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APRIL 30, 2007 WORK SESSION DISCUSSION
TCAAP MASTER DEVELOPMENT AGREEMENT
DISCUSSION
DEVELOPMENT DEAL POINTS AND SAMPLE TERM
SHEETS
EHLERS
& ASSOCIATES INC
To:
0
~ From:
W Date:
~ Subject:
Michelle Wolfe - City Administrator
City Council
Stacie K vilvang & Sid Inman - Ehlers & Associates
April 25, 2007
Development of Deal Points and Sample Term Sheets
On April 30, 2007 we will be meeting with the City Council in a work session to develop deal points
and discuss the use of a Term Sheet as a form to keep the City Council informed on salient terms/deal
points in the negotiations with RRLD.
Deal Points are a simplistic list of what the City would like to achieve from the negotiations/deal. It
can include what the City wants or doesn't want, community needs/priorities, list of potential areas of
disagreement, likely positions of the other side, common objectives or outcomes and identification of
issues that need to be resolved. These deal points are what we utilize to formalize the City's position as
we move forward in the negotiations.
A Term Sheet is list of terms that each side can use to articulate their desired outcomes. We typically
use them early in the process to assist us in determining agreed upon global terms of the transaction or
where there may be disagreement. We have found that Council members tend to like the format
because they are easy to read and understand and provide a mechanism to obtain concurrence on the
major business terms without overwhelming them with detail. The Term Sheet is then used as
framework for drafting of the Development Agreement.
Attached please find sample copies of term sheets from three (3) different projects as follows:
1. St Louis Park - Hoif!aards Redevelopment. Only one term sheet was developed for the project
and brought forward to the City's EDA (same make up as the City Council) for review and
approval before drafting the Development Agreement (fairly typical with smaller, less complicated
developments).
2. Mounds View - Medtronic Redevelopment. Many term sheets were brought forward and discussed
with the City Council. I have provided only three (3) of them. The first outlines some of the terms
from discussions midway through the negotiations, the second is a more detailed listing of deal
points when the City was approving the deal and the third outlines deal points when Medtronic
decided to expedite phase II and combine it with phase I and the City needed to amend the existing
Development Agreement.
3. St. Anthonv - Apache Plaza Redevelopment. Many term sheets were brought forward and
discussed with the City Council. I have provided two (2) of them. The fIrst one shows responses
to term sheet items presented by the developer and the second one is the term sheet brought before
the City Council to approve (used for drafting the final Development Agreement).
These are for the Council's information to give them an nnderstanding of the various forms a Term
Sheet can be in and what is included in them.
Please contact me at 651-697-8506 with any questions.
LEADERS IN PUBLIC FINANCE
3060CentrePofritE'-Drive~'-~~--
Roseville, MN 55113.1105
t
Phone: 651.697.8506 Fax: 651'697.8555
skvilvang@ehlers.inc.com
St. Louis Park
Hoigaards
Redevelopment
Business Points of Redevelopment Contract
Between the SLP EDA and Union Land II, LLC
The primary business points for a Redevelopment Agreement between the EDA and
Union Land II, LLC ("Redeveloper") are as follows:
. Both parties agree that the Redeveloper will be solely responsible for the acquisition of
the six parcels that constitute the Redevelopment Property and that the EDA has no
obligation to acquire the Redevelopment Property.
. Redeveloper is responsible for any relocation benefits that may be payable in connection .
with acquisition of any Parcel of the Redevelopment Property.
. Redeveloper will indemnifY, defend, and hold hannless the EDA and the City from any
and all claims for benefits or payments arising out of the relocation or displacement of
the lessee or any person from the Redevelopment Property as a result of the
implementation of the Agreement.
. Except for any misrepresentation or any misconduct, affirmative act or negligence of
the EDA or the City and except for any breach by the EDA or the City of their
obligations under the Agreement, redeveloper agrees to hold the EDA and the City
hannless from any claim arising out of the presence, if any, of hazardous wastes or
pollutants existing on or in the Redevelopment Property (including any asbestos in
the existing buildings)
. Developer agrees that the project will be professionally managed by a property
management company with substantial experience in operating mixed use
developments and is subject to EDA approval.
. Developer agrees to provide and maintain adequate pedestrian connections to nearby
trail and transit stops in the surrounding neighborhood to the satisfaction of the City.
. Developer agrees to make a lump sum up front payment to the City of $ to assist
with the maintenance of a traffic signal at 36th Street & Xenwood Avenue. (Let's just
put this in for now).
. Assuming all statutory tests can be met, the City agrees to modify the existing
Elmwood Village Tax Increment District (a Renewal and Renovation Tax Increment
Financing District) to assist with such activities as: building demolition; soil
remediation; site preparation; stormwater pond construction; utility upgrades; curb,
gutter, sidewalks; landscaping; and lighting.
. The TIP note would be structured on the following hasis:
)> Issue total:
)> Type:
)> Term:
)> Interest Rate:
)> Admin Fee:
)> Fiscal Disparities:
$5 million
Pay-as-you-go note
8 years
6.5%
5%
Paid from within the district
. EDA may tenninate the Note with ---- days written notice to the Redeveloper of the
conditions of default and shall be provided -------days to cure. If after cure period has
expired the EDA may terminate the Note and this Agreement with ---- days written
notice to the Redeveloper.
. Within 60 days after closing on Redeveloper's sale to third parties of the final unit
within the completed Project Union Land II, LLC agrees to provide financial data to
the EDA's consultant as may be necessary for the consultant to calculate the actual
rate ofretum to the Redeveloper. If, based on such review, the actual profit for the
Redeveloper exceeds a 8% rate of return on total project costs then 50 percent of
excess amount of profit (the "Prepayment Amount") will be applied as prepayment of
the outstanding principal amount of the Note in accordance with the terms of Section
5(b) of the Note. Such prepayment will be effective upon delivery to Redeveloper ofa
written notice stating the amount of excess profit determined by the EDA in accordance
with this Section; however, the prepayment ofthe Note will be deemed to have occurred
as of the Final Closing Date.
. Both parties agree that any assistance provided to the Redeveloper under this Agreement
is not a "business subsidy" under Minnesota Statutes, Section I 16J.993, subd. 3 because
the assistance is for housing and redevelopment.
. Redeveloper agrees to obtain all planning approvals necessary to construct the Project,
including without limitation a planned unit development and replat of the
Redevelopment Property.
. Redeveloper agrees that it will pay the reasonable costs of consultants and attorneys
retained by the EDA "in connection with the creation of the TIP District and the
negotiation in preparation of the Agreement and other incidental agreements and
documents related to the development contemplated hereunder. Upon termination of the
Agreement, the Redeveloper remains obligated for costs incurred through the effective
date of termination.
. Redeveloper agrees to undertake the redevelopment project as described. In
summary, the developer would purchase the six subj ect properties, remove the current
buildings, and construct approximately 25,000 square feet of commercial space, 132
condominiums, 22 townhomes, and 220 market rate apartments.
. Redeveloper agrees to donate a portion of the redevelopment property for the
construction of a sub-regional stormwater pond for use by the redeveloper and the
northern portion of the Elmwood neighborhood. It will be the Redeveloper's
responsibility to construct the pond per city and watershed district specifications and
requirements, install landscaping approved by the city, and maintain both on an
ongoing basis. It will be the city's responsibility to dredge the pond as necessary on a
periodic basis and in cooperation with the Redeveloper. The Redeveloper is
responsible for its proportionate share of the construction cost of the sub-regional
pond. Since the pond is to serve an area of approximately 40 acres and the
redeveloper's property is approximately 10 acres the redeveloper's proportionate
share ofthe construction cost is 25%. The city agrees to pay upfront for the remaining
75% of the pond's construction cost through its Development Fund. The City expects
to recoup its costs through a stormwater management fee charged to properties that
redevelop within the northern portion of the Elmwood neighborhood.
. Redeveloper agrees to complete construction on:
. Phase I - mixed use bldg consisting of approximately 25,000 SF of retail
space and 54 condominiums by June 30, 2007.
. Phase 11-74 condominiums by Dec. 31,2008.
. Phase III - 22 townhomes by Dec. 31, 2008.
. Phase N -220 aparlments by Dec. 31,2009.
. Upon satisfactory completion of the project, the EDA will furnish the Redeveloper with
a Certificate of Completion.
. Redeveloper agrees to provide the EDA with proof of proper insurance.
. If Redeveloper requires mortgage financing for the development of the Project, the EDA
agrees to subordinate its rights under the Agreement to the Holder of any Mortgage
securing construction or permanent financing, in accordance with the terms of a
mutually-approved subordination agreement.
. Redeveloper agrees not to transfer the agreement or the redevelopment property
(except to an affiliate) prior to receiving a Certificate of Occupancy for each phase
without the prior written consent ofthe EDA.
. Redeveloper agrees that the EDA and the City will not be held liable for 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 Redevelopment Property or the Minimum
Improvements.
Mounds View
Medtronic
Redevelopment
CITY OF MOUNDS VIEW
March 30, 200S
Proposed Medtronic Campus in Mounds View
DRAFT
Summary of Terms and Conditions of the Proposed Sale of Land
Comprising The Bridges in the City of Mounds View to Medtronic
.:. The City of Mounds View owns 118 acres of land at the junction of State Highway 10 and
Interstate 35W (See Map below). The Mounds View Economic Development Authority agrees to
sell to Medtronic, the Developer, 72 acres of land currently used as a municipal golf course for
$8,650,000. The City would retain 46 acres known as the former Sysco property.
.:. The conveyance of the golf course property is subject to covenants and restrictions imposed by a
Development Agreement that is being negotiated between the City and Medtronic. These include
the submittal and approval of preliminary construction plans, the approval of the Alternative
Urban Areawide Review (AUAR), and approval of the City's Comprehensive Plan amendment.
.:. The City is seeking approval of the AUAR, an environmental assessment process, for 1,500,000
square feet of office space for a proposed corporate office development. The campus would be
used by Medtronic's largest division, Cardiac Rhythm Management (CRM), for expanding its
research and development activities. The City expects approval of the AUAR by May of2005.
.:. The first phase of the Medtronic campus would involve the construction of approximately
820,000 sq. ft. of office space in several buildings and would entail an investment of $65 million
in new buildings in Mounds View. With lab equipment, computers, furnishings, etc., total
investment in Mounds View by Medtronic would be over $100 million for Phase I.
.:. Medtronic has requested tax increment financing (TlF) assistance for the project. To facilitate the
development of Phase I of the campus, the Mounds View EDA is prepared to offer TlF assistance
in an amount of 95% of the net increment (This amount represents approximately 34% of the
property taxes to be paid by Medtronic). Assumptions include a 26-year TIF district, election "B"
for fiscal disparities, and 5.0% for City administration. Legislative action is required to act on
Medtronic's request.
.:. It is projected that the increment generated during the life of the district would result in developer
payments to Medtronic of over $14 million over 25 years (the net present value). This would only
partially offset Medtronic's TlF-eligible development costs that are forecast to exceed $25
million. Qualified costs for TlF reimbursement include land acquisition, parking, wetland
mitigation, soils correction, and site utilities.
.:. The property is currently tax-exempt. This project takes the property from tax exempt to taxable.
Ramsey County, the Mounds View School District and the City of Mounds View will receive the
taxes from the taxable base value of the property. It is projected that over 25 years this amounts
to about $2 million (net present value).
.:. The City is pursuing TIF legislation that will allow the flexibility necessary to assist in the
reimbursement of some of the extraordinary costs associated with the site and project. It allows
for expenditure of increment within a specific area outside the boundaries of the City for specific
costs. This facilitates infrastructure improvements necessary for the Medtronic campus. One or
more TIF Districts can be created within the specific area under this special legislation before the
end of20l9. Multiple districts may be needed for multiple phases.
.:. The City is pursuing reverter clause legislation to remove the public purpose deed restriction on a
portion of the Development Area (the former MnDOT property). Medtronic seeks clear title to all
parcels in the Development Project Area. As part of the legislative process to remove the deed
restriction, a payment by the City to the State of Minnesota has been negotiated. Further,
Medtronic agrees to contribute on behalf of the City $1,000,000 to MnDOT to be deposited into
the Minnesota Trunk Highway Trust Fund.
Medtronlc Projed Area in Mopnd$ View
.:. As part of the Development Agreement, the City seeks the removal or relocation of up to six Clear
Channel billboards constructed at the golf course. Medtronic has requested the removal of some
or all of the signs as part of the redevelopment of the site. The City is in negotiations with Clear
Channel regarding removal or relocation of the outdoor signs.
.:. Medtronic agrees to pay a Park Dedication Fee of $600,000 to the City to be used for various park
improvements. The City would dedicate up to $150,000 of the $600,000 for park improvements
on the former Sysco property, the adjoining land retained by the City. Improvements could
include a trail, one or two pedestrian bridges and a small paved parking lot.
.:. The City is prepared to install all necessary offsite water and sewer line improvements necessary
for the Medtronic campus. This would include the extension of watennain, sanitary sewer, and
stormwater lines. Costs for onsite water and sewer improvements would be paid by Medtronic.
It is projected that utilities improvements will cost $800,000. The City's portion would be
approximately $400,000 and is a TIF eligible expense.
.:. Medtronic agrees to pay the City's Utility Franchise Fee. The fee based upon 4.0% of the gross
utility revenues (electricity and natural gas) is projected to generate about $80,000 per year after
Phase I facilities are completed. Half of the monies are allocated to the City's General Fund and
halfto the Street hnprovement Fund.
Outstanding Issues to be Resolved:
. The City and Medtronic are continuing to negotiate and work through various development
issues related to the project.
. Negotiations with Clear Charmel are progressing in an orderly fashion.
. All major components of the Development Project are subject to change.
. Final terms and conditions ofthe Development Agreement are subject to change and final
legislative action.
DEVELOPMENT PROPOSAL AND TERMS OF DEVELOPMENT AGREEMENT
CONFIDENTIAL ATIORNEY/CLIENT PRIVILEGED COMMUNICATION -- NOT TO
BE DISCLOSED
EDA Executive Session June 13,2005
To:
Kurt Ulrich - Executive DiIector
Economic Development Authority m
Scott Riggs, Mounds View City Attome~
June 10, 2005
From:
Date:
Re;
Medtronic - Development Proposal and Terms of Development Agreement
Medtronic Inc. has submitted its concept for redevelopment of The Bridges of Mounds View Golf Course,
a 72.2.acre Course currently owned by the City. This concept includes the acquisition and subsequent
redevelopment of the above referenced property, along with other property located within the City of
Blaine, for development of a corporate campus for their Cardiac Rhythm Management division. It is
anticipated that the development will be divided into the following three phases:
Phase I 820,000 SqlFt 2005 - 2007 November Dec 31, 2008 $65.6 Million
2005
Phase II 340,000 S 1Ft 2012-2014 S rin 2012 N/A $27.2 Million
Phase ill 340,000 S 1Ft 2017-2019 S rin 2017 N/A $27.2 Million
TOTAL 1,500,000 N/A N/A N/A $120 Million
SIFt
All buildings will be located within the City of Mounds View, and the Blaine property is being acquired
to provide access to the site, allow retainage of more wetland area, provide more open space and
accommodate parking for the office complex. It is anticipated that in Phase I of the development,
Medtroruc will employ up to 3,200 employees and grow to 5,900 employees when Phase ill is completed.
Based upon the above rererenced development program, the following is a listing of the proposed
business terms for the final Development Agreement:
1. Special Legislation
a. Creation of an Economic Development TIF District. The City and EDA sought passage
of special TIF legislation for this development. The City originally modeled the
legislation after the special legislation approved for the City of New Brighton, which was
for a Redevelopment TIF District, with a 25-year term and variations from TIF law.
SJR-26396Svl
MU205-30
CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED COMMUNICATlON-
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Director
Economic Development Authority
June 10, 2005
Page 2
Based upon revisions made at the request of and by the legislative bodies, the following
are the details of the special legislation the State approved as part of the Public Finance
Bill (Chapter 152, Article 2, Section 26):
i. Creation of one (I) or more Economic Development Districts with a term(s) of
25 years
ii. The TIF District(s) must be located on property that was exempt from tm<es
payable in 2005
iii. Extension of the 5-year rule requirement for development to 10 years (ability to
incur T1F eligible costs)
iv. Limitation on spending TIF outside the district does not apply (pooling)
v. Limitation of spending increment for development with more than 15 percent of
the square footage for office does not apply
vi. Increment may be speut on acquisition and removal of existing billboards, land
and easements~ sanitary sewer, sewer and water improvements, road
improvements, parking (including structured parking), administrative expenses,
wetland mitigation, soils correction ~d environmental clean up
vii. Increment may be expended on areas located outside of the T1F District for
sanitary sewer, sewer and water improvements and improvements to Coral Sea
Street, Airport Road, 82" Lane NE, County Road J, US Highway 10 and
Interstate Highway 35W so long as the improvements are related to development
within the development area
viii. The City may elect if Fiscal Disparities will be paid inside or outside of the
district
ix. The EDA's authority to create a T1F district under this special legislation expires
on December 31, 2015
The legislation will become effective after approval by the City, County and School
District. The City will be considering approvai of the legislation at the June 27, 2005
meeting. Staff and consultants have met with both County and School representatives
and they have stated that their respective boards will consider approval at their June 28,
2005 board meetings. After approval of the legislation by the respective bodies, it is
understood that the City and EDA will begin the process of creating a T1F plan and
holding public hearings on the creation of the District prior to closing on the property.
b. Sale oHormer MNDOT Prooertv. The City received title to 40.41 acres from the State of
Minnesota in 1988, which contained a right of reverter clause in favor of the State. This
SJR-26396Svl
MU205-30
CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED COMMUNICATION -
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Director
Economic DevelopmentAuthority
June 10, 200S
Page 3
document was recorded on March 29, 1989 and restricted the City from using the land for
anything other than a public purpose or open space. In order to sell the land to
Medtronic, the City sought passage of special legislation, which would allow the City to.
sell the land to Medtronic and have clear title. The legislation was approved as part of the
Public Finance Bill (Chapter 152, Article 2, Section 27) and authorizes the conveyance
of the land after payment of $1 million from the City to MNDOT for deposit in its Trunk
Highway Fund (Medtronic has agreed to reimburse the City for this expense). The
legislation requires the City to enter into a development agreement for the property by
January 1, 2007.
2. AcquisitionIPark Dedication Fees
a. The Bridges Golf Course. The City will be required to transfer title of the land
comprising The Bridges Golf Course to the EDA for subsequent sale and conveyance to
Medtronic Inc. via a quitclaim deed. The City will be required to undertake and complete
the creation of an ordinance to complete this transfer in accordance with the City Charter.
The proposed purchase price for the 72.2 acre site totals $9,650,000 ($8,650,000 paid to
the City and $1,000,000 paid to the MNDOT for the reverter). The EDA is required to
pay any levied or pending special assessments on the property (none are pending or
levied). The purchase price will be paid at closing which will occur on or before
September 30, 2005.
b. Park Dedication Fee. Medtronic will pay the City $865,000 in park dedication fees which
is equal to ten (10) percent of the land purchase price from the City/EDA. Park
dedication fees will be paid at the time a building permit is pulled for construction. The
City will be required to dedicate up to $150,000 of these funds for park improvemeuts on
the adjoining land retained by the City (former Sysco property). Improvements could.
include trails, pedestrian bridges and small paved parking lot.
c. MNDOT Prooertv. Medtronic Inc. will reimburse the City for the $1 million paymeut to
the State for the transfer of the former MNDOT property for private development in
accordance with the terms of the special legislation. Medtronic will deposit these funds
with the City/EDA at the time of closing.
d. Blaine Acauisition. The unique dimeusions of the Mounds View 72.2 acre property
requires that Medtronic purchase up to five (5) parcels, owned by three (3) different
companies/individuals, in Blaine. This is a requirement to accommodate parking for the
development, provide access to the site and allow more wetland areas and open space to
remain on the Mounds View property. These properties are currently occupied by
structures and operating businesses. The estimated acquisition price of these occupied
properties at this time, inclusive of business interruption, relocation of personal fIXtures
and inventory and cost considerations for the existing owners to lease/purchase/construct
new locations is $11 million.
SJR-26396Svl
MU20S-JO
CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED COMMUNlCATlON-
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Director
Economic Development Authority
June 10, 2005
Page 4
e. Environmental Indenmitv. The City anticipates receiving a ''No Action" and ''No
Association" letter from the MPCA pertaining to environmental conditions existing at the
site. The City has responded to a draft Indemnity and release Agreement from
Medlronic, the terms of which can be discussed further with the EDA on Monday.
f. Conditions urior to convevance of land. Prior to conveyance of the land from the EDA to
Medlronic, the City needs to complete the following:
i. Approval of the Alternative Urban Areawide Review (AUAR). It is anticipated
that the City Couucil will consider final approval at their June 13, 2005 meeting.
ii. Approval of special legislation. It is anticipated that the City Council will
consider approval at their June 27, 2005 meeting).
iii. Removal/relocation of Clear Channel billboards. The developer agrees to work
in good faith to minimize the economic impact ofthe removal of the billboards
by allowing two (2) billboards to remain on site.
iv. Approval of a Comprehensive Plan amendment. It is anticipated that the City
will consider final approval at their June 27, 2005 meeting.
v. Conveyance of the property from the City to the EDA. The City will undertake
the ordinance process required by City Charter to authorize this conveyance. It is
anticipated that 1his will be considered by the City Council in July.
vi. Medtronic is required to fmalize negotiations for purchase of property located
within Blaine ou or before September 30, 2005.
g. Right of Reverter. The EDA has the authority to re-enter and take possession of the
property and to terminate and revest the land if Medtronic fails to initiate construction,
construct the facility or abandons or substantially suspends construction work. This
Right of Reverter shall be in place for one (1) year from the date of transfer of title to
Medtronic.
h. Resale of Reacouired Prouertv. Under the Right of Reverter clause, the CitylEDA will
have the right to resell the property to a qualified and responsible parly who will assume
the obligation of completing the construction of the facility. Sale proceeds will be
distributed first to the CitylEDA to cover costs incurred, including CitylEDA personnel,
in connection with recapture, management and resale of the property, taxes, assessments,
sewerlwater charges, payment of encwnbrances or liens or any expenditures made or
obligations incurred with respect to the making or completion of the development. Any
remaining balance shall be paid to Medtronic.
SJR-2639tlSvl
MU205-3Q
CONFIDENTIAL ATTORNEVfCLIENT PRIVILEGED COMMUNICATION-
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Director
Economic Development Authority
June 10, 2005
Page 5
3. Purchase, Termination or Relocation ofBitlboard Leaseholds [See Note below).
a. Retained Billboards. In order to minimize the economic impact of the relocation of the
billboards on the EDA, Medtronic has agreed to allow two (2) billboards (#1 and #6) to
remain on site. Clear Channel has requested new leases for these signs that extend for a
thirty (30) year tenn. They will pay the City $10,000 annually for each sign in years 1-
10, $15,000 for each sign in years 11-20 and $20,000 for each sign in years 21-30.
b. Relocation of Billboards. The CitylEDA will use best efforts to relocate the remaining
four (4) billboards (#2, #3, #4 and #5). The CityfEDA has up to two (2) years (and signs
will be relocated as needed to accommodate construction) from the date of closing on the
land to relocate the billboards to site locations within the City approved by the CitylEDA.
Clear Channel will be required to pay the CityfEDA prorated rent for the time any
billboard to be relocated remains on site. Medtronic will work with the CitylEDA in
obtaining necessary variances required from MNDOT for any signs that are to be located
on their property. Proposed locations are the fonner Sysco land CIllTently owned by the
City (the City would receive the same lease tenn and compensation stated for the two
signs above); and two other locations within the City (since the potential sites are
privately owned, the sites will be identified to the EDA on Monday, but are still subject to
negotiation). The City is required to approve these sites or other alternative sites deemed
acceptable by both the City and Clear Channel.
c. Cost of Relocation. The City will be required to pay Clear Channel $202,500 for
relocation of the four (4) billboards, for a total of $810,000. It should be noted that this
amount is estimated at this time, and Clear Channel will only be compensated for actual
costs to relocate and construct the billboards. The EDA will pay the first $550,000 ofthis
cost (this is a TIF eligible cost and may be paid from increment generated from this
district or other available TIF funds) and Medtronic will pay the remaining amonnt, up to
$260,000.
d. Condemnation. If the CityfEDA are unable to negotiate acquisition, tennination or
relocation of the billboards, Medtronic may ask the City to exercise its power of eminent
domain. The CityfEDA's obligation to use eminent domain is contingent upon Medtronic
agreeing to purchase and redevelop the property; Medtronic entering into an agreement to
reimburse the CityfEDA for all costs including legal fees and expenses associated with
the acquisition of two (2) of the billboards; Medtronic having agreed to reimburse the
CityfEDA for any claims for relocation services or benefits; and Medtronic having
executed all agreements required by the Development Agreement. Medtronic agrees to
pay costs associated with acquisition of two (2) billboards if the City has approved
relocation sites acceptable to Clear Channel, but they decide not to relocate. If it is
necessary to acquire more than two (2) billboards, the City will be required to pay these
costs.
SJR-263965v1
MU205-30
NOTE: LEASE TERMS, REVENUE TO BE PAID BY CLEAR CHANNEL AND
COSTS OF RELOCATION ARE PROPOSED TERMS SUBMITTED BY CLEAR
CHANNEL TO THE CITY AT THIS TIME, THE CITY HAS NOT ACCEPTED
THESE TERMS AND HAS VERBALLY PROVIDED A COUNTER OFFER.
FINAL TERMS MAY BE AVAILABLE AT THE MEETING ON JUNE 13m AND
TIllS MEMORANDUM WILL BE UPDATED TO REFLECT THEM.
CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED COMMUNICATlON-
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Director
Economic Development Authority
June 10,2005
Page 6
4. Construction ofMinimnm Improvements and Public Improvements
a. Minimum hnprovements. Medtronic is required to constroct an 820,000 sq/ft office
complex (with supporting accessory uses) on the site at a minimum value of $65.6
million. Construction shall commence by December 31, 2005 and be completed by
December 31, 2008.
b. Reconstruction of Imlltovements. If the development is destroyed before or after
comptetion of the project, but prior to payment in full on the TIF Note or tennination of
the District, Medtrornc has one (1) year from the date of the damage or destruction to
begin reconstruction of the development at a value at least equal to the original value.
c. Public Improvements. Tbe City is required to install all necessary offsite water and sewer
line improvements necessary for the development. This includes the extension of the
water main, sanitary Sewer and storm water lines. It is estimated that these improvements
will cost approximately $400,000 and the CitylEDA will be reimbursed through available
TIF frrst from this District then as needed from other available TIF funds. Medtronic will
be responsible to pay for all onsite water and sewer improvements required to service the
development from the property line.
d. Roadwav Imorovements. Several roadway improvements need to be completed, not only
to accommodate this development, but to improve existing conditions and address future
traffic issues due to growth occurring in surrounding communities. On April 11, 2005,
Governor Pawlenty signed the State's Bonding Bill that included appropriations for road
improvements to address existing conditions and to accommodate this development. The
amount appropriated for these improvements is $20.5 million and will be utilized for
improvements to Airport Road, County Road J, Sylite Street, Coral Sea Street,
Interstate 35W, Naples Street and reconstruction of the County Road J and 35W bridge.
It is anticipated that all roadway improvements will be completed by 2008, and
coordination oftbese improvement projects is to be completed by Ramsey County. This
funding not only allows these required projects to bappen ahead of schedule, but also
saves tbe City money that the City would bave been required to expend for required road
improvements to County Road J.
SJR-26396Sd
MU2l15--JO
CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED COMMUNICATION -
NOT TO BE DISCLOSED
Kmt Ulrich - Executive Director
Economic Development Anthority
June 10,2005
Page 7
5. Administrative Expenses
a. Pavment of Administrative Elmenses. Medtronic will reimburse the City and EDA for all
costs of the City and Authority in advancement of the Project, including but nollimited to
the costs of the City Consultants, preparation of AUAR, fmancial analysis of the Project
and the Tax Increment Plan, TIF District analysis and creation, legal fees, survey and title
costs, environmental review costs, environmental site investigation costs and other
similar costs. These costs to date are estimated as follows:
Orion A . sal
Patchin, Messner and Dodd
Short Elliot Hendrickson
RLK Knusisto
Boonestro
Ehlers & Associates
Kenned & Graven
Bri s and Mor an
Various Pa rs
TOTAL
A raisal of The Brid es
Billboard A raisal
Wetland delineation
AUAR
AUAR & Utili Estimate
Financial Anal sis and TIF District
10 , Ie islation, billboard ne otiations
TIP District and 10 'slation
10 INotices
N/A
$2,500
$12,500
$2,021.68
$80,50234
$2,393.82
$8930256
$95,806.49
$16,500
$763.75
$312 076.04
Medtronic will be required to reimburse the EDA for these expenses upou approval of the
Development Agreement. A fmal cost accounting will be completed prior to sale of the land and
Medtronic will reimburse the EDA for the additional expenses at closing. If the EDA does not
approve the Development Agreement, Medtronic will not be required to reimburse the EDA for
any expenditures. If after approval of the Development Agreement Medtronic doesn't proceed,
they will still be required to reimburse the City and EDA for these costs.
6. Tn Increment
a. Creation of a TIF District. The EDA will be required to create TIF District No.5 in
2005, which will be an Economic Development District as defined by the special
legislatiou passed for the City and this project during the 2005 legislative session and as
detailed above. It is anticipated that the first increment will be received in 2007, thus the
district will tenoinate in 2032.
b. Minimum Assessment Agreement. Medtronic will be required to enter into a Minimum
Assessment Agreement with the City and County for a minimum value of $6,650,000
million as of January 2, 2006, $32,800,000 million as of January 2, 2007 and
$65.6 million as of January 2,2008 (Note: the minimum assessment amounts are subject
to review and approval by the County Assessor). This equates to $80 sqlft and is the
minimum set to detennine the size of the TIF Note. The County Assessor will detenoine
the actual vatue, however at no time will Medtronic be able to contest the assessed
SJR-263965vl
MU20s.30
CONFIDENTIAL ATTORNEY/CLIENT PRIVILEGED COMMUNlCATION-
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Director
Economic Development Authority
June 10, 2005
Page 8
valuation of the property below the $80 sq/ft amount. This agreement will remain in
place until the TIF Note is paid in full or the district is terminated, whichever is earlier.
c. Base Valuation. Since the property is currently exempt from property taxes, the County
Assessor will be required to assign a value to the property. Medtronic will not have the
right to contest this valuation. The current base value assigned to this property, per the
Ramsey County tax exempt abstract, is $7,228,000. This will equate to approximately
$41,000 in ammal taxes to the City's General Fund
NOTE: THE BASE VALUE WILL CHANGE AND BE UPDATED BY THE
COUNTY ASSESSOR WHEN THE PROPERTY IS TRANSFERRED FROM TAX
EXEMPT TO TAXABLE. IT IS ANTICIPATED THAT THE BASE VALUE
WJLL BE INCREASED FROM TillS AMOUNT AND mus, THE PROPERTY
WILL GENERATE MORE ANNUAL TAXES TO THE CITY'S GENERAL
FUND.
d. Amount of Increment: Based upon the latest Sources and Uses from the Development
Team, it is anticipated that the Phase I development will generate approximately
$14.8 million in present value tax increment, at a five (5) percent rate. Requests -for-
increment for future phases will be reviewed and negotiated at the time development is
ready to move forward.
NOTE: THE ACTUAL AMOUNT OF INCREMENT THAT WJLL BE
GENERATED WILL DEPEND UPON THE BASE VALUE ESTABUSHED BY
THE COUNTY ASSESSOR, VALUATION OF THE DEVELOPMENT
DETERMINED BY TIlE COUNTY ASSESSOR AND CURRENT TAX RATES.
e. Oualified Costs. Based upon budget estimates submitted by Medtronic, Ehlers &
Associates estimates that the qualified costs eligible for TIF reimbursement for Phase I of
the project are as follows:
Land Acquisition
Billboard RemovallRelocation
Environmental
Soil Correction
Demolition/Relocation
Wetland Mitigation
Utilities
Parking
Landscaping and Lighting
Access Road
Fees Associated With Above
City Administrative Fees
$11,000,000
$260,000
$100,000
$1,900,000
$500,000
$1,500,000
$600,000
$3,000,000
$1,500,000
$1,500,000
$1,000,000
$500.000
$23,360,000
TOTAL
SJR-26396Svl
J.\.fU205-30
CONFIDENTIAL ATIORNEY/CLffiNT PRIVILEGED COMMUNICATION-
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Direc/Or
Economic Development Authority
June 10,2005
Page 9
Since the qualified costs exceed the available amount of increment, Medtronic will only
be reimbursed for qualified costs in the amount of $14,8 million. Medtronic shall cost
certify all such private third party costs and expenses to the reasonable satisfaction of the
City and EDA.
f. Fiscal Disoarities. Fiscal Disparities will be paid inside the district (B election), meaning
there will be no impact on other taxpayers in the community.
g. Administration Exoense Allocation. Currently all TIF calculations show 5% of available
tax increment being available for on-going administration and capital expenditures forthe
District.
h. TIF Note. Medtronic will fmance their development costs up front and will receive tax
increment on a Pay-As-You-Go (pAYG) basis. This means that as they pay their taxes,.
they will receive a portion of their tax dollars back (approximately $.37 on the dollar).
The TIF note is being paid at a five (5) percent PAYG mte, which is a low risk mtefor
equity in comparison to other typical office/commercial developments, The TIF Note will
be issued to Medtronic after certification of qualified costs to the EDA.
i. Business Subsidy ReQuirements. Since Medtronic is seeking assistance in excess of
$25,000, they are required to follow the City's Business Subsidy criteria, and the
CitylEDA is required to hold a public hearing on the terms and conditions of the subsidy
(June 20th hearing). The City's business subsidy policy requires any development
receiving a subsidy create one (I) new full-time equivalent (FTE) jobs within two (2)
years after completion of the development at a wage of 125% of Minimum Wage, or
$7.69/hour, exclusive of benefits. Medtronic proposes to create up to 3,200 new jobs
within the City of Mounds View in Phase I. For purposes of the Business Subsidy
requirement, they agree to create 1,500 new FTE jobs within two (2) years after
completion of construction at an average of $34/hour, exclusive of benefits, or
$70,000/year, which well exceeds the City's requirement. Medtronic is required to
submit annual reports to the EDA summarizing business subsidy goals and results by not
later than March I" commencing on March 1,2008.
7. Miscellaneous.
a. Wetland Mitigation. It is anticipated that due to the location of buildings and parking
areas for Phase I of the development, a portion of Judicial Ditch No. I will need to be
relocated/mitigated. It is currently anticipated that the Ditch area to be mitigated equates.
to approximately 1 to 1.5 acres, which means Medtronic may have to replace up to three
(3) acres. Medtronic will work with the Rice Creek Watershed District on the size and
amount of the Ditch to be mitigated, and it is anticipated that the mitigation will be
accommodated on the existing site.
SJR-263965v}
MU205-30
CONFIDENTIAL ATIORNEY/CLIENT PRIVILEGED COMMUNICATION-
NOT TO BE DISCLOSED
Kurt Ulrich - Executive Director
Economic Development Authority
June 10, 2005
Page 10
b. Prohibition on Tax ExemDtion. Once Medtronic purchases the property, no portion of
the property can become exempt from paying rea! estate taxes. This covenant shall be
recorded against the property upon transfer to Medtronic.
c. Sale or Assil!l1ment. Medtronic is precluded from selling its development rights to the
project or the property prior to issuance of a Certificate of Occupancy (CO) on the
project. Medtronic may transfer the property and future development rights to another
entity in the future, but it will require EDA approval, which sha!1 not be unreasonably
withheld.
d. Events of Default. The following issues constitute an event of default and either party
has thirty (30) days to cure the default:
1. Failure of the EDA or Medtronic to proceed to closing on the property
ii. Failure ofMedtronic to construct the proposed Phase I Development
iii. Appeal or challenge by Medtronic of the Minimum Assessment Agreement
iv. Sale of the Development prior to issuance of a Certificate of Occupancy and
written consent by the EDA
v. Failure ofMedtronic to pay rea! estate taxes or special assessments
vi. If the project becomes exempt from payment of real estate taxes
e. Phase II and III. Medtronic intends to complete Phase II and phase ill at a future date.
The CityfEDA acknowledge that Medtronic may request fmancia! assistance with the
development of these phases. The City/EDA will review the development programs and
proformas and determine if assistance is warranted, but by no means is obligated to
provide assistance for these phases.
f. "But For" Analvsis. EWers has performed a "But For" analysis to ascertain the
appropriate level of assistance.
The elements of this transaction are within industry standards that Ehlers & Associates (the City's/EDA's
fiscal consultant) has seen within the Minneapolis-St. Paul metropolitan area on these types of
developments. At this time, it is anticipated that a fmal Purchase and Redevelopment Agreement would
be brought before the EDA at its June 27, 2005 meeting for consideration and approval.
SJR-26396Svl
MU205-3D
MEDTRONIC DEVELOPMENT PROPOSAL
AND TERMS OF AMENDED CONTRACT
FOR PRIVATE DEVELOPMENT
January 17,2006
Following are the proposed terms to the modification/amendment to the contract for private
redevelopment by and between the City of Mounds View and Medtronic:
I. Medtronic will construct 1.2 million square feet in Phase I (previous Phase I of 820,000 plus
previous Phase II of380,000 sq/ft).
2. The amended Phase I will include the construction of structured parking (4,200 stalls) at a
cost of $24 million ($16 million for phase I and $8 million for phase II).
. . . . ,
-. ". . . . ."'"
. . ' . : ' ,
3. Construction w-~!:tC9~enpe;jI\.;20Q6 with 6Q% oft!lede"~lqpmrnt~e~hg completed by
January 2, 2007!(nd1'9lQ% 9ftl\~,~evelopmentcompletedby January'2.,-'20Q8.
: :.:::,:-': .'";sx,r "<' .r'" ',':' -.'", :-':'.~:,.. :.-::-'" '. .. '-- :--~::>-~'~~_",.._,',.~;;:
4. Minimum Asse~smerit;~gree'ti).entwill sta,te a value of $57.6 milliol(by January 2,2007 for
pay 2008 taxfs,and aj-v,alue Ql $~(j.lnilli(Jnby Januroy2, 2008 foi;;pily 2009 taxes (based
upon $80 sq/~,:.,LaIi:gu.;lge 'o/jlhb~-lldded that the value of the projept inflates at a 3% rate
beginning in2Q'P9 fo~;payabl&;iiQ']9- to be ~oirsistenfwjth the TIF,t;:ote and proposed cash
flow.-- .. - ,'. . . '. . ','./.'
.: -,'.... ',:'.- .
5. Medtronic wilLbe r~sp~msi~l~ tdil;Qnstruct the utilities to the sitetfult was previously the
City's responsibility (~tin{~ted at $400,000), The City will publicly l{id their portion ofthe
utilities and lY1edtr()riicwill:f.i~imbi.jrses thco'City Jbr,tb,e costs (the Gity will use their best
efforts to time;<i()!i&tmction~~jtheirportion oftlWutilities with Medtr()nic's internal utilities
to take advant~ge'Q$edonoIJii~~ ofs.cale, ..'
; ::--:,:.: ,-,:' ,:,,;:::"\! ',:,.::.: .' ..
The City will receive a copy of the feasibility study to extend utilities to the site soon. If the
cost greatly exceeds $400,000, Medtronic will receive dollar for dollar, additional TIF for
this expense in the amount above the agreed upon $400,000 (but overall not to exceed an
additional $355,000 - see # 10 below).
6. Medtronic will pay 100% of cost to relocate all billboards which is estimated to be $810,000
(previous agreement City portion was $550,000 and Medtronic portion was $260,000. for
total of $81 0,000).
7. Medtronic will be required to reimburse the City for administrative costs to complete this
amended agreement (estimated on the high side at $150,000).'
Medtronic Term Sheet
January 17,2006
Page 2
8. If the buyout alternative has to be undertaken for the billboards, Medtronic will pay all costs
associated with this (buyout option would be initiated if the City approved relocation sites and
Clear Channel chooses not to relocate to them). It is anticipated that up to three billboards will
fall under this option since one site (Sysco) has been approved by the City for location of a
billboard. If we are to assume that all three will need to be bought out, the cost associated with
this is $2,475,000 ($825,000 per billboard). As noted in the original Agreement, Medtronic was
responsible to buyout the 15t two billboards and the City was responsible for any billboards
above and beyond the 15t two. This request increases Medtronic's contribution by $825,000, if
three billboards need to be bought out, and by $1,650,000 if four need to be bought out (they
don't pursue the Sysco site). Medtronic is of the opinion that Clear Channel should relocate a
billboard to the Sysco site and that this should be pursued at all costs. They agree that if
MNDOT doesn't approve a permit, then they will pay the cost to buyout the sign (assumes that
they have to buyout 4 s,j~s). O\'c~~a,ll,they would like to ke€JP theacq,!isition, tel 3 signs rather
than 4, so i.f another sit~iij~~~ppro$~~r{~4(C~ear Char,mel rel~f~t~~;6~e?tthe:4 signs, then ifin
the alternative they h;v(j'$()91w 0l),tpj9t4ers1gns, theY are okaY;:-Ylt4;tha!,'C_ ; _
.- - ,:t?{~~';)' ~i~\ f:~N~~L~:{~:~:"~-}~:: ; ":..- : :':!~~j:~': :',:::. ,:':'-< -', .- :':::::i:, _:.:;: ~;.:
9. Costs associated withc,1jt5;At'~~ancj,~,,*7 abqye willreiJ,nire Me!i1mnic to "pay an additional $1.1
million in costs, rather;' th~#l,awj' th~C-ity p~y'iiiem arld');leducting tl)-is amount from the
available TIF. If they have:t.,~jpaY,1;be $82-,>,000 in'costs outllned in #8 <!hove, then their total
costs they will contribute wi,~~~ ~1}~;!'5,O~Q. ' 'i'," fe.,"'!';
':~~"" - : "','.- - - '-" "--'-':,' :-'.-":"':', -; : - .-.
10. Medtronic will pay tp;brini}~ e;ll\'#Il-into working C6mplilli;JCli(;fef use at a cost of $545,000.
This increases their'IjIF asslS'ti!nc~~~$22.545 n;rilli(JltJn liM;tlon, the City is requesting that
Medtronic make a Pl\YmenM~:th~1r.oadwaY reconsti:U.qtion-fUnd in the amount of $355,000 to
address reconstructiQIj.<and.it~l;!ic;r~~lies oPcollectoreroaas thatwere not a<l<lj:essed as part of the
transportation packa~e;~l1dl;l'onk,i\vill re.ceive$35MOq nior(j in TIF (tqtalof $22.9 million).
It is understood bY';~l1'GJ-tYi that:ti).e rewitiriir!g $355;'OOO'available inTIf will first go to
overruns in utility cos~s(o~ the$400,000estiIhate), Wen tiJ.:~jremaining limi)unt will go to the
road reconstruction fu-nd3tid is a riot to exceed number toaccOliunodate these items/costs.
1 L Medtronic in return will receive 95% of the available tax increment from the entire
development, up to the estimated to be $22.9 million (this is estimated based upon $80 sq/ft and
is a not to exceed number).
12. Tax increment assistance will be provided for the structured parking only (cost to construct
structured parking is estimated at $24 million).
Medtronic Term Sheet
January 17, 2006
Page 3
13. Construction of the park and trail system adjacent to the Medtronic campus may be cost
prohibitive due to the soil and wetland conditions. If the costs are deemed excessive by the
City, the City will not want to be required to construct the park and therefore, not be required to
expend $150,000 of the park dedication fees on the park. If Medtronic insists that the park and
trail system be constructed, then the City would require that Medtronic pay for the increased
costs above and beyond $150,000 in recognition of the fact that the park development will be a
significant benefit to employees of the neighboring commercial development (City would still
contribute $150,000).
14. New language will be added to the agreement regarding any tax court petitions to adjust value.
Medtronic is required to notify City of tax court petitions filed with the tax court on the
development property. Language will be added that the City will continue to make TIF
payments to Medtronic based upon the minimum assessment agreement value in place at the
time and any additional TIF available for payment will be withheld until the petition is resolved
by the court.
15. Amended TIF applicatiorqvill n-i#befiled wiili:tpe City"(feewaived}aud~'new But-For test
will be completed tb',appr6ve the;;" '_liest. " '/e ,-" c-7-_!~", :.,
~"'_'_.:_';::'-' ;'"->;\J\;, "".;\V _:. _' i_" . _,c. ""_" '_:<-:: _~::\
16. Job and Wage gomswHL1'1e upc;\at~d~taii~c1uqe;iZ.2(;)0 new jobs asa'resultof the new, larger
initial phase.' .'
" : ::j;" _ ~jS.: ;f~ \.>,:":t '\:<
17. A public hearing will be r~Uirba:\'(he~e\the 1fiF_;.Qlstrict pudgefwill bel110dified to reflect the
larger developmetitand ajJ~pli~;Jjt,~~.{yiIL~,~eldon thi;)' ari):ended AJ;ieement to reflect the
new Business Sub$idy that.isbei1U;l~ni{\~ded a1)G th\l-Otheramtmded terms" The EDA will host
a public informational lI1~tin~,1g~~!%lUary;'c2fl:~'\-t() go.over final te~s of the amended
Development Agreement<With,1ll~J ~.i\\ ~-J?JI'Ii:!ic.helll:ing on the~ended Development
Agreement will be hel~ 1'1.* the E:U>~ onR~~Iil~'1;~tl1/TIjey will also a~rri?ve ~e modifi~ati~n
to the TIF plan, butthintem IS)l,o,t apuphcJie!(t:1llg;:_OrlcPebruary 13t,i_the City Council w1l1
also approve the amended Developm~t Agreement, but this is nota public hearing. In
addition, they will hOld apnblic hearin;g-,o,Ilthe modificatIoIl to the TIF ,plan on that same night
as reqnired by statute, ',.'h,-,-
St. Anthony
Apache Plaza
Redevelopment
.
EHLERS
& ASSOCIATES INC
o
~
W
~
To:
John Herman - Faegre & Benson
From:
Stacie Kvilvang - Financial Advisor
Jim Prosser - Financial Advisor
Sid Inman - Senior Vice President
Subject: Northwest Quadrant Redevelopment
Date: August 4, 2003
On July 30, 2003, you provided the City and EWers with a Term Sheet outlining the proposal for
redevelopment of the above referenced project on behalf of the Development Team you represent
We have had an opportunity to review the Term Sheet and have the following five (5) comments with
regards to the overall redevelopment as proposed:
L The purchase price of the various properties needs to reflect the true market value for the
property. This is the foundation for the But-For Analysis to be completed by Ehlers and is
subject to review by the State Auditor. As stated previously, the City will make its final
review ofthe purchase prices based upon an appraisal analysis it will have completed.
2. The scope of the project has been changed from what was originally proposed to the City.
The City Council has stated that senior housing is a development component they desire to
see in the final development, along with "high-end" town homes. The Redeveloper will need
to address senior housing in the development program.
3. The agreement as it stands does not address the complete build out of the entire site. The
Redeveloper needs to provide the City and Ehlers will a final listing of all components types
of the development, which portions are in future phases and how they will be financed.
4. The City has no additional resources available for this project and it is their position that it
will not accept any additional level of risk or debt until all the Redeveloper's resources
available to the project are depleted.
5. The level of assistance requested by the Redeveloper has to be commensurate with the overall
level of risk and industry standards for similar developments.
Understanding these are the overarching issues we have to factor in as we reviewed your information,
following is the detailed responses to the various components. It should be noted that we have not
reviewed all of the language from a legal standpoint, since this will be addressed when the
Development Agreement is drafted. Therefore, if we state there are ''No changes" to a section, it is
only in reference to the proposed terms.
I. General Project Description
A. Proiect Area. No changes.
B. Redevelopment Obiectives. No changes.
John Herman
August 4, 2003
Page 2
C. Parties. No Changes.
D. Minimum Improvements. The original concept plan provided to the City Council outlined
80 units of senior rental housing, a 64-unit senior cooperative housing development and
28 high-end for sale town home units. Since that time, the plan has changed and it is our
understanding that no senior rental housing will be constructed and it is uncertain if the
senior cooperative housing or high-end town homes will be constructed. The City
Council has stated that it is important that this development have a senior component and
that no assistance may be provided if it is not accommodated in a manner that is
satisfactory to the City Council. We strongly recommend that the Redeveloper review the
plans and address providing senior housing (when, where and how) and clarifY ifthe high-
end town homes will be constructed.
It is our understanding that Dominium intends to construct only 212 market rate units,
rather than the 225 you have outlined. In addition, the City would like as definitive
answer as the Redeveloper can provide as to the number of Cooperative units as well as
the number of high-end town home units that will be developed and the timing of the
development of these units. This information is needed to provide the City with a
comprehensive understanding of the overall development and to provide Ehlers with the
needed information to complete the Tax Increment Financing Plan.
Under Phase IA For Sale Housing you have noted the properties to be developed for the
commercial site are the St. Marie Parcel (inclusive of Taco Bell and the New Market Site),
Tires Plus/SA V II and the two storm water ponds located behind the mini mall and the US
Bank Building. It should be noted that the following three (3) parcels are located adjacent
to the new commercial property and will most likely need to be acquired by the
Redeveloper:
1. PID #313023340018 - Parcel surrounding Taco Bell. County Records indicate the
property owner to be Welsh as receiver
2. PID #313023340019 - Parcel adjacent to the south end of the Tires Plus property.
County records indicate the property owner to be Welsh as receiver
3. PID #313023340014 - Parcel between the Conoco and SA V II. This parcel is owned
by the St. Anthony HRA
E. City/Authority Decision: Redevelopment and Tax Increment District Establishment.
Currently the City is working towards holding the public hearing on the TIF Plan on
September 23, 2003. However, the City will not formally request certification of the
District until final terms for the Development Agreement have been negotiated.
John Herman
August 4, 2003
Page 3
II. General Development Timing and Phasing, City Land Sales, Municipal Liquor Store Sale
and Constructiou of New Liquor Store.
A. St. Marie Acquisition. The City has concerns that the amount being paid for the property
exceeds its value based upon the estimated cost to extinguish the Restrictive Covenants
and Cross Easement with the adjoining Cub Foods development. In addition, EWers is of
the opinion that this cost may not be up held by third party scrutiny.
B. Liquor Store and City Ponding Area. Sale by Cityl Acquisition by Redeveloper. The City
will agree to a payment of the appraised amount plus actual relocation expenses it needs to
pay to Tires Plus. It is estimated this cost would be approximately $1,700,000
($1,550,000 plus $150,000).
Under bullet point #2, the City is willing to transfer the existing ponds under the following
conditions:
a. The City will deed the pond behind US Bank and in front of the Cub Foods to the
Redeveloper, since it is to be retained as a storm water pond. Since the Redeveloper
is developing the pond behind the Mini Mall into additional retail space, the City
will sell the land to the developer for its purchase price of the other commercial
property being purchased by the Redeveloper for $5.31 sq/ft. The site is 28,750
sq/ft, therefore the City will request payment in the amount of $152,663.
C. Development Timing. Demolition of Apache Mall. No changes.
D. Development Timing. Commencement of Minimum Improvements. Following is the
development program proposed by the Development Team:
Commercial- 236,000 s 1ft
Mk Rate Rental (212)
For Sale, Phase IA - Flats (128
For Sale, Phase IB - Flats (128)
Senior Coo erative
For Sale, Phase II - (44)
S rin 2004
Fall 2004
Fall 2004
Fall 2005
Fall 2004
Summer 2005
June 1, 2005
Jul 1,2005
July 1, 2005
July 1, 2006
July 1, 2006
July 1, 2006
As stated previously, the development program no longer shows the development of
Senior Rental Housing. Senior housing is a requirement of approval of any Development
Agreement and needs to be addressed to the satisfaction of the City Council. In addition,
the City and Ehlers needs clarification on ifthe Redeveloper is going to construct a Senior
Cooperative and how many units will be in it. The City and EWers also needs clarification
on the Phase II For Sale Housing of 44 units as to what type of housing it is and its price
point.
After the City and EWers is satisfied that the development program meets the goals of the
City Council, the City Attorney will provide language in the Development Agreement that
John Herman
August 4, 2003
Page 4
will cover timing, phasing, development components and issues of default. It should be
noted that if a Senior Housing component, acceptable to the City Council, is not
developed this would constitute a default under the Agreement. In addition, no profit will
be provided to the Redeveloper(s) until all components ofthe development are completed.
E. Infrastructure Construction and Phasing (bv City/ Authoritv). commercial Phase.
Following comments regarding this section:
a. The City's Engineer will need to review the costs of improvements and verify the
final number
b. The City has no other source of funding available to it and reserves the right to use
project resources to pay any costs associated with the public improvements.
c. The term of the special assessments that will be passed on to the small commerciaf
properties will not exceed 15 years
d. The City has no other sources of funding available to it and reserves the right to
utilize project resources if additional Right-Of-Way is needed, inclusive of assessing
any portion of the costs.
F. Phase I Publiclv Assisted Redevelopment Activities. 1bis section to be reviewed and
refined as appropriate by the City Attorney.
G. Liquor Store. Land Acquisition and Construction. The City will be providing the
Redeveloper with a counter offer for this section under separate cover.
H. Cub hnorovements and Accuisition. The City agrees that public assistance may be
warranted with regards to the Cub Foods for the needed improvements to assure it meets
the standards of the new surrounding commercial development. However, the City and
Ehlers has reviewed the proforma submitted by the Redeveloper for the Cub Foods
acquisition and is of the opinion that no additional subsidy is needed. The City
encourages the Redeveloper to reassess the acquisition of this property and/or renegotiate
a purchase price with US Bank for the Ste. Marie Property or the owner of the Cub Foods
if they continue to insist that they need assistance to acquire the property.
1. Redeveloper Profit and Overhead Limitations.
a. The City and Ehlers does not agree that the Redeveloper should be entitled to any
profit above what he is entitled as a project partner and/or developer of the various
components of the development.
b. Redeveloper(s) shall not be entitled to project profit until all issues regarding Senior
Housing and the For Sale housing have been resolved and the City has needed
assurances that Phase II development will happen.
c. Inflationary revenue and coverage will first go towards any City shortfalls from TIF
and/or grants, then to cover any agreed upon sums not paid to the Redeveloper, then
to a sinking fund to prepay all TIF obligations.
John Herman
August 4, 2003
Page 5
d. Need to have the Redeveloper submit a detailed listing of overhead and out of
pocket costs for review by Ehlers and the City ($1,150,000 & $1,000,000).
e. Redeveloper overhead costs paid to legal and fiscal consultants will be viewed as
part of the Administrative Costs of the TIF District. Since the City is allowing the
Redeveloper to utilize up to 95% of the available increment, than these overhead
costs cannot exceed $2.7 million according to initial TIF runs.
III. Land Assembly, Condemnation
A. Condemnation. The City will only consider use of Condemnation after the Redeveloper has
proven to the City in a satisfactory manner that it has taken all steps, including use of
Mediation, to acquire the property. The City request that the Redeveloper take out any
references to which properties the Redeveloper is of the opinion will need to be condemned
and anticipated condemnation dates.
B. Condemnation Cost Reimbursement.
a. All costs of condemnation and relocation shall be paid by the Redeveloper and are
subject to reimbursement as a Publicly Assisted Redevelopment Expense.
b. The City will agree to inform the Redeveloper of the condemnation process and the
amounts to be paid with respect to any settlement. However, the Redeveloper will
have no approval of amounts to be paid.
c. The City agrees that an interim financing tool will be needed to acquire the
commercial property for the Phase IB housing, but is of the opinion that this will be
the responsibility of the Redeveloper and not the City.
d. No reimbursements for project overhead/profit will be paid to Redeveloper(s) until
all property being condemned is purchased.
C. Attempts at Private Acquisition.
a. Mediation will be a cosi to the Redeveloper
D. Coordinated Timing of Condemnations and Private Improvements. No Changes.
E. Shortfall Funding for Phase IB For Sale Parcels.
a. The City expects the Redeveloper to sell a TIF Revenue Note to cover the costs of
acquisitions.
John Herman
August 4, 2004
Page 6
b. If TIF revenue funds are insufficient, the City will consider assisting the
Redeveloper in obtaining an interim loan from Fannie Mae, with [lIst security being
withheld Redeveloper profit and prepaid Redeveloper expenses.
IV. Rental Housing Development, Special Terms.
A. Land Sale bvRedeveloper.
a. It is the City's and Ehlers understanding that the Redeveloper agreed to pay
$12,900/unit and not $13,OOO/unit. ill addition, this amount included payment for
SAC/W AC and Park Dedication Fees.
b. The housing Redevelopers will be required to pay Park Dedication Fees to the City
as well as SAC/W AC charges.
B. Separate Redevelopment Contract. No Changes.
V. Commercial Development, Special Terms.
A. Land Sale bvRedeveloper. Purchase price should be reflected as $4,165,000 or $5.31
sq/ft. The Asbestos grant and Site hnprovement Costs should not be applied as part of
the purchase price, since they are not an acquisition cost paid by the Redeveloper and
are or should be addressed elsewhere in the agreement.
B. Site hnprovements bv Redeveloper or Commercial Developer.
a. The City and Ehlers needs to see and review an itemization of $2,850,000 of
development costs to determine if they are valid reimbursable development
expenses. These costs will not be viewed as a credit against the purchase price of
the land.
C. Liquor Store. Delete. Refer to Section II G.
D. Financing. No Changes.
VI. For Sale Housing Development, Special Terms.
A. Land Sale bv Redeveloper. The City and Ehlers does not agree that $7,500 per unit is a
Fair Market Value for the Land or within the range of other similar projects that have
been recently completed in the Metropolitan Area ill addition, the City and Ehlers will
need clarification on which housing units will pay special assessments for various
improvements and the amount of the special assessment for each housing phase and type
(currently understood that only Phase ill For Sale Housing will pay special assessments).
B. Land Sale bv Authority or Redeveloper. See comments in section above.
John Herman
August 4, 2003
Page 7
C. Road Improvements on 39th Street. No Changes.
D. Financing. No Changes.
VII. Public Assistance and TIF Budget. Leave the amount blank at this time. It will be filled in
when negotiations are completed.
VIII. Tax increment Financing Plan; Other Financing for Public Improvements and Publicly
Assisted Redevelopment Costs.
A. Authoritv/City Grant Applications. No Changes.
B. Commercial Special Assessments. Add clarifying language that the $1.2 million will
be paid up front by the Large Anchor Tenant and that the $500,000 will be assessed in
accordance with Section II E.
C. Housing Special Assessments. The City and Ehlers will need clarification as to the
amount being assessed to the For Sale Housing in Phase IB and the rational as to why
no assessments will be paid by Phase IA housing. If no assessments are to be paid by
Phase IA Housing, then it is assumed that they should pay a higher per unit land
acquisition price that will reflect the total costs being paid by Phase IB Housing.
D. Public ()Pen Space Contribution. It is the City's and Ehlers understanding that the
total park site being developed is approximately 3.4 acres. Of this, 1.7 acres is the
required size of the storm water pond for the commerciallhousing development and
the remaining 1.7 acres is for park trails and other improvements. The City will accept
the 1.7 acres of land as a contribution by the commercial development in lieu of
payment of Park Dedication Fees. However, the City requires payment of Park
Dedication Fees by the housing developments to support development ofthe Park.
E. Tax Increment fmancing. No Changes
a. Admin Fees. No Changes
b. Taxable with Tax Exempt Take Out. The City will only consider subordinating its
5% Admiuistration fees if it is proven that it is needed for coverage.
c. Fiscal Disparities. The City will pay Fiscal Disparities outside the District only if
it is proven by the Redeveloper that it is needed.
IX. Environmental, zoning and Land Use Approvals, Building and construction Permits.
A. Environmental Review. No Changes.
B. Zoning and Land Use Approvals. No changes
C. Building and Construction Permits. No Changes
John Herman
August 4, 2003
Page 8
D. Review of Construction Plans. No Changes.
x. Assignment. The City will approve any assignments under the agreement, which shall not be
unreasonably withheld.
XI. Exclusive Development Rights. This is being reviewed by the City Attorney to ascertain if
all phases of the development will be contained within one Development Agreement.
XII. DefaultlTermination. To be reviewed by the City Attorney.
Please contact me at 651-697-8506 if you have any questions.
cc: Mike Mornson - City Manager
N:\Minnsota\St. Anthony\Northwest Quandrant\Negotiations\Iohn Herman MemO 7-31-03.doc:
.
EHLERS
& ASSOCIATES INC
To:
0
~ From:
LLI
~ Date:
Subject:
Mike Mornson - City Manager
City Council and Housing and Redevelopment Authority (HRA)
Stacie Kvilvang & Sid Inman - Ehlers & Associates
September 17, 2003
Northwest Quadrant Redevelopment - Development Proposal and Terms of
Development Agreement
The Development Team has refined their concept for redevelopment of the above referenced project
area. This concept includes the acquisition and subsequent redevelopment of the following properties:
I - Commercial
Apache Plaza 31-30-23-34-0016 IE - For Sale Housing
I - Rental Housing
Vacant New Market Site 31-30-23-33-0002 I - Rental Housin
Taco Bell 31-30-23-34-0018 I - Commercial
SA V II/Tires Plus 31-30-23-34-0017 I - Commercial
2 Vacant HRA Parcels 31-30-23-34-0014 I - Commercial
31-30-23-34-0019
Vacant Parcel around Taco Bell 31-30-23-34-0015 I - Commercial
Pond behind Cub Foods 31-30-23-31-0028 I - Commercial
Pond Behind Mini Mall 31-30-23-31-0033 I - Commercial
Cub Foods I - Commercial
A ache S uares 31-30-23-33-0001 IA - For Sale Housing
A ache Office 31-30-23-33-0011 IA - For Sale Housing
JA Cadwallader Office 31-30-23-33-0012 IA - For Sale Housin
Bakers Square & Parking Lot 31-30-23-33-0013 IIA - Housing
31-30-23-33-0014
Don'sCarWash 31-30-23-33-0005 IIA - Housing
Firestone 31-30-23-33-0006 lIB - Town Homes
Ed's Carwash 31-30-23-33-0010 lIB - Town Homes
Vacant arcel on Stinson Blvd lIB - Town Homes
Fuel Mart 31-30-23-33-0003 TIC - Housin
Carwash on Stinson Blvd 31-30-23-33-0004 TIC - Housing
LEADERS IN PUBLIC FINANCE
t
Phone,651-697-8506 Fax, 651-697-8555
skvilvang@ehlers-inc.com
3060 Centre Pointe Drive
Roseville, MN 55113-1105
Mike Mornson - Northwest Quadrant Redevelopment
September 17, 2003
Page 2
The Development will be divided into the following three phases:
Phase I Big Box 2004 - 2005 June 1, 2005
Phase I Retail 2004-2005 June 1, 2005 $18.81
Phase I Office 2004-2005 June I, 2005 Million
Phase I SA V II 2004-2005 June 1, 2005
Phase I Market Rate 220 Units 2004-2006 Fall 2004 July I, 2005 $19.8 Million
Apartments
Phase IA Urban Flats 128 Units 2004-2006 Fall 2004 July 1,2005 $30.72
Million
Phase IE Urban Flats 128 Units 2005-2007 Fall 2005 July 1, 2006 $30.72
Million
Phase IIA 80 Units 2005-2007 Fall 2005 July I, 2006 $16 Million
Senior Co-
Phase lIB 26 Units 2005-2006 Fall 2005 July 1,2006 $9.75 Million
3-Story Town Homes
Phase IIC Urban Flats 80 Units 2006-2007 Fall 2006 Jul 1,2007 $19.2 Million
TOTAL N/A N/A N/A N/A $145 Million
Based upon these options, Ehlers and the Development Team have estimated that the cost to acquire all
the land, relocate existing businesses, demolish the structure and complete the public improvements
will cost approximately $16 million for Phase I and $4 million for phase II. To assist in offsetting this
cost, the Developer has proposed the following payment for land and special assessments for the Phase
I Development:
Land Cost
Special
Assessment
$7,589,300
$2,030,000
Total
$1,285,000
$1,600,000
$2,249,940
$9,619,300
The for sale urban flats will be paying an average of $10,000 per unit, but it is divided among the two
phases to allow the initial phase to pay less for land up front to allow the Developer the flexibility to
address any market issues and legal, financing & design issues occur disproportionately in the first
phase. It should be noted that Phase II land prices have not been submitted yet and will be reviewed
and compared to industry standards when our office receives them.
Based upon the above referenced development program, following is a listing of the proposed business
terms for the final Development Agreement:
1. General
a. Parties. The Redeveloper will be one or more single asset entities created by Pratt Ordway
LLC to act as the Redeveloper. Pratt Ordway will assign its purchase agreement for the
Ste. Marie Property and any other property it obtains purchase agreements upon, to this
Mike Mornson - Northwest Quadrant Redevelopment
September 17,2003
Page 3
entity. The Redeveloper will subdivide the redevelopment area and sell various portions of
the property to other entities (in which Pratt Ordway, its principals or affiliates may be
participants, with the exception of the rental housing portion).
2. Tax Increment.
a. Creation of a Redevelopment TIF District. The City and HRA are required to create a
Redevelopment TIF District by September 30, 2003, to assist in offsetting the high costs
associated with redevelopment. It is understood that the City and HRA will be holding
public hearings on the creation of the District prior to this date, but that the City will not
request certification of the District until a Development Agreement is executed.
b. Amount of Increment: Based upon the latest Sources and Uses from the Development
Team, it is anticipated that the Phase I development will generate approximately $13.3
million in present value tax increment. Of this increment, it is anticipated that the
Commercial and For Sale Housing Development Elements will require approximately $7
to $8.5 million to complete the redevelopment and the Rental Housing Developer will
require approximately $2.7 million.
The Sources and Uses Statements and the amount of TIF for Phase II development are in
the process of being compiled.
c. Fiscal Disparities. Fiscal Disparities will be paid inside the district.
d. Administration Expense Allocation. Currently all TIF calculations show 5% of available
Tax Increment being available for administration. To the extent that the development will
require more than 95% of the TIF for actual redevelopment costs or coverage of bonds, the
City may elect to subordinate its 5% administration until the entire development comes on
line (it is anticipated that this will not be required at this time). In the alternative, if there is
excess increment, the City may increase its administration amount to the statutory limit of
10%.
e. TIF Notes. It is anticipated that the Development Team will finance their development
costs up front and that they will request the City to "take them ouf' after the development
is completed through the issuance of Tax Exempt TIF bonds. This is a tool that is ilsed in
many of the metropolitan communities to assist developers with development and is a low
risk proposition for the City, since the developments will be constructed and paying taxes
when the City is issuing these bonds.
3. Public Improvements.
a. Roadwav and Sanitary Sewer Improvements. 39th Avenue will be reconstructed from
Silver Lake Road to Stinson Boulevard and upgrades will be made to the sanitary sewer
lines as well. It is anticipated that it will cost approximately $2.205 million to complete
these improvements and the cost will be assessed to and paid for by the development and
other benefiting properties within the TIF District as follows:
Mike Mornson - Northwest Quadrant Redevelopment
September 17, 2003
Page 4
Large Retailer:
Small Commercial:
Phase IA For Sale Housing:
Benefiting properties:
$1,200,000
$500,000
$325,000
$175.000
Paid up front or completion of roadway
Assessed over term of bonds
Paid at sale of units
Assessed over term of bonds
TOTAL
$2,205,000
The City will most likely be required to sell temporary bonds (I-year call date) to pay for
the construction up front then refinance the bonds once any prepaid special assessments are
received. Any amount in excess of the anticipated amount of $2.205 million will be paid
through Tax Increment generated from the project.
b. Site Imurovements/Onen Space. The Redeveloper will pay for the open space/ponding
and site improvements, which are estimated to cost approximately $1,430,000. They will
be reimbursed by the City and HRA for a portion or all of the site!ponding improvements
through Park Dedication Fees generated from the development (estimated at $205,000),
any grants the City may receive and from Tax Increment. The site improvements may be
phased over a three (3) year period if the City does not receive the $900,000 in LCDA
funds it requested from the Metropolitan Council. The phasing of the site improvements
will allow the Development Team to pay for the improvements as cash becomes available.
The Development will be responsible for the costs associated with maintaining the storm
water ponds and the City will be responsible for maintaining the open space around the
storm water ponds. The City and Redeveloper are currently discussing coordination and
responsibility for the maintenance, etc.
4. Miscellaneous.
a. City Liauor Store. The Redeveloper will construct and furnish a new Municipal Liquor
Store within the commercial development. It is anticipated that the Liquor Store will be
constructed prior to demolition of the existing store so as to cause minimal disruption to
the City's Liquor operation. Since Tires Plus will be required to relocate their business, the
City will work with them to find a suitable site to relocate to. It should be noted that the
City may need to condenm the Tires Plus lease if deemed necessary by the City Attorney.
The Redeveloper will pay the cost to relocate the existing Tires Plus building and the cost
to construct the new Liquor Store, up to an amount not to exceed $1,700,000.
b. Cub Foods. The Redeveloper has a signed purchase agreement for the existing Cub Foods
store for $10,850,000, inclusive of the restrictive property covenants. The Redeveloper
intends to rehabilitate the store to upgrade its appearance to the quality of the new
commercial development. It is estimated the cost of this "face lift" will be $580,000. The
agreed upon purchase price of the store does not allow the Redeveloper to obtain any more
debt on the property.
In addition, the City agrees that absent this sale, the property was "under threat of
condemnation" and would consider taking all necessary actions to acquire the site if the
acquisition had not been negotiated.
Mike Mornson - Northwest Quadrant Redevelopment
September 17, 2003
Page 5
c. Commercial Property Acauisition. The Redeveloper has requested assistance in acquiring
the three commercial properties that the Phase IA For Sale housing units will be located
upon (Apache Squares, Apache Office and JA Cadawallader Office). The Development
Team has had discussions with Fannie Mae to assist in providing the "up fronf' money
needed to acquire these properties. Fannie Mae is willing to provide this assistance but
will require, as collateral, the land, Developer Guarantee and a pledge funds from the City.
Itis anticipated that the City will utilize funds from the Water Filtration Fund to utilize as
collateral for the loan and will not be required to provide its General Obligation Taxing
Authority. The terms of the collateral are still be discussed with Fannie Mae and terms of a
revolving fund for future property acquisitions is still being discussed with the
Redeveloper. Any fmalloan agreement will be brought before the City Council and HRA
for approval.
The Redeveloper will be required to have 20% of the units in the first Phase IA building
sold prior to the City advancing the loan funds from Fannie Mae. m addition the
Redeveloper will need to have obtained the commitment for construction financing for the
Phase IA land prior to advancement of the loan.
d. Profit Sharing on For Sale Urban Flats. The Developer of the For Sale housing units
anticipates a twelve (12) percent profit on the development. Once the Developer obtains
this profit margin, they will provide a prorated "pay back" to the City and HRA of 25% of
the excess profit. If the project profit exceeds fifteen (15) percent, then the City and
HRA's prorated share of the profit will be increased to 50%. It should be noted that the
profit calculations exclude any unit "upgrades" requested by homeowners.
e. Below Market Profit TIT Assistance mcrease. Provided the For Sale Developer is not in
default, in the event the return to the For Sale Developer is less than 12%, the City and
HRA shall provide the For Sale Developer a subordinated Pay-As-You-Go (P A YG) Tax
Increment Note in the amount needed to attain a 12% return. The Subordinated TIF Note
shall be payable solely from the amounts of Available Tax mcrement on the For Sale
Element not utilized to pay the Tax Exempt TIF Refmancing or the CitylHRA 5%
administration, on the For Sale Element (i.e. coverage, inflation or excess TIT). We are
still finalizing negotiations on when the subordinated TIT note would be paid to the
Developer and anticipate we will have it finalized by the September 23, 2003 meeting.
f. Look Back Provision. As an Exhibit to the Development Agreement, a mutually agreed
upon preliminary development proformas for the For Sale Housing and Commercial
Development will be attached. This will be the basis for detennination of assistance for the
developments. When the developments are completed the actual development proformas
will be compared with the preliminary development proformas. If the projects perform
better than anticipated and the For Sale Developer receives their required profit amount of
12% and the Commercial Developer meets their construction and lease goals then the
excess proceeds will be disbursed to the City and HRA as excess TIF and will be made
available for Phase II developments within the TIF District.
Mike Mornson - Northwest Quadrant Redevelopment
September 17,2003
Page 6
g. Rental Housing Development. The City and HRA will enter into a separate redevelopment
contract with the Rental Housing Developer. A separate But-For analysis will be
completed for this portion.
h. Condemnation. The Redeveloper wiU utilize reasonable efforts to acquire all property
privately prior to requesting the City to initiate condemnation, including use, where
appropriate of City sponsored mediation. The City wiU agree to undertake condenmation
of aU real properties located within the Redevelopment District, including any leaseholds,
easements, restrictive covenants or other or other legal or equitable interest that encumber
the Redevelopment District and would restrict redevelopment as contemplated.
Condemnation shall be undertaken on a schedule mutually agreed to between the
Redeveloper and the City.
All costs of condemnation proceedings, including, but not limited to legal fees, filing fees,
costs, appraisal fees and title work, shall be paid by the Redeveloper, subject to
reimbursement of certain costs as a public redevelopment cost from Tax Increment in
accordance with the Redevelopment Agreement. The Redeveloper shall enter into a
Reimbursement Agreement with the City to reimburse the costs of condemnation proceeds,
condemnation awards and relocation as incurred for acquisition of the Phase I property.
i. Advancement and Reimbursement to Redeveloper. The Redeveloper has reimbursed and
agrees it will in the future continue to promptly reimburse the City and HRA for aU costs
of the City and Authority in advancement of the Project, including but not limited to the
costs of the City Consultants, financial analysis of the Project and the Tax Increment Plan,
Redevelopment and TIF District analysis and creation, legal fees, survey and title costs,
environmental review costs, environmental site investigation costs and other similar. costs.
The Redeveloper wiU be reimbursed for these costs and costs associated with acquiring and
holding the Apache Plaza property and other overhead as a qualified Tax Increment cost in
an amount that is currently estimated to be $2,645,000 and individually listed as follows:
Predevelopment Costs (publiclPrivate):
Apache Mall Holding Costs
Apache Capitalized Interest:
Developer Overhead! Administration
Redeveloper Capitalized Interest - Project Costs:
$1,250,000
$355,000
$100,000
$590,000
$350.000
TOTAL
$2,645,000
The Redeveloper shaU cost certify aU such private third party costs and expenses of the
developer to the reasonable satisfaction of the City and HRA. Any cost savings will be
considered available Tax Increment for other qualified costs in the Redevelopment District.
J. Redeveloper Incentive Payment. Any costs savings by the Redeveloper on negotiating the
purchase, relocation (only due to non statutory payments) and demolition of the three
commercial properties for the Phase IA For Sale Housing component wiU be used to first
cover any overruns in any other Redeveloper category and second shall be paid one-half to
the Redeveloper and one-half shall be available to the City and BRA for other public
Mike Mornson - Northwest Quadrant Redevelopment
September 17,2003
Page 7
redevelopment costs. The Incentive Fee will not be payable to the Redeveloper if he is in
default under the Redevelopment Contract.
k. Grants. The City and HRA will provide the Redeveloper with the $586,000 grant it
received from the Metropolitan Council for the Asbestos Abatement at Apache Plaza. The
City and HRA will use it's best efforts to obtain LCDA and Tax Base Revitalization grant
funding and any other available funding from Metropolitan, Sate and Fedeml Sources.
1. Master Redeveloper Fee. The Master Redeveloper will be paid a $1 million fee for the
Phase I development. The fee will be paid as follows:
Rental Housing Sale:
Commercial Sale:
For Sale Housing Sale:
$500,000
$300,000
$200,000
The Redeveloper will be paid at the time of the closing of the land sale to each project
element. At the land sale closing, one-half of the fee will be paid to the Developer and one-
half of the fee shall be deposited with the City/HRA, until the City/HRA has received
$250,000 as security against defaults and for Phase II of the project. The City/HRA may
use this $250,000 to fund public redevelopment costs on an interim basis until payable to
the Redeveloper. No interest shall be paid by the City/HRA on this fee. If the Redeveloper
defaults in any fashion of the Redevelopment contract, all Redeveloper Fee Hold Back shall
be forfeited to the City/HRA. The Redeveloper shall be paid hack the Hold Back Fee upon
the earlier to occur of the following: a City/HRA decision not to proceed with Phase II, a
determination by the City/HRA to proceed with Phase II with a developer other than
Redeveloper or as follows: $125,000 upon commencement of construction ofthe Phase IIA
and $125,000 upon commencement of the Construction of Phase lIB by the Redeveloper.
m. Default. In the event that the Redeveloper fails to commence an Element of the Project by
the default dates set forth in the chart on page 2 of this memorandum, the City and HRA
may terminate its obligations under the Redevelopment Contract as regards that Element of
the Project.
Upon any tennination, Tax Increment from portions of the Project, which have not been
commenced, shall, at the election of the City and HRA, no longer be pledged and available
to repayment of any "pay as you go" tax increment. As part of the underwriting process,
the parties and the underwriters, shall establish the terms of any Tax Increment obligations
to both recognize this provision and allow effective issuance of the debt. Tax Increment
from completed and under construction Elements of the Project shall remain available for
outstanding Tax Increment debt. A default shall not prevent refinancing with Tax Exempt
Take-out Debt on completed Elements of the Project.
n. Assignment. The Redeveloper may create and assign its development rights and the right
to enter into the Redevelopment Contract to a single purpose entity to undertake the
Project, without the consent of the City and HRA, provided Len Pratt and John Ordway
continue to hold a majority voting interest in the new entity. The Redeveloper may
thereafter assign portions of the rights and obligations under the Redevelopment Contract
to the Commercial, Rental and For Sale Developers, with the consent of the City and HRA,
which shall not be unreasonably withheld.
o. Land Purchase Price. Purchase price of land for each use will be reviewed and must be
shown to be at market and similar to what other projects are paying.
Mike Momson - Northwest Quadrant Redevelopment
September 17, 2003
Page 8
p. "But For" Analvsis. Ehlers recommends that prior to final determination of Tax Increment
assistance that will be provided that a "But For" analysis be preformed to ascertain
appropriate level of assistance.
The elements of this transaction are within industry standards that Ehlers and Associates have seen
within the Metropolitan Area on these types of developments. At this time, we anticipate that a final
Development Agreement will be brought before the City Council and HRA in October for
consideration and approval. Please contact Sid Inman or I at 651-697-8500 with any questions.
cc: Jeny Gilligan - City Attorney
File