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Home My WebLink About2010-12-15 PACKET 04.B.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM# Zj DATE 12/15/2010 0 1w-wiviv Administration 191MM- I O N I lyl IQ 0 1 E I W NJ COUNCIL ACTION REQUEST: Consider ratifying the EDA action regarding the Norris Square Minimum Assessment Agreement. STAFF RECOMMENDATION: Ratify the EDA action. SUPPORTING DOCUMENTS: Z MEMO/LETTER: Memo from Ryan Schroeder. ❑ RESOLUTION: ❑ ORDINANCE: [-] ENGINEERING RECOMMENDATION: F LEGAL RECOMMENDATION: Z OTHER: Attachments. ADMINISTRATORS COMMENTS: City Administrator Date COUNCIL ACTION TAKEN: SdAPPROVED El DENIED FlOTHER I City of ti Cottage • VI Minnesota To: Honorable Mayor and City Council Members From: Ryan R. Schroeder, City Administrator Date: December 9, 2010 Subject: Norris Square Minimum Assessment Agreement On December 14, 2010 staff is requesting the EDA consideration of an amendment to the Minimum Assessment Agreement (MAG) for the Norris Marketplace property. Essentially, the requested action is to continue to provide the floor for the commercial portion of the property at the same level as payable 2011 for taxes payable 2012. Upon the belief that the EDA will in fact take that action we are asking for Council ratification of that same action so that we can file the paperwork with the County prior to year end. The EDA packet materials are enclosed for your review. Council Action: By motion ratify EDA action regarding the Norris Square Minimum Assessment Agreement City of Cott aqe G rove Minnesota Toe Economic Development Authority From: Ryan R. Schroeder, City Administrator Date: December 8, 2010 Subject: Norris Square /Marketplace Minimum Assessment Agreement On January 12, 2010 the EDA approved amendments to the then existing Minimum Assessment Agreement (MAG) on the Norris Square and Marketplace properties. The agenda item for that action item is enclosed for your review. The change was for one year, tax year payable 2011. At this time we are asking the Board to grant an approval for another year, payable 2012. The rationale is the same as in January, effectively that no forward progress has been made on the Marketplace portion of the project and we do not believe the Board would wish to place an undue burden upon future prospects of that development. It should be noted in this additional consideration that the project was a "pay as you go" project. Different from many others within which the City participates, this developer provided for all of the upfront expenses and is reimbursed toward those expenses out of TIF that their project generates. If no TIF is generated they do not realize a benefit of their project. If TIF is generated the EDA realizes the first dollar benefit and then the Developer recovers TIF toward expenses after that. We have included some financial information that demonstrates all of this. Enclosed is an itemization of expenses generated by the developer to acquire and prepare the land. In total, their acquisition costs comprised $9,022,885 or a per square foot cost of $14.29. To put that into perspective the current taxable market value of the 7 acre commercial portion of this property is at $1,620,400 or about $5.31 /square foot. The rationale for the initial investment by the EDA via TIF reimbursement was to pull the land cost down to about $12 /square foot. There are additional e discussion beyond the requested MAG action. First, the EDA has provided notice to the developer r in default of the development agreement. The result of that action is that we are not contractually obligated under the agreement to r # the developer for generated. A## a do not have an obligation to the developer to provide payments under a separate note that provides their bond holders with sufficient debt coverage ratios. Under that note, had the development not gone into technical default, we would be obligated to pay: 2010 $205,000 2011 $140,000 2012 $ 73,000 2013 $ 15,000 Under the TIF portion of the note we are obligated to reimburse 90% of the TIF generated over $4.1 million in taxable market value. TIF was generated in 2009 and 2010 and will be generated in 2011 and thereafter through 2024. The developer is requesting reimbursement of the TIF revenues given that they completed a substantial portion of the project. Minimally, they submit that they are entitled to at least a pro - rata share of generated TIF. We are requesting direction on that question. The options include: 1. Denial of the request on the basis of the project default. Of note is that any TIF generated prior to the default may be an obligation of the EDA 2. Provide for a pro -rata share of the TIF generated based upon the level of development generated. In this case we could use either market value generated or tax capacity generated. We would recommend the later. 3. Provide for a reimbursement of generated TIF as if there was no default. We are not recommending this approach. Recommendation: Provide direction on TIF reimbursement approach We should discuss reevaluation of the development scenario. At this point there are 7.5 acres dedicated to housing and 7 acres proposed for future commercial development. It has been suggested that there might be an interest in a high acuity care facility of 40 to 60 units (2 acres ?) retaining the balance for future commercial. Norris Marketplace 120810 TIF District 1-12 All parcels Pay 2003 Total Net Tax n/a Total TIF Total Taxable Capacity 163,368 Received - Market Value $ Retained 277,963 District Pay 2003 n/a n/a $ 80,401 Pay 2004 n/a 163,368 174,864 Pay 2005 $ 26,603,600 277,963 282,349 Pay 2006 $ 32,953,500 335,458 324,043 Pay 2007 $ 31, 508, 010 391,157 376,810 Pay 2008 $ 30,829,100 380,578 360,900 Pay 2009 $ 47,678,100 607,344 568,396 Pay 2010 $ 55,533,700 762,563 742,076 $ 2,909,839 E O an cu Ln VI 4-J < f cc B cz V) 0 OEW O Ln Fj a 9 75 E 4-+ -0 (U C: 0) j� u 4 X N w " 4- ai 0 = c m 0 > -0 N > 0 4- a 4+ cu E N G! cu 4+ W 0 OD dJ E CL 0 > w 00 r1 s - 0 - 0 CU cu z U > ,u 0 U- o r- 0 00 0 4� 0 M C4 = -0 cr C m • ( 0 0 0 CD 0 0 0 0 >- m ro U- 00 C) 0 0 0 0 a 00 4 6 6 C5 C5 (.6 0 0 0 0 C4 rq ll*� Lr� r4 N ffi C� C� �, cu H o H CN a) r- rn 0 m 4� O rq r14 CO m C'J Q0 Ln I H rn I-q 4 r-I ( (Y) 0 0 I;t CD 00 0 w C 00 C rn 0 00 0 0 I ci Gi � C� ` oc� ll� a C� rl� l ll� O 00 a "D a) Ln H 1*1 0 cn rn cn -zt .�: -zt N r, M H r, w H r• C m -q r -;t r r*4 SZ 06 6 • -tF rr� H rq 0 1-1 C U) 0 00 0 t 0 0 1 .0 0 H 0 r1i CN 6 0 6 cyi 6 ryi C5 r• LL 0 r1i c a) 0 Ln 0 Q0 0 Ln co rq 0 w 00 ct C) d 1� -zF a� a� O N C) N r- 0 H r- m ko I CO a) H H H H ry� r- 0 Ln 0 H 0 m O a) 0 Ln 0 w 0 -q 00 C5 cyi ci Gi C5 C3 6 0 0 0 0 r c a) 0 00 O cn C w co m 0) (N CO 0 00 lo co �t 00 -1 V) 00 00 H 00 N m CL 0 r14 C) I-z ry� 0 00 0 rN 0 Ln C m 0 cn r" ci 1.6 C5 .4 6 ci C o a) 0 N C rq 0 0) m H M 0 fl- CN I I r*.j C*4 r4 N -;t CL r- t cl � rq Q) cu (U LL U u > P= aj Q) Q) 70- Ri - R - Fu 4� 0 + 0 It Ln a) 0 r4 c 4 li Vi ri o6 06 00 r-I H H O Ln Fj a 9 75 E 4-+ -0 (U C: 0) j� u 4 X N w " 4- ai 0 = c m 0 > -0 N > 0 4- a 4+ cu E N G! cu 4+ W 0 OD dJ E CL 0 > w 00 r1 s - 0 - 0 CU cu z U > ,u 0 U- o r- 0 00 0 4� 0 M C4 = -0 cr C m • ( 0 1--1 rq m et In Co rl w ro U- 00 C) 00 4 N (.6 -zt ( r4 C4 rq r4 r4 r4 N N (.0 C r- r- (N cy� 4 r-I ( (Y) 0 U I I I � CY) 00 a "D a) Ln .�: -zt (.0 • r-I 6 • Lr� Lr) r r1l -4 CN LL m 0 1--1 rq m et In Co rl w (N r1l r4 C4 rq r4 r4 r4 N N 4� L) m 4 C: 0 U � I:L O1 • • m 0 1--1 rq m et In Co rl w (N r1l r4 C4 rq r4 r4 r4 N N 4� L) m 4 C: 0 U � I:L O1 CL rR 1! Ul \ \ . .,:�\ \ 1 I J L 6 Fil 171 Cottage Land & Additional Costs to Prepare Land For Development ITINTON Mall Parcel B $ 431,912 Mall Parcel A $ 4,113,681 Goodyear $ 1 BP Amoco $ 1,218,227 y : Relocation Costs $ 622,913 Tenant Lease Terminations $ 640,610 in Moy's $ 10,000 Mny's $ 5,029 Human Services $ 20.000 T&MJohnsnn $ 20.000 Bulletin License $ 20.008 Home Building $ 20.000 La Pooch $ 20.000 East Suburban $ 20.080 A&BCompubern $ 20.000 Dance byKris $ 39.170 Park Grove $ 3.150 Inver Hills CC $ 1.583 Stone Soup $ 24.896 Tom K8nyCnf6 $ 4.924 Synder'o $ 200,000 VVUmooDev $ 430 City nf Cottage Grove $ 2.339 City of Cottage Grove $ 710 VN|nnnDev. $ 229 City of Cottage Grove $ 0 VVi|aonDev. $ 48 City of Cottage Grove $ 4.550 VVi|munDev. $ 513 City of Cottage Grove $ 9,381 Leonard O`Brien $ 1.800 VV||oonDev. Total TuDate $ 27,255 Moy'sRoloomtion $ 45,076 Dance hy Kris Relocation $ 25/00 NVV Publications Relocation $ 20,000 Park Grove TVRelocation $ 16.850 Owner Build Homes Relocation $ 20l00 Stone Soup Relocation $ 20.000 New Moon Restaurant Relocation $ 20.880 �� Lease Buyouts May's $ 25,110 Past Suburban $ 11,000 New Moan $ 17,000 Demori's $ 1 80,000 Synder's $ 375,000 Fraternal Order of Police Lodge $ 20,000 Mendota Valley Amusement $ 12,500 E The EDA has been on notice of the need to provide for amendment to the existing redevelopment agreement and minimum assessment agreement (MAG) regarding the Norris Square and Marketplace developments. This "need" results due to the current status of the development agreement as being in default due to the lack of build out of the commercial portion of the project. Staff continues to work toward proposed amendments but we are not yet prepared to provide a recommended document at this time. However, we would propose that the Board consider amending the MAG as it relates to taxable market values for pay 2011. Currently, the minimum market value by agreement for the commercial portion of the development agreement is $8,725,000 (18.027.21.11.0049) with the residential portion at $13,900,000 for a total of $22,625,000 (18.027.21.12.0094). Additionally, the former BP Amoco and Goodyear parcels have been combined with a taxable value for pay 2011 of $562,300 (18.027.21.11.0050). Absent the MAG the County has informed us that the pay 2011 value for the residential parcel (Norris Square) would be $14,127,300 while the commercial parcel would be $1,620,400. The BID/Goodyear parcel is as noted above as it has been outside of the MAG. Given that these are County determined market values we are proposing the EDA adopt an interim amendment to the MAG with each of these values (including the former BP/Amoco) as the minimum values for pay 2011. The effect of such an action, if adopted and agreed to by the parties is: If t .-' he EDA is inclined to allow for a reduction in taxable market value that change needs to occur t ccur in time for the County to make the appropriate adjustment. It is likely that a decision at the January meeting is necessary for that to occur. Recommended Board Action: Amend the PHM/PHS minimum assessment agreement include minimum market values for taxes payable 2011 as follows: 1. 18.027.21.12.0094: $14,127,300 2. 18.027.21.11.0049 $ 1,620,400 3. 18.027.21.11.0050 $ 562,300