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15 Memo To: Mike Momson — City Manager From: Stacie Kvilvang Date: September 14, 2010 Subject: Development Agreement — Phase III Silver Lake Village Redevelopment At the August 10, 2010 City Council meeting, the Council requested a work session regarding the Phase III Development Agreement. At the meeting Council provided staff direction on the following proposed deal points: 1. Further refinement of the definition of commencement of construction 2. Priority of repayment to City for the Fannie Mae loan with regards to the Phase IA make up note On August 19°i and 23`d staff met with the developer to discuss issues and proposed refinement of the terms. On August 30, 2010 staff met with the City Council at a work session to discuss the proposed terms based upon discussions with the developer. Attached you will find a copy of the memorandum dated August 10, 2010 which outlined all of the proposed terms of the Phase III agreement. Following are the changes discussed with the City Council at the work session as they relate to the terms in the previous memo: 2. Surviving Provisions of the Phase I Development Agreement a. Below Market Profit Tax Increment Assistance Increase. The principle amount of this note will be set at $3.2 million which was the original amount of profit the developer expected to receive after sale of all the units. This is approximately $2 million less than the amount the note amount the developer would otherwise be entitled to (without defaults) due to the increased carrying and related costs of the project. This note will bear no interest and will be subordinate to the outstanding TIF revenue bonds that were sold for the project. If or when these bonds are refinanced, any TIF not needed to pay debt service on the new bonds will be split between the City and the developer 50/50 until the City is reimbursed 100 percent for its investment in repayment of the Fannie Mae loan and reimbursed for administrative costs advanced for the project. After that, 100 percent of the TIF will go to payment on the $3.2 million note, until paid in full. Any TIF available after repayment to the City and the developer will go to the City for use in accordance with thc'I'IF plan. 5. Phase III Tax Increment a. Use and Amount of Increment: Phase IIIA. The increment generated from Phase 1I113 (Don's Car Wash) will be made available to a third party developer if needed. Any increment that is not needed by Apache Redevelopment LL.0 or a third party to develop the Phase IIB project, the excess amount will be split 75/25 between the City and Apache Redevelopment LLC respectively until the City has been reimbursed 100 percent for its investment in repayment of the Fannie Mae loan and reimbursed for administrative costs advanced for the project. After the City is 10 EHLERS_ LEADERS IN PUBLIC FINANCE 3060 Centre Pointe Drive Roseville, MN 55113-1105 Phone: 651-697-8506 Fax: 651-697-8555 skvilvang@ehlers-inc.com