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City Council Regular Meeting Minutes August 10, 2010 Page 3 1 informed that Apache Redevelopment LLC approached the City to enter into a new development 2 agreement to finish out certain portions of the Silver Lake Redevelopment as Phase IIIA, Phase 3 HIB, and Phase IHC. She provided an overview of the following proposed business terms for the 4 new Phase IH Development Agreement: 1) General; 2) Surviving Provisions of the Phase I 5 Development Agreement; 3) Surviving Provisions of the Phase H Development Agreement; 4) 6 Conveyance of Vacant Apache Office Site (North Portion of Phase IIIA); 5) Phase IH Tax 7 Increment; 6) Redeveloper Obligations; 7) Payment of Special Assessments; 8) Development 8 Timeframe; 9) Reporting Requirements; 10) Events of Default. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 Councilmember Stille inquired about risks associated with the tax increment if nothing were to transpire with the development. Ms. Kvilvang stated if the developer does not perform by December 31, 2011 the City will be in a position with a need for the land to be sold for the proceeds and future increment to be able to pay Fannie Mae. The developer is requesting to receive their makeup note for the 200 units they developed in the hopes to bring them to some level of profit. Councilmember Stille stated his position that Fannie Mae should receive priority of being paid over the developer. He questioned if there have been environmental studies completed on the property the City would acquire. City Attorney Lindgren replied that there were not any issues noted with the environmental study previously completed. This issue would be reviewed again prior to a closing on the property. Councilmember Stille inquired who would determine the rate to be applied to the makeup note. Ms. Kvilvang replied that the market and underwriters will determine the rate applied to the makeup note; the remaining portion would likely be set at that same rate. Councilmember Stille inquired about the expiration of the TIF district. Ms. Kvilvang replied that the TIF district expires at the end of 2030 with the last increment receipt in 2031. Mayor Faust requested clarification regarding the definition of "commencement of construction" as outlined in Term No. 7 of the proposed Phase III Development Agreement. City Attorney Lindgren advised as the agreement has been negotiated this term has been defined as the date a building permit is pulled. Mayor Faust verified with City Manager Morrison that a one year time period is allowed to build a project once a permit is pulled. He stated his position that Term No. 7 as defined allows for too much wiggle room. and should be reconsidered. He requested clarification regarding the following statement included in the proposed resolution: "Whereas, the Parties have agreed to cancel all rights and obligations under the Phase I Agreement and Phase II Agreement related to the Phase IIB Senior Housing Development." City Attorney Lindgren explained that the Phase II Agreement is now embodied in the proposed Phase III Agreement. Councilmember Roth questioned what the reason is for the length of time the subject property has been sitting vacant without development beginning. Ms. Kvilvang discussed the current condition of the capital markets and the economic downturn.