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HomeMy WebLinkAbout09/05/2019 EDAC PacketCITY OF LINO LAKES ECONOMIC DEVELOPMENT ADVISORY COMMITTEE MEETING Thursday, September 5, 2019 8:00 A.M. Community Room AGENDA CALL TO ORDER AND ROLL CALL 2. APPROVAL OF MINUTES: July 2, 2019 3. DISCUSSION ITEMS A. Lyngblomsten TIF Recap, Michael Grochala B. Board Member Strengths/Experiences, Jim Schueller No Report C. October/November BRE visits No Report D. Project Updates 4. ADJOURN CITY OF LINO LAKES ECONOMIC DEVELOPMENT ADVISORY COMMITTEE MINUTES DATE: July 2, 2019 MEMBERS PRESENT: Jim Schueller, Andrew Cravero, Patrick Kohler, Don Johnson, Chad Wagner MEMBERS ABSENT: Michael Ruhland, Thomas Colgan, Julie Jeffrey -Schwartz, Nathan Vojtech OTHERS PRESENT: Mikaela Huot, Mike Grochala, Mara Strand APPROVAL OF MINUTES It was moved by Mr. Cravero to approve the minutes from May 2, 2019. The motion was seconded by Mr. Wagner, passing unanimously. DISCUSSION ITEMS A. Lyngblomsten Tax Increment Financing Request Michael Grochala, Community Development Director, welcomed Mikaela Huot, Baker Tilly, and introduced the discussion item. Mr. Wagner has a conflict of interest and will not take part in the conversation. Ms. Huot and Mr. Grochala presented the staff report. Mr. Kohler asked what 50% is of the area median income. Payable 2019 is $100,000; half is $50,000. Most retired seniors technically qualify as it is based on annual income, not assets. Scenarios that may reduce the term of the TIF districts were presented. Next steps — • 7/8/2019: City Council is holding a public hearing to consider adopting TIF plan and TIF district, possible EDA meeting to review the terms of the contract. • 7/22/2019: EDA meeting to review the TIF plan and TIF district, contingent on City Council's action on 7/8/2019. EDA to consider adopting resolution that would approve the contract for private development. Mr. Cravero asked if there have been conversations with Lyngblomsten regarding the adjusted numbers. Staff confirmed they have had discussions with Lyngblomsten. Mr. Grochala reviewed Willow Ponds history regarding TIF Housing district 1-5 which has been around for a while. Mr. Grochala reviewed the additional improvements that are happening concurrently with the development. Mr. Kohler asked how much tax revenue will be lost when the commercial area redevelops. Staff estimated the existing taxes payable total approximately $15,000. The City anticipating development will double the minimum value. Mr. Schueller made a MOTION to approve the Lyngblomsten Tax Increment Financing Request. Motion carried 4-0. Abstained by Mr. Wagner. B. Projects Updates Minnesota Technology Corridor launched a week ago and an article was published in the Star Tribune. Love To Grow On had their soft opening on July 1, 2019. All Seasons Rental is under construction. Watermark will have pavement down by the third week in July. The second phase was recently submitted. Natures Refuge final plat has been submitted. Main Street Shoppes 2nd Addition is under construction. Eastside Villas is a development with 35 villas going in east of NorthPointe. Conversations regarding the interchange at County Road J and Centerville Road are on going. ADJOURNMENT The meeting was adjourned at 8:57 A.M. 2 ECONOMIC DEVELOPMENT ADVISORY COMMITTEE AGENDA ITEM 3A STAFF ORIGINATOR: Michael Grochala, Community Development Director EDAC MEETING DATE: September 5, 2019 REQUEST: Lyngblomsten TIF Recap BACKGROUND In July of 2019 the City Council and the Economic Development Authority (EDA) approved the establishment of Tax Increment Financing District 1-13 and the Contract for Private Development with Lyngblomsten. As previously discussed the assistance package totaled $3.6 million dollars. Approximately $382,000 is provided through housing funds generated from TIF 1-5 (Willow Ponds Senior Housing). The balance of funding will be provided through tax increment created by the new project. The assistance from TIF District 1-13 will be on a "pay as you go" basis for site improvements, building and infrastructure costs. The EDA will issue a "note" in the amount of $3,218,000 in exchange for the improvements identified in the agreement. The developer will be reimbursed by tax increments generated by the development on an annual basis. The TIF note is expected to be paid off within 7.5 years based on an initial taxable market value of $33,000,000. Should the taxable market value increase the note will be paid off sooner. The contract does includes a provision to reduce the principal of the TIF note based on actual construction costs. The potential reduction is capped at $160,900 which represents a pro-rata share of any project cost savings. Additionally, the contract includes provisions for the EDA to share in the profit of any land sale proceeds for the commercial area if said proceeds exceed 105% of the developer's acquisition costs. A summary of the provisions of the Contract for Private Development is attached. EDAC CONSIDERATION None required. ATTACHMENTS Summary of Contract Provisions Summary of Contract for Private Development with Lynglomsten Senior Housing, Inc. Minimum Improvements The Developer has agreed to construct: • Approximately 92 independent living units • Approximately 50 assisted living units • 20 detached townhomes • a clubhouse Purchase of Additional Property, Land Dedication and Infrastructure Improvements The Developer has agreed to purchase the property adjacent to the Tax Increment District and demolition certain buildings on the property. The Developer has agreed to dedicate right-of-way and easements to the City. The Developer has agreed to construct various public improvements, including: • Construction of local and County roads, including the construction of turn lanes • Relocation of Xcel power lines Skilled Nursing Units In addition, the Developer intends to build approximately 56 skilled nursing units if the following conditions are met: (i) the Developer is able to obtain the proper approvals to transfer beds to the TIF District Property from the State on terms and conditions reasonably acceptable by the Developer; (ii) the independent living and assisted living units have maintained at least a 90% occupancy rate for one year; (iii) the Developer is able to find financing for the Skilled Nursing Units from a lender with an interest rate of less than 6.0% per annum; and (iv) a feasibility study commissioned by the Developer or its lender shows that the Skilled Nursing Units are feasible in the market. If one or more of the conditions are not met, the Developer shall not be a default hereunder if the Developer does not build the Skilled Nursing Units. Affordability Covenants At least twenty percent (20%) of the independent living and assisted living units shall be available for occupancy by individuals or families whose income is fifty percent (50%) or less of the area median gross income. Qualified Development Costs Due to the constraints of a housing tax increment district, qualified costs must be solely related independent living and assisted living units. Qualified Development Costs include land acquisition for the independent living and assisted living units, demolition on the land for the independent living and assisted living units, the costs of constructing the underground parking related to the independent living and assisted living units, and the costs of constructing the independent living and assisted living units. Subsidy Provided to Project • TIF Note in the amount of $3,218,000 for Qualified Development Costs • $382,000 from Willow Ponds TIF District for Qualified Development Costs Reduction of Principal of TIF Note The principal amount of the Note will be reduced: • If the final construction costs of constructing the Minimum Improvements and the Infrastructure Improvements are less than estimated by the Developer at the time it sought assistance from the Authority, the principal amount of the TIF Note will be reduced by 5% of the difference between the initial estimated construction costs of the Minimum Improvements and the Infrastructure Improvements and the final construction costs of the Minimum Improvements and the Infrastructure Improvements. If the final construction costs of constructing the Skilled Nursing Units are less than estimated by the Developer at the time it sought assistance from the Authority the principal amount of the TIF Note will be reduced by 5% of the difference between the initial estimated construction costs of the Skilled Nursing Units and the final construction costs of the Skilled Nursing Units. If the Skilled Nursing Units are not commenced by August 1, 2027, the Authority shall reduce the principal amount of the TIF Note by 5%. Notwithstanding the foregoing, the reductions of the TIF Note are capped at $160,900. Sale of Property 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 I of the Agreement) for more than one hundred and five percent (105%) 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 the Development Property to determine a per square foot cost and multiplying the square footage cost by the number of square feet sold. The net developable acreage will be based on the final plat. Minimum Assessment Agreement Developer has agreed to a minimum assessment for property tax purposes of $33,015,000 for the property within the Tax Increment District for the term of the TIF Note. The County still needs to confirm this value.