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HomeMy WebLinkAbout2012-09-05 PACKET 08.A.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM# CP DATE 9/5/2012 u* PREPARED BY: Administration Ryan Schroeder ORIGINATING DEPARTMENT DEPARTMENT HEAD COUNCIL ACTION REQUEST: Consider approving the first amendment to the development agreement with Stonehenge Development LLC. STAFF RECOMMENDATION: Approve the amendment. ADVISORY COMMISSION ACTION: DATE ❑ PLANNING ❑ PUBLIC SAFETY ❑ PUBLIC WORKS ❑ PARKS AND RECREATION ❑ HUMAN SERVICES/RIGHTS Z ECONOMIC DEV. AUTHORITY 8/14/12 F SUPPORTING DOCUMENTS: REVIEWED APPROVED DENIED ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ 1:1 ❑ ❑ z ❑ ❑ ❑ ❑ E MEMO/LETTER: Memo from Ryan Schroeder. F RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: F LEGAL RECOMMENDATION: M OTHER: Attachments. ADMINISTRATORS COMMENTS: Z AOill\ ity Administrator Date COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED FIOTHER Document2 City of Cotta Grove Minnesota To: Honorable Mayor and City Council Members From: Ryan R. Schroeder, City Administrator Date: August 22, 2012 Subject: First Amendment to Stonehenge development agreement El At their meeting of August 14, 2012 the EDA approved amendments to the existing agreement with Stonehenge LLC toward redevelopment of the Home Depot redevelopment. The amendment clarifies pooled versus non - pooled tax increment and amends the required real estate and project completion dates (to October 31 and June 30 respectively). The EDA approval was of deal point concepts. In front of Council at this time is the agreement, drafted by the City Attorney, which memorializes those points within a recordable document. It is requested that the Council ratify the prior approval of the EDA. Council Action: By motion approve the first amendment to the development agreement with Stonehenge Development LLC To: Economic Development Authority From: Ryan R. Schroeder, City Administrator Date: August S, 2012 Subject: Home Depot Redevelopment On May 8, 2012 the EDA approved the major deal points for a development agreement with Stonehenge toward redevelopment of the vacant Home Depot property. On May 16, 2012 the City Council approved the development agreement that resulted from the EDA action. The agenda items and minutes from each of those meetings are attached for your review as is the approved development contract. At this time we are recommending amendments to the development contract. Upon positive EDA consideration the Council would be asked to approve these amendments at their meeting of August 22, 2012. Proposed changes relate to the following: 1. Extension of the Real Estate Closing Date 2. Extension of the Completion Date 3. Clarification on Assignment 4. Clarification of Pooled Increment 5. Clarification of Minimum Disbursements Real Estate Closing Date Within the current agreement article 3.1 is the requirement for an August 31, 2012 Closing Date. The purpose of this date is to provide assurance to the City that the project will maintain a schedule that provides the opportunity to meet requirements for project completion and eligibility for the contemplated TIF subsidy. The developer has requested that the date be extended to October 31, 2012. The developer has also expressed confidence that the extension will continue to provide the opportunity to comply with audit requirements for expenditures and TIF eligibility. We recommend this change. 2. Extension of Completion Date Within the current agreement article 4.4 we set an arbitrary date of April 1, 2013 to provide for project completion, again to assure that construction progress is maintained. The developer has requested a June 30, 2013 completion date. We recommend this change. 3. Clarification of Assignment Within the current agreement article 8 (8.1 and 8.2) it is contemplated that the EDA restricts the opportunity to assign rights of the developer until after receipt of a certificate of occupancy. The developer has informed us that as part of their financing commitments they intend to take on an equity partner. The developer has requested the ability to do so without further action of the EDA Board. We recommend this change. 4. Clarification of Pooled Increment Within the current agreement under definitions (page 3) and also article 3.2.b and 3.2.f there is the provision that pooled increment may be spent beyond December 31, 2012. The amount adjudged within the agreement is $500,000 when in fact the actual amount of pooled increment is somewhat greater than that amount. The developer has requested clarification of the actual amount of pooled increment and a change in the $500,000 to the extent that actual pooled increment will exist in a greater amount. Use of the $500,000 was to ensure that the City did not commit to a number greater than the actual number (as a conservative approach). To the extent that pooled increment is greater than $500,000 we are comfortable using that number as approved by our fiscal consultant. Upon that clarification we would recommend this change. 5. Clarification of Minimum Disbursements The basis of the entire agreement as it relates to use of non - pooled tax increments is to ensure that the project incurs sufficient expenditures by year end to qualify for reimbursement of Jobs Bill /Stimulus tax increments. As noted in #4 above in order to accomplish this requirement $3.6 million in project costs must be incurred prior to year end. Therefore we are suggesting changing the $5.4 million requirement in 3.2.e be changed to $3.6 million. At the same time it has been noted that the cost sharing agreement in 3.2.d and 3.2.e refers to "contributions" by the developer when in fact it was intended to be "expenditures" by the developer in reference to the $5.4 million (now proposed at $3.6 million). We recommend these changes. Board Action: Recommend Council approval of the development agreement changes pursuant to the above. re. FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT By and Between COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY and STONEHENGE DEVELOPMENT, LLC This document drafted by: KENNEDY & GRAVEN, CHARTERED 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, MN 55402 (612) 337 -9300 409585 RSB CT165 -45 FIRST AMENDMENT TO CONTRACT FOR PRIVATE DEVELOPMENT This First Amendment to Contract for Private Development (the "First Amendment "), is made this day of 2012, by and between the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota (the "Authority ") and Stonehenge Development, LLC, a Minnesota limited liability company (the "Developer"). WITNESSETH: WHEREAS, the Authority and the Developer entered into that certain Contract for Private Development dated 2012, and recorded as document no. on , 2012, in the Office of the County Recorder, Washington County, Minnesota (the "Development Contract ") regarding the land legally described in Exhibit A attached hereto (the "Development Property"); and WHEREAS, the Authority and the Developer wish to amend the terms of the Contract as specified herein. NOW, THEREFORE, in consideration of the covenants and the obligations contained herein, the Authority and the Developer hereby agree as follows: 1. Section 1.1 of the Contract is amended by deleting the definition of Pooled Increment and by inserting the following in its place: "Pooled Increment" means $648,000 in Tax Increment which has previously been paid to the Authority's TIF Districts 1 -1 and 1 -3 and which has been determined by the Authority's fiscal advisor to be available for use in accordance with the requirements of the TIF Act applicable to districts for which certification was requested prior to April 30, 1990. The Pooled Increment is part of the $1,800,000 in Spending Plan Increment and is not in addition to said amount. 2. Section 3.1 of the Contract is amended by deleting the date August 31, 2012, and inserting the date October 31, 2012, in the first sentence. 3. Section 3.2(b) of the Contract is amended by deleting the second sentence thereof and by inserting the following sentence in its place: Subject to determination by the Authority's fiscal advisor, up to 5648,000 of Spending Plan Increment may be recharacterized as Pooled Increment in accordance with this Agreement. 4. Section 3.2(d) of the Contract is amended by deleting the first sentence thereof and by inserting the following sentence in its place: 409585 R14B CT165 -45 (d) The Disbursement Agreement shall provide that any Advance required to be made by the Authority shall not exceed $1.00 for each $2.00 contribution by the Developer to project costs. 5. Section 3.2(e) of the Contract is amended by deleting the second sentence thereof and by inserting the following sentence in its place: Satisfactory Progress means the Developer shall have completed by the above date a sufficient portion of the Minimum Improvements so that the value of the Minimum Improvements at that time, plus the cost of acquisition of the Development Property, is equal to no less than $3,600,000. 6. Section 3.2(f) of the Contract is amended by deleting it in its entirety and by inserting the following in its place: (f) Subject to determination by the Authority's fiscal advisor, the Authority has identified $648,000 of the Spending Plan Increment as also being Pooled Increment. Pooled Increment may be spent by the Authority after December 31, 2012. If the Developer has made Satisfactory Progress by December 20, 2012 and if there has been no Event of Default on the part of the Developer by that date, the Authority, at its sole option, may fund some or all of its remaining obligation towards the Qualified Costs out of money it recharacterized as Pooled Increment rather than Spending Plan Increment. This does not alter the Authority's obligation under this Agreement but relates solely to whether it uses Pooled Increment or Spending Plan Increment to meet its obligation. Payments out of Pooled Increment made after December 31, 2012 will be made on the same ratio of $1.00 of Authority Advance for each $2.00 of Developer contribution and under all other terms and conditions applicable to Advances made by the Authority from Spending Plan Increment. 7. Section 4.4 of the Contract is amended by deleting the date April 1, 2013, and inserting the date June 30, 2013, in the first sentence. S. Section 8.2(b) of the Contract is amended by deleting the first sentence thereof and by inserting the follow sentence in its place: (b) The Developer may transfer or assign any portion of the Development Property or the Minimum Improvements or the Developer's interest in this Agreement without the consent of the Authority (i) at any time with respect to a transfer or assignment to any person or entity that is affiliated with the Developer, its partners (limited or general) or any officers, director or shareholders of any of its partners or (ii) at any time to an entity in which the Developer is a joint venturer provided that the joint venture entity is bound by all the Developer's obligations remaining under this Agreement, including compliance with the Business Subsidy Act and under the Assessment Agreement 409585 RHB CT165 -45 2 or (iii) after issuance of the Certificate of Completion for the Minimum Improvements on the Development Property with respect to a transfer or assignment to any other person or entity provided that the transferee or assignee is bound by all the Developer's obligations remaining under this Agreement, including compliance with the Business Subsidy Act and under the Assessment Agreement. 9. Section 9.2 of the Contract by deleting the last paragraph thereof in its entirety and by inserting the following paragraph in its place: Notwithstanding anything herein to the contrary, i) failure to commence work on the Minimum Improvements before July 1, 2012 is an Event of Default not subject to the 30 -day cure period above and renders this Agreement null and void, ii) failure by the Developer to acquire the Development Property in fee by October 31, 2012, renders this Agreement null and void unless the Developer has received any Spending Plan Increment, and iii) the Authority shall have no obligation to expend any Spending Plan Increment on assistance to the Developer after December 31, 2012 unless, prior to said date, the Authority's legal authorization to do so is extended by state law and subject to the Authority's option to utilize Pooled Increment after that date to satisfy its obligation to the Developer as noted in section 3.2(f) of this Agreement. 10. Except as specifically noted in this First Amendment, the Contract shall remain in full force and effect. 409585 RHB CT165 -45 3 IN WITNESS WHEREOF, the Authority and the Developer have caused this First Amendment to be executed in their names and on their behalves as of the date first above written. COTTAGE GROVE ECONOMIC DEVELOPMENT AUTHORITY By: Its President By: Its Executive Director STATE OF MINNESOTA ) ss. COUNTY OF ) The foregoing instrument as acknowledged before me this day of 2012, by and president and executive director, respectively, of the Cottage Grove Economic Development Authority, a public body corporate and politic under the laws of Minnesota, on behalf of the Economic Development Authority. Notary Public 409585 RHB CT16545 4 STONEHENGE DEVELOPMENT,LLC, A MINNESOTA LIMITED LIABILITY COMPANY Its: STATE OF ) ss. COUNTY OF The foregoing instrument was executed this of day 2012, by ' the of Stonehenge Development, LLC, a Minnesota limited liability company, on behalf of the limited liability company. Notary Public 409585 RHB CT16545 5 EXHIBIT A LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY The Development Property is located in Washington County, Minnesota and is legally described as follows: Lot 2, Block 1, Grove Plaza 2 Addition 409585 RHB CT165 -45 A -1