2022, and each February 1 and August 1 thereafter to and including February 1, 2031 (the “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 thirty (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 solely from and in the amount of “Available Tax Increment,” which shall mean, on each Payment Date, ninety-five percent (95%) of the Tax Increment attributable to the Development Property (defined in the Agreement) and paid to the Authority by Anoka County, Minnesota in the six months preceding the Payment Date, all as such terms are defined in the Contract for Private Development between the Authority and the Owner, as the developer, dated _____________, 2019 (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. E-2 The Authority shall have no obligation to pay principal of and interest on 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 or interest on this Note on any Payment Date shall not constitute a default hereunder as long as the Authority pays principal and interest hereon to the extent of Available Tax Increment. The Authority shall have no obligation to pay the unpaid balance of principal or accrued interest that may remain after the final Payment on February 1, 2031. 4. 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 under 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, on the next Payment Date after the Event of Default is cured. If the Event of Default is not timely cured, the Authority may terminate this Note by written notice to the Owner in accordance with the Agreement. 5. Optional Prepayment. The principal sum and all accrued interest 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. 6. Termination. At the Authority’s option, this Note shall terminate and the Authority’s obligation to make any payments under this Note shall be discharged upon the occurrence of an Event of Default on the part of the Developer as defined in Section 9.1 of the Agreement, but only if the Event of Default has not been cured in accordance with Section 9.2 of the Agreement. 7. Nature of Obligation. This Note is the sole note of an issue in the total principal amount of $3,218,000 all issued to aid in financing certain Senior Building Costs (as defined in the Contract) of a housing development undertaken pursuant to Minnesota Statutes, 469.090 through 469.1082, as amended, and is issued pursuant to an authorizing resolution (the “Resolution”) duly adopted by the Authority on July 8, 2019, and pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 through 469.1794, as amended. 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 and the interest 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 or interest on 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 or interest on this Note or other costs incident hereto. 8. Estimates of Available Tax Increment. Any estimates of Tax Increment prepared by the Authority or its financial advisors in connection with the Available Tax Increment and the E-3 Agreement are for the benefit of the Authority only, 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 AND INTEREST ON THIS NOTE. 9. 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 of the Authority, 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, bearing interest at the same rate 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 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. IN WITNESS WHEREOF, the Board of Commissioners of the Lino Lakes Economic Development Authority have 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 President Executive Director E-4 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 Registration Registered Owner Signature of Executive Director Lyngblomsten Senior Housing, Inc. Federal ID #_____________ F-1 EXHIBIT F FORM OF INVESTMENT LETTER To the Lino Lakes Economic Development Authority Attention: Executive Director Dated: ______________, 20__ Re: Tax Increment Revenue Note, Series 20__ The undersigned, as purchaser of $_________ in principal amount of the above-captioned Tax Increment Revenue Note, Series 20___ (the “Note”), approved pursuant to Resolution No. _________, adopted by the Board of Commissioners of the Lino Lakes Economic Development Authority (the “Authority”) on ________, 20__ (the “Resolution”), hereby represent to you and to Kennedy & Graven, Chartered, Minneapolis, Minnesota, as special counsel to the Authority, as follows: 1. We understand and acknowledge that the TIF Note is delivered to the Purchaser on this date pursuant to the Resolution and the Contract for Private Development, dated _____________, 2019 (the “Agreement”), between the Authority and Lyngblomsten Senior Housing, Inc., a Minnesota limited liability company. 2. The TIF Note is payable as to principal and interest solely from Available Tax Increment pledged to the TIF Note, as defined therein. 3. We have sufficient knowledge and experience in financial and business matters, including purchase and ownership of municipal obligations, to be able to evaluate the risks and merits of the investment represented by the purchase of the above-stated principal amount of the TIF Note. 4. We acknowledge that no offering statement, prospectus, offering circular or other comprehensive offering statement containing material information with respect to the Authority and the TIF Note has been issued or prepared by the Authority, and that, in due diligence, we have made our own inquiry and analysis with respect to the Authority, the TIF Note and the security therefor, and other material factors affecting the security and payment of the TIF Note. 5. We acknowledge that we have either been supplied with or have access to information, including financial statements and other financial information, to which a reasonable investor would attach significance in making investment decisions, and we have had the opportunity to ask questions and receive answers from knowledgeable individuals concerning the Authority, the TIF Note and the security therefor, and that as reasonable investors we have been able to make our decision to purchase the above-stated principal amount of the TIF Note. F-2 6. We have been informed that the TIF Note (i) is not being registered or otherwise qualified for sale under the “Blue Sky” laws and regulations of any state, or under federal securities laws or regulations, (ii) will not be listed on any stock or other securities exchange, and (iii) will carry no rating from any rating service. 7. We acknowledge that the Authority and Kennedy & Graven, Chartered, as special counsel to the Authority, have not made any representations or warranties as to the status of interest on the TIF Note for the purpose of federal or state income taxation. 8. We represent to you that we are purchasing the TIF Note for our own accounts and not for resale or other distribution thereof, except to the extent otherwise provided in the TIF Note, the Resolution, or any other resolution adopted by the Authority. 9. All capitalized terms used herein have the meaning provided in the Agreement unless the context clearly requires otherwise. 10. The Purchaser’s federal tax identification number is _______________. 11. We acknowledge receipt of the TIF Note on the date hereof. IN WITNESS WHEREOF, the undersigned has executed this Investment Letter as of the date and year first written above. LYNGBLOMSTEN SENIOR HOUSING, INC. By Its G-1 EXHIBIT G COMPLIANCE CERTIFICATE The undersigned officer of Lyngblomsten Senior Housing, Inc. (the “Developer”), does hereby certify that as of the date of this Certificate not less than twenty percent (20%) of the residential units in the senior housing facility, known as _____________, located at ____________________ in Lino Lakes, Minnesota (the “Project”), referred to as the “Senior Building” in the Contract for Private Development, dated ___________________, 2019, between the Lino Lakes Economic Development Authority and the Developer are occupied by individuals whose income is fifty percent (50%) or less of the area median gross income. Attached hereto are the vacancy rate and the income verifications used to establish the above conclusions broken down by unit type and size. Dated this ____ day of _________________, 20___. LYNGBLOMSTEN SENIOR HOUSING, INC. By Its H-1 EXHIBIT H FORM OF MINIMUM ASSESSMENT AGREEMENT THIS MINIMUM ASSESSMENT AGREEMENT, made on or as of the ___ day of __________, 2019 (the “Minimum Assessment Agreement”), is by and between the LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, MINNESOTA, a public body corporate and politic under the laws of the State of Minnesota (the “Authority”), and Lyngblomsten Senior Housing, Inc., a Minnesota limited liability company (the “Developer”). WITNESSETH, WHEREAS, the Authority and the Developer have entered into that certain Contract for Private Development, dated _________, 2019 (the “Contract”), regarding the acquisition of property, the construction of senior housing (the “Minimum Improvements”) to be constructed on property legally described in Exhibit A (the “Development Property”); and WHEREAS, the Authority and the Developer desire to establish a minimum market value for the Development Property and the Minimum Improvements to be constructed thereon, pursuant to Minnesota Statutes, Section 469.177, subdivision 8; and WHEREAS, the Authority and the County Assessor (the “Assessor”) have reviewed the preliminary plans and specifications for the Minimum Improvements and have inspected such improvements; NOW, THEREFORE, the parties to this Minimum Assessment Agreement, in consideration of the promises, covenants and agreements made by each to the other, do hereby agree as follows: 1. All capitalized terms used herein and not otherwise defined have the definition given such terms in the Contract. 2. The minimum market value which shall be assessed for ad valorem tax purposes for the Development Property, together with the Minimum Improvements constructed thereon, shall not be less than $___________ as of January 2, 2021, notwithstanding the progress of construction by such date. [may need multiple parcels listed with different values] 3. The minimum market value herein established shall be of no further force and effect and this Minimum Assessment Agreement shall terminate on the Termination Date. The Authority shall execute a certificate or affidavit upon the occurrence of a termination event referred to in this Section 3 indicating that this Minimum Assessment Agreement has terminated and shall supply such certificate to the Developer for recording. Notwithstanding anything to the contrary in this Minimum Assessment Agreement or in the Contract, this Minimum Assessment Agreement shall not terminate prior to the payment in full of Development Property Purchase Price. 4. This Minimum Assessment Agreement shall be promptly recorded by the Authority. The Developer shall pay all costs of recording. H-2 5. Neither the preambles nor provisions of this Minimum Assessment Agreement are intended to, nor shall they be construed as, modifying the terms of the Contract. 6. This Minimum Assessment Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. 7. Each of the parties has authority to enter into this Minimum Assessment Agreement and to take all actions required of it, and has taken all actions necessary to authorize the execution and delivery of this Minimum Assessment Agreement. 8. In the event any provision of this Minimum Assessment Agreement shall be held invalid and unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. 9. The parties hereto agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements, amendments and modifications hereto, and such further instruments as may reasonably be required for correcting any inadequate, or incorrect, or amended description of the Development Property or the Minimum Improvements or for carrying out the expressed intention of this Minimum Assessment Agreement. 10. This Minimum Assessment Agreement may not be amended nor any of its terms modified except by a writing authorized and executed by all parties hereto. 11. This Minimum Assessment Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 12. This Minimum Assessment Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. H-3 IN WITNESS WHEREOF, the Authority and the Developer have caused this Minimum Assessment Agreement to be executed in their respective corporate names by their duly authorized officers, all as of the date and year first written above. LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY, MINNESOTA By Its President By Its Executive Director STATE OF MINNESOTA ) ) SS. COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this ____________, 2019, by __________________, the President of the Lino Lakes Economic Development Authority, Minnesota, on behalf of the Authority. Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this ____________, 2019, by Jeff Karlson, the Executive Director of the Lino Lakes Economic Development Authority, Minnesota, on behalf of the Authority. Notary Public H-4 Signature page of the Developer to the Minimum Assessment Agreement, dated as of the date and year first written above. LYNGBLOMSTEN SENIOR HOUSING, INC. By Its STATE OF MINNESOTA ) ) SS. COUNTY OF __________ ) The foregoing instrument was acknowledged before me this _________________, 2019, by _________________, the ________________ of Lyngblomsten Senior Housing, Inc., a Minnesota nonprofit corporation, on behalf of the Developer. Notary Public H-5 CERTIFICATION BY COUNTY ASSESSOR The undersigned, having reviewed the plans and specifications for the improvements to be constructed and the market value assigned to the land upon which the improvements are to be constructed, hereby certifies as follows: the undersigned Assessor, being legally responsible for the assessment of the above described property, hereby certifies that the market values assigned to the land and improvements are reasonable. ASSESSOR FOR ANOKA COUNTY By STATE OF MINNESOTA ) ) ss COUNTY OF ANOKA ) The foregoing instrument was acknowledged before me this ___ day of ______________, 2019, by _________________, the County Assessor of Anoka County. Notary Public H-6 EXHIBIT A LEGAL DESCRIPTION [Insert Legal Description of parcels subject to MAA] City of Lino Lakes July 1, 2019 City Council Work session Proposed Lyngblomsten Senior Care Campus Presenter: Mikaela Huot, Director Baker Tilly 1 Purpose of Discussion 2 Description of proposed financial assistance package Illustration of possible ways to reduce term Construction cost audit Draft Tax Increment Financing Plan Draft Contract for Private Development Proposed Financial Assistance 3 City received application for financial assistance Tax increment financing (housing) Term of 15 years totaling approximately $5.3 million Proposed senior care building Approximately 143 independent and assisted living Approximately 56 skilled care Proposed detached town homes Approximately 20 with separate clubhouse Proposed Financial Assistance 4 Financial Assistance Package Initial request $5,300,000 Reduction of request based on financial review $(1,400,000) Reduction based on fee credits $(300,000) Net Assistance through TIF (est. 9.5 years) $3,600,000 Pooled TIF from Housing District 1-5 $382,000 Proposed TIF Assistance to Developer from TIF 1-13 (New Housing TIF District) over 8.5 years $3,218,000 Financial Assistance Package Initial request $5,300,000 Reduction of request based on financial review $(1,400,000) Reduction based on fee credits $(300,000) Net Assistance through TIF (est. 9.5 years) $3,600,000 Pooled TIF from Housing District 1-5 $382,000 Proposed TIF Assistance to Developer from TIF 1-13 (New Housing TIF District) over 8.5 years $3,218,000 Financial Assistance Package Initial Request $5,300,000 Reduction of request based on financial review $(1,400,000) Reduction based on fee credit $(300,000) Net assistance through TIF (est. 9.5 years)$3,600,000 Pooled TIF from TIF 1-5 $382,000 Proposed TIF Assistance from TIF 1-13 over 8.5 years $3,218,000 Proposed Financial Assistance 5 Financial Assistance Package Initial request $5,300,000 Reduction of request based on financial review $(1,400,000) Reduction based on fee credits $(300,000) Net Assistance through TIF (est. 9.5 years) $3,600,000 Pooled TIF from Housing District 1-5 $382,000 Proposed TIF Assistance to Developer from TIF 1-13 (New Housing TIF District) over 8.5 years $3,218,000 Financial Assistance Package Initial request $5,300,000 Reduction of request based on financial review $(1,400,000) Reduction based on fee credits $(300,000) Net Assistance through TIF (est. 9.5 years) $3,600,000 Pooled TIF from Housing District 1-5 $382,000 Proposed TIF Assistance to Developer from TIF 1-13 (New Housing TIF District) over 8.5 years $3,218,000 Scenario 1 Scenario 2 Scenario 3 Scenario 4 Total Estimated Taxable Value $28,991,000 $28,991,000 $31,890,100 (10% increase) $34,789,200 (20% increase) Annual MV Inflator 0%3%3%3% Total # of Years 8.5 years 7.5 years 7 years 6.5 years Total Gross Increment $3,701,133 $3,668,729 $3,485,203 $3,810,504 City Retainage $185,058 $183,437 $174,262 $190,524 Total Net Increment $3,516,075 $3,485,292 $3,310,941 $3,619,980 Maximum Amount to Developer $3,218,000 $3,218,000 $3,218,000 $3,218,000 Estimated Surplus $298,075 $267,292 $92,941 $401,980 Construction Cost Audit 6 Two general approaches Independent review prior to construction Test estimates as compared to market standards Understand reasonableness of estimates Post -construction audit Review of total costs following construction Provide City with understanding of developer’s assumptions Proposed Financial Assistance 7 Reduction of TIF Assistance based on: Developer need and extraordinary development costs (1,400,000) Review and application of fee credits through City policy $(300,000) Expanded boundaries of new TIF District to include town homes and increase revenues Reduced # of years Use of existing pooled housing TIF funds from TIF District 1-5 $382,000 Proposed Financial Assistance 8 1) Review and application of fee credits through City policy Credit of approximately $300,000 Park dedication and trunk utility fees for public trail and trunk utility oversizing improvements 2) Expanding boundaries of TIF District Include 20 detached townhomes in district Estimate of $6.0M (est.$300,000 for 20 units) of new value will provide additional incremental revenues Approximately 1-2 year reduction of TIF district Proposed Financial Assistance 9 3) Use of pooled TIF funds Existing funds available from TIF 1-5 Approximately $382,000 Funds may only be used on affordable housing projects within the City If funds not used, will be returned to the County for redistribution City may expect to receive approximately 1/3 of those funds Proposed Financial Assistance 10 Ways to potentially further reduce term of assistance Increased taxable value of senior building and townhomes Annual inflationary increase of taxable value Overall construction cost savings Additional fee credits over $300,000 initial estimates Tax Increment Financing Plan 11 Public purpose Construction of approximately 200 senior units Mix of independent, assisted living and skilled care Qualification as housing TIF district At least 20% of the units occupied by persons/families at 50% area median income Term of district Estimated 8.5 years Maximum allowable term of 26 years Tax Increment Financing Plan 12 Budget of projected revenues and expenditures Total estimates of $3,701,133 Provides authority to provide $3,600,000 to developer Finance TIF Note of $3,218,000 Assuming use of pooled TIF funds of $382,000 City withholding (admin or other) of $185,058 May be surplus that would be returned to County after payment of obligations Tax Increment Financing Plan 13 Boundaries of district 1 parcel with PID: 31-31-22-43-0018 Will be split and portion in district (removal of future commercial) Estimated impact to other taxing entities County share of revenues: $1,089,103 School share of revenues: $1,136,840 City share of revenues: $1,321,121 Estimated total decrease in combined tax rate upon district decertification (1.110%) Proposed Tax Increment Financing (Housing) District No. 1-13 14 Contract for Private Development 15 Purchase of land Minimum improvements Public improvements Declaration of restrictive covenants Reduction of TIF note Sale of restaurant and commercial properties Next Steps as Scheduled 16 6/25/19: Publication of Public Hearing Notice 6/27/19: EDAC review 7/1/19: City Council Work Session 7/8/19: EDA meeting to review TIF Plan and TIF District and consider approval, contingent on City 7/8/19: EDA considers adopting resolution approving TIF Agreement, contingent on District 7/8/19: City Council public hearing to consider approving TIF Plan and TIF District Questions? 17 Mikaela Huot, Director Baker Tilly Phone: 651-223-3036 651-368-2533 Mikaela.Huot@bakertilly.com