IP #971Request for Action
May 14, 2018
Approved by: Kirk McDonald, City Manager
Originating Department: Community Development
By: Aaron Chirpich, CD Specialist
Agenda Section
EDA
Item Number
6
Agenda Title
Resolution approving assignment of tax increment note from Industrial Equities, New Hope, LLC to trustees
of John N. and Rebecca B. Allen 2012 family trust (improvement project no. 971).
Requested Action
The developer of the Industrial Equities New Hope project has requested an assignment of the tax increment
note that was issued by the city as part of the agreement for the redevelopment of 9449 Science Center Drive.
The requested assignment will transfer future TIF payments to a trust fund established by the developer
rather than the corporation that was originally designated in the redevelopment agreement. Staff requests the
EDA approve a resolution approving an assignment of the tax increment note.
Policy/Past Practice
The terms of the tax increment note establish the right of Industrial Equities, New Hope, LLC to assign the
tax increment note. The request for assignment has been reviewed by Martha Ingram, the city's public
finance attorney, and found appropriate.
Background
In early 2015, Industrial Equities purchased the vacant and distressed industrial building located at 9449
Science Center Drive with the intent of redeveloping the site. Shortly after acquisition, the owner approached
the EDA with a request for TIF assistance to pay for demolition, abatement, and soil corrections on the site. In
November of 2015, the EDA agreed to support the project by providing $370,000 of TIF assistance.
Subsequently, the Industrial Equities TIF district was established and the project was completed.
Since completion of the project in January of 2017, the building has sat vacant. However, the developer/owner
has recently reached an agreement with Twin Cities Acoustics to lease 2/3 of the 48,000 s.f. building. As part
of the agreement, Twin Cities Acoustics will actually acquire a partial ownership stake in the building. This
ownership stake has prompted the request for assignment of the tax increment note, as the current owner
would like to separate the note under the new ownership arrangement.
Twin Cities Acoustics is a family-owned and operated business that was established in 1972. The company is
currently located in Plymouth, and plans to locate their headquarters to New Hope while retaining their
location in Plymouth. The company is a provider and installer of acoustical materials for the construction
industry. The company has worked on many notable projects including:
• Excel Energy Center
• Minneapolis Convention Center
• U.S. Bank Tower
• University of Minnesota Molecular and Cellular Biology Building
• MSP International Airport Concourse expansion
I:\RFA \COMM DEV \ Development\Q & R Industrial Equities TIF Note Assignment 5-14-18 Project 971.docx
Request for Action, Page 2
Recommendation
Staff recommend that the EDA approve the attached resolution authorizing the assignment of the tax
increment note.
Attachments
• Resolution
• Assignment
EDA RESOLUTION NO. 18-07
RESOLUTION APPROVING ASSIGNMENT OF TAX
INCREMENT NOTE FROM INDUSTRIAL EQUITIES -
NEW HOPE, LLC TO TRUSTEES OF JOHN N. AND
REBECCA B. ALLEN 2012 FAMILY TRUST
(IMPROVEMENT PROJECT NO. 971)
BE IT RESOLVED BY the Board of Commissioners ("Board") of the Economic Development
Authority in and for the City of New Hope, Minnesota (the "Authority") as follows:
Section 1. Recitals.
1.01. The City of New Hope (the "City") and the Authority have heretofore approved
the establishment of the Industrial Equities Tax Increment Financing District (the "TIF District")
within the Authority's New Hope Redevelopment Project No. 1 (the "Project"), and have
adopted a tax increment financing plan for the purpose, among other things, of financing a
portion of the qualified costs of certain improvements on real property within the Project (the
"Redevelopment Property") to be developed by Industrial Equities - New Hope, LLC (the
"Redeveloper").
1.02. The Authority and the Redeveloper have executed a Contract for Private
Redevelopment, dated as of December 21, 2015, as amended by a First Amendment thereto dated as
of May 23, 2016 (as so amended, the "Contract"), whereunder the Authority pledged Available Tax
Increment to pay or reimburse the cost of certain Site Improvements (as such terms are defined in
the Contract) incurred by the Redeveloper in connection with the development of the Minimum
Improvements on the Redevelopment Property.
1.03. The Authority duly issued its Limited Revenue Tax Increment Note (Industrial
Equities -New Hope LLC Project) (the "Note") to the Redeveloper on March 16, 2017.
1.04. The Redeveloper has requested that the Authority consent to an assignment of the
Note from the Redeveloper to the Trustees of the John N. and Rebecca B. Allen 2012 Family
Trust (the "Assignee"), as authorized pursuant to the terms of the Note and the Authority's
Resolution No. 15-25, authorizing the issuance of the Note (the "Note Resolution"), and has
presented an Assignment of Limited Revenue Tax Increment Note (the "Assignment") to the
Board for its consideration and approval.
Section 2. Assignment Approved.
2.01. The Assignment as presented to the Authority is hereby in all respects approved.
2.02. The Board hereby directs the Executive Director of the Authority, as Note
Registrar, to register the assignment of the Note to the Assignee in the register for the Note, as
authorized pursuant to Section 3.02(a) of the Note Resolution, and to take all other actions
necessary to evidence the assignment of the Note to the Assignee.
521144v 1 MN1 NE395-2
Adopted by the Board of Commissioners of the Economic Development Authority in and
for the City of New Hope, Minnesota, this 14th day of May, 2018.
President
ATTES=:, -
Executive Director
521144v MNI NE395-2
PW
ALLONGE TO $370,000.00 LIMITED REVENUE TAX INCREMENT NOTE
(INDUSTRIAL EQUITIES — NEW HOPE, LLC PROJECT), DATED MARCH 17,
2017, ISSUED BY THE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
TO INDUSTRIAL EQUITIES — NEW HOPE, LLC, A MINNESOTA LIMITED
LIABILITY COMPANY, AS ORIGINAL OWNER
NOTE ENDORSEMENT
Endorsed to the order of the Trustees of the John N. and Rebecca B. Allen 2012 Family
Trust, the current Trustees of which are Neil Polstein, Brian P. Mark, and Stephen Slyce.
521149v2 MNI NE395-2
ENDORSER:
INDUSTRIAL EQUITIES — NEW HOPE, LLC
By: 04���
Jo en, Chief Manager
Dated as of March 13, 2018
I of 1
ASSIGNMENT OF WMED REVENUE TAX INCREMENT NOTE
THIS ASSIGNMENT, made as of this 13th day of March, 2018, by and between
INDUSTRIAL EQUITIES — NEW HOPE, LLC, a Minnesota limited liability company
("Assignor") and TRUSTEES OF THE JOHN N. AND REBECCA B. ALLEN 2012
FAMILY TRUST, a Minnesota trust ("Assignee").
RECITALS:
A. Assignor is the owner of that certain $370,000 Limited Revenue Tax
Increment Note (Industrial Equities — New Hope, LLC Project), issued by the
New Hope Economic Development Authority (the "Authority") on March lb,
2017 (the "Note"), and has full right, title and interest in receiving any and all
Available Tax Increment (as defined in the Note) payable on the Note,
pursuant to that certain Contract for Private Redevelopment by and between
the Authority and the Assignor, dated as of December 21, 2015, as amended
by a First Amendment thereto dated as of May 23, 2016 (as so amended, the
"Contract').
B. Assignor desires to assign said Note to Assignee.
C. Assignor is authorized to assign the Note to Assignee subject to the
requirements set forth in paragraph 11 of the Note and Section 3.02(6) of the
Authority's Resolution No. 15-25, authorizing execution of the Contract and
issuance of the Note.
NOW, THEREFORE, IN CONSIDERATION OF One Dollar ($1.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Assignor does hereby grant, transfer and assign to Assignee, all of its right,
title and interest in and to said Note as of the date set forth hereinabove.
521141vi MNl NE395-2
IN WITNESS WHEREOF, the parties have executed this Assignment, using counterpart
signature pages, as of the date first indicated above.
INDUSTRIAL, EQUITIES — NEW HOPE, LLC
("ASSIGNOR")
By:
John
Its: Chief Manager
TRUSTEES OF THE JOHN N. AND REBECCA B. ALLEN 2012 FAMILY TRUST
("ASSIGNEE')
Trustee
Trustee
�; �, � -/< " `
Trustee
521141v1 MNINE395-2
IN WITNESS WHEREOF, the parties have executed this Assignment, using counterpart
signature pages, as of the date first indicated above.
INDUSTRIAL EQUITIES — NEW HOPE, LLC
("ASSIGNOR")
By:
John N. Allen
Its: Chief Manager
TRUSTEES OF THE JOHN N. AND REBECCA B. ALLEN 2012 FAMILY TRUST
("ASSIGNEE")
Trustee
_.__. Trustee
Trustee
521141v 1 MNI NE395-2
THIS ASSIGNMENT, made as of this 13th day of March, 2018, by and between
INDUSTRIAL EQUITIES — NEW HOPE, LLC, a Minnesota limited liability company
("Assignor and TRUSTEES OF THE JOHN N. AND REBECCA B. ALLEN 2012
FAMILY TRUST, a Minnesota trust ("Assignee").
iTuyK "
A. Assignor is the owner of that certain $370,000 Limited Revenue Tax Increment
Note (Industrial Equities — New Hope, LLC Project), issued by the New Hope
Economic Development Authority (the "Authority') on March 16, 2017 (the
"Note"), and has full right, title and interest in receiving any and all Available
Tax Increment (as defined in the Note) payable on the Note, pursuant to that
certain Contract for Private Redevelopment by and between the Authority and
the Assignor, dated as of December 21, 2015, as amended by a First
Amendment thereto dated as of May 23, 2016 (as so amended, the
"Contract").
B. Assignor desires to assign said Note to Assignee.
C. Assignor is authorized to assign the Note to Assignee subject to the requirements
set forth in paragraph I I of the Note and Section 3.02(6) of the Authority's
Resolution No. 15-25, authorizing execution of the Contract and issuance of
the Note.
NOW, THEREFORE, IN CONSIDERATTON OF One Dollar ($1.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Assignor does hereby grant, transfer and assign to Assignee, all of its right, title
and interest in and to said Note as of the date set forth hereinabove.
IN WITNESS WHEREOF, the parties have executed this Assignment, using counterpart
signature pages, as of the date first indicated above.
INDUSTRIAL EQUITIES — NEW HOPE, LLC
("ASSIGNOR')
By:
John N. Allen
Its: Chief Manager
TRUSTEES OF THE JOHN N. AND REBECCA B. ALLEN 2012 FAMILY TRUST
("ASSIGNEE")
Trustee
$370,000.00
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF HENNEPIN
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
LIMITED REVENUE TAX INCREMENT NOTE
(INDUSTRIAL EQUITIES - NEW HOPE, LLC PROJECT)
The New Hope Economic Development Authority (the "Authority"), hereby acknowledges
itself to be indebted and, for value received, promises to pay to the order of Industrial Equities —
New Hope, LLC, a Minnesota limited liability company, or its permitted assigns (the "Owner"),
solely from the source, to the extent and in the manner hereinafter provided, the principal amount
of this Note, being Three Hundred Seventy Thousand Dollars ($370,000.00) (the "Principal
Amount"), together with interest as described herein commencing on August 1, 2018, and
continuing on each February 1 and August 1 thereafter until February 1, 2033 (the "Scheduled
Payment Dates"). From and after the date of this Note simple non -compounding interest at the
rate four and one half percent (4.5%) shall accrue on the outstanding Principal Amount until this
Note has been paid in full or terminated in accordance with its terms. Interest shall be computed
on the basis of a 360 day year consisting of twelve (12) thirty (30) day months.
Each payment on this Note is payable in any coin or currency of the United States of America
which on the date of such payment is legal tender for public and private debts and shall be made
by check or draft made payable to the Owner and mailed to the Owner at its postal address within
the United States which shall be designated from time to time by the Owner.
The Note is a special and limited obligation and not a general obligation of the Authority,
which has been issued by the Authority pursuant to and in full conformity with the Constitution
and laws of the State of Minnesota, including Minnesota Statutes, Section 469.178, subdivision 4,
to aid in financing a "project", as therein defined, of the Authority consisting generally of defraying
certain public redevelopment costs incurred and to be incurred by the Authority within and for the
benefit of its Redevelopment Project No. 1 (the "Project").
THIS NOTE IS NOT A DEBT OF THE CITY OF NEW HOPE OR THE STATE OF
MINNESOTA (THE "STATE"), AND NEITHER THE CITY, THE STATE NOR ANY
POLITICAL SUBDIVISION THEREOF SHALL BE LIABLE ON THE NOTE, NOR
SHALL THIS NOTE BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER
THAN THE AVAILABLE TAX INCREMENT, AS DEFINED BELOW.
The Scheduled Payment of this Note due on any Scheduled Payment Date is payable solely
from and only to the extent of Available Tax Increment, which consists of a portion of the real
property taxes received as tax increment by the Authority with respect to that certain real property
described in the attached Exhibit A (hereinafter referred to as the "Redevelopment Property").
Available Tax Increment, with respect to each Scheduled Payment Date, shall have the meaning
given to such term in that certain Contract for Private Redevelopment between the Authority and
the Owner dated as of December 21, 2015 (as amended, the "Contract") .
The Authority shall not be in default under this Note for failure to make a Scheduled Payment
using the Available Tax Increment and no interest shall accrue with respect to the Scheduled
Payment not made until a date thirty (30) days after the Authority receives written demand for
such payment from the Owner; provided, that the Authority shall endeavor to make Scheduled
Payments when due or as soon as possible after receipt of the Owner's written demand.
The Authority shall pay on each Scheduled Payment Date to the Owner the Available Tax
Increment. All payments made by the Authority shall be applied first to accrued interest and then
to the Principal Amount. On the earlier of (i) when the Principal Amount and all accrued interest
has been paid or (ii) February 1, 2033, after the payment is made on such date, this Note shall
terminate and the Authority shall have no further obligations hereunder. Notwithstanding the
foregoing, if Hennepin County fails to pay the Authority by February 1, 2033, tax increment
derived from taxes timely paid in 2032, the Authority will make the payment to the Owner,
otherwise due on February 1, 2033, as soon as practical after the Hennepin County pays such tax
increment to the Authority.
The Authority's obligations herein are subject to the terms and conditions of the Contract.
Subject to Section 9.2 of the Contract, the Authority's payment obligations hereunder shall be
suspended and this Note may be terminated by the Authority upon the occurrence of an Event of
Default as provided in Section 9.1 of the Contract, which Contract is incorporated herein and made
a part hereof by reference. Upon such termination, the Authority's obligations to make further
payments hereunder shall be discharged. Such termination may be accomplished by the
Authority's giving of written notice to the then registered owner of this Note, as shown on the
books of the Authority.
This Note shall not be payable from or constitute a charge upon any funds of the Authority,
and the Authority shall not be subject to any liability hereon or be deemed to have obligated itself
to pay hereon from any funds except the Available Tax Increment, and then only to the extent and
in the manner herein specified.
The Owner shall never have or be deemed to have the right to compel any exercise of any
taxing power of the Authority or of any other public body, and neither the Authority nor any
director, commissioner, council member, board member, officer, employee or agent of the
Authority, nor any person executing or registering this Note shall be liable personally hereon by
reason of the issuance or registration hereof or otherwise.
This Note shall not be transferable or assignable, in whole or in part, by the Owner without
the prior written consent of the Authority, which consent shall not be unreasonably withheld or
delayed.
This Note is issued pursuant to Resolution No. 15-25 of the Authority and is entitled to the
benefits thereof, which resolution is incorporated herein by reference.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things
required by the Constitution and laws of the State of Minnesota to be done, to have happened, and
to be performed precedent to and in the issuance of this Note have been done, have happened, and
have been performed in regular and due form, time, and manner as required by law; and that this
Note, together with all other indebtedness of the Authority outstanding on the date hereof and on
the date of its actual issuance and delivery, does not cause the indebtedness of the Authority to
exceed any constitutional or statutory limitation thereon.
IN WITNESS WHEREOF, the New Hope Economic Development Authority, by its
Board of Commissioners, has caused this Note to be executed by the manual signatures of the
President and Executive Director of the Authority and has caused this Note to be dated March 16,
2017.
Presider Executive Director
EXHIBIT A TO NOTE
Description of Redevelopment Property
Lot 1, Block 1, Brandell Fourth Addition, City of New Hope, Hennepin County, State of
Minnesota
EDA
Request for Action
Originating Department
Approved for Agenda
Agenda Section
Community Development
November 23, 2015
EDA
Item No.
By: Jeff Sargent, Director of CD
By: Kirk McDonald, City Manager
7
Resolution Authorizing the Execution of a Contract for Private Redevelopment with Industrial Equities — New
Hope, LLC (project no. 971)
Requested Action
Staff requests the Economic Development Authority (EDA) to approve a resolution authorizing the execution
of a contract for private redevelopment with Industrial Equities — New Hope, LLC.
Policy/Past Practice
It is a past practice of the staff to get EDA approval/authorization for a development agreement with a private
third -party owner of a land when a TIF District has been established on the property to make improvements
to the land.
Background
Industrial Equities has requested $250,000 in TIF assistance to pay for demolition, abatement, and soil
corrections on the site. When the EDA approves the TIF District for this property, it is common practice to
also approve the development agreement to ensure that the required site improvements be completed in
order to use tax increment to help the developer pay for those costs.
Bob Deike, the city's redevelopment attorney, has been working with the legal counsel for Industrial Equities
on creating the attached development agreement. Mr. Deike has also drafted and reviewed the resolution
supporting the development agreement.
Jason Aarsvold from Ehlers & Associates will be in attendance at the EDA meeting to help answer any
questions that the EDA may have.
Motion bySecond by
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I: \RFA\COMM DEV\Develo ment\Q & R -Development A reement Industrial Equities 11-23-15.doc
Request for Action
November 23, 2015
Page 2
Recommendation
Staff recommends that the EDA approve the development agreement with Industrial Equities.
Attachments
• Resolution
• Draft Development Agreement
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO. 15- 25
RESOLUTION AUTHORIZING THE EXECUTION OF A CONTRACT FOR PRIVATE
REDEVELOPMENT WITH INDUSTRIAL EQUITIES — NEW HOPE, LLC
BE IT RESOLVED BY THE BOARD OF COMMISSIONERS OF THE NEW HOPE
ECONOMIC DEVELOPMENT AUTHORITY (the "Authority") AS FOLLOWS:
WHEREAS, the Authority and the City of New Hope, Minnesota (the "City") are in the
process of creating a new housing tax increment financing district (the "District"), pursuant to the
Minnesota Tax Increment Financing Law, Minnesota Statutes, sections 469.174-469.1794 (the
"Tax Increment Act"); and
WHEREAS, the Authority has received a proposal from Industrial Equities — New Hope,
LLC, (the "Redeveloper") pursuant to which the Redeveloper would construct an
office/warehouse development (the "Minimum Improvements") within the District; and
WHEREAS, the Redeveloper has also proposed that the Authority provide financial
assistance to the Redeveloper using tax increment revenues from the District; and
WHEREAS, there has been presented to the Authority's Board of Commissioners a
proposed Contract For Private Redevelopment (the "Contract") between the Authority and the
Redeveloper setting forth the terms of the Authority's provision of financial assistance to the
Redeveloper in connection with the construction of the Minimum Improvements.
NOW, THEREFORE, be it hereby resolved by the Board of Commissioner of the
Authority as follows:
1.02. Execution of Contract and Issuance of the Note. The appropriate officers of the
Authority are hereby authorized to execute the Contract in substantially the form presented to the
Board of Commissioners, subject to such non -substantive changes as may be approved by the
Executive Director and the Authority's legal counsel, to execute the Note at the time stated in the
Contract and to issue and deliver the Note described therein at the time provided in the Contract;
provided, that authority to execute the Contract is subject to the City and the Authority having
created the District.
Section 2. Form of Note. The Note shall be substantially in the form contained in the
Contract, with the blanks properly filled in.
Section 3. Terms, Execution and Delivery.
3.01. Dates, Interest Payment Dates. The Note shall be dated as of the date it is issued.
Principal of and interest on the Note shall be payable to the owner of record thereof as of the
close of business on the fifteenth day of the month preceding each Scheduled Payment Date,
whether or not such day is a business day.
3.02. Registration. The Authority appoints the Executive Director as Note Registrar. The
effect of registration and the rights and duties of the Authority and the Registrar with respect
thereto shall be as follows:
(a) Resister. The Registrar shall keep at his/her principal office a Note register in
which the Registrar shall provide for the registration of ownership of the Note and the
registration of transfers or exchanges of the Note.
(b) Transfer of Note. Upon surrender for transfer of the Note duly endorsed by the
registered owner thereof or accompanied by a written instrument of transfer, in form satisfactory
to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized
by the registered owner in writing, the Registrar shall authenticate and deliver, in the name of the
designated transferee or transferees, a new Note of a like aggregate principal amount and
maturity, as requested by the transferor. The Registrar may close the books for registration of
any transfer after the fifteenth day of the month preceding each interest .payment date and until
such interest payment date. The Note shall not be transferred to any person other than an
affiliate or other related entity of the Redeveloper, unless the a has been provided with an
opinion of counsel, acceptable to the Authority, that such transfer is exempt from registration and
prospectus delivery requirements of federal and applicable state securities laws.
(c) Cancellation. The Note surrendered upon any transfer shall be promptly canceled
by the Registrar and thereafter disposed of as directed by the Authority.
(d) Improper or Unauthorized Transfer. When the Note is presented to the Registrar for
transfer, the Registrar may refuse to transfer the same until it is satisfied that the endorsement on
the Note or separate instrument of transfer is valid and genuine and the requested transfer is
legally authorized. The Registrar shall incur no liability for its refusal, in good faith, to make
transfers which it, in its judgment, deems improper or unauthorized.
(e) Persons Deemed Owners. The Authority and the Registrar may treat the person in
whose name the Note is at any time registered in the Note register as the absolute owner of the
Note, whether the Note shall be overdue or not, for the purpose of receiving payment of, or on
account of, the principal of or interest on the Note and for all other purposes, and all such
payments so made to any such registered owner or upon the owner's order shall be valid and
effectual to satisfy and discharge the liability of the Authority upon the Note to the extent of the
sum or sums so paid.
(f) Taxes, Fees and Charges. For every transfer or exchange of the Note, the Registrar
may impose a charge upon the owner thereof sufficient to reimburse the Registrar for any tax,
fee, or other governmental charge required to be paid with respect to such transfer or exchange
and reasonable legal fees and other costs incurred in connection therewith.
(g) Mutilated, Lost, Stolen or Destroyed Note. In case the Note shall become mutilated
or be lost, stolen, or destroyed, the Registrar shall deliver a new Note of like amount, maturity
dates and tenor in exchange and substitution for and upon cancellation of such mutilated Note or
in lieu of and in substitution for such Note lost, stolen, or destroyed, upon the payment of the
reasonable expenses and charges of the Registrar in connection therewith; and, in the case of a
Note lost, stolen, or destroyed, upon filing with the Registrar of evidence satisfactory to it that
such Note was lost, stolen or destroyed, and of the ownership thereof, and upon furnishing to the
Registrar of an appropriate indemnity in form, substance, and amount satisfactory to it, in which
both the Authority and the Registrar shall be named as obligees. Any Note so surrendered to the
Registrar shall be canceled by it and evidence of such cancellation shall be given to the
Authority. If the mutilated, lost, stolen, or destroyed Note has already matured or been called for
redemption in accordance with its terms, it shall not be necessary to issue a new Note prior to
payment.
3.03. Preparation and Delivery. The Note shall be prepared under the direction of the
Executive Director of the Authority and shall be executed on behalf of the Authority by the
manual signatures of its Executive Director and President. In case any officer whose signature,
or a facsimile of whose signature, shall appear on the Note shall cease to be such officer before
the delivery of the Note, such signature or facsimile shall nevertheless be valid and sufficient for
all purposes, the same as if such officer had remained in office until delivery. Notwithstanding
such execution, the Note shall not be valid or obligatory for any purpose or entitled to any
security or benefit under this Resolution unless and until a certificate of authentication on such
Note has been duly executed by the manual signature of an authorized representative of the
Registrar. The executed certificate of authentication on the Note shall be conclusive evidence it
has been authenticated and delivered under this resolution. When the Note have been so
executed and authenticated, it shall be delivered by the Executive Director to the Redeveloper.
Section 4. Pledge of Available Tax Increment. The Authority hereby pledges to the
payment of the principal of and interest on the Note Available Tax Increment, as defined in the
Contract.
Section 5. Certification of Proceedings.
5.01 Certification of Proceedings. The officers of the Authority are hereby authorized and
directed to prepare and furnish to the purchaser of the Note certified copies of all proceedings
and records of the Authority, and such other affidavits, certificates, and information as may be
required to show the facts relating to the legality and marketability of the Note as the same
appear from the books and records under their custody and control or as otherwise known to
them, and all such certified copies, certificates and affidavits, including any heretofore furnished,
shall be deemed representations of the Authority as to the facts recited therein.
Adopted this 23rd day of November, 2015.
Kathi Hemken, President
Attes
Kirk McDonald, Executive Director
12/2/15
CONTRACT
FOR
PRIVATE REDEVELOPMENT
By and Between
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
and
INDUSTRIAL EQUITIES — NEW HOPE, LLC
Dated: �� , 2015
11
This document was drafted by:
BRADLEY & DEIKE, P. A.
4018 West 65h Street Suite 100
Edina, MN 55435
Telephone: (612) 926-5337
TABLE OF CONTENTS
Page
PREAMBLE 1
ARTICLE I
Definitions
Section 1.1. Definitions 3
ARTICLE II
Representations
Section 2.1. Representations by the Authority 6
Section 2.2. Representations by the Redeveloper 6
ARTICLE III
Status of Property; Site Improvements
Section 3.1.
Status of Property 8
Section 3.2.
Site Improvements 8
Section 3.3.
Issuance of Note 8
Section 3.4.
Conditions Precedent to Issuance of Note 9
Section 3.5.
Payment of Administrative Costs 9
Section 3.6.
No Business Subsidy 9
ARTICLE IV
Construction of Minimum Improvements
Section 4.1. Construction of Minimum Improvements 11
Section 4.2. Construction Plans 11
Section 4.3. Commencement and Completion of Construction 12
Section 4.4. Certificate of Completion 12
(i)
Section 5.1. Insurance
Section 5.2. Condemnation
ARTICLE V
Insurance and Condemnation
ARTICLE VI
Taxes; Tax Increment
Section 6.1. Real Property Taxes
Section 6.2. Creation of Tax Increment District
Section 6.3. Tax Increment
ARTICLE VII
Mortgage Financing
Section 7.1. Mortgage Financing
Section 7.2. Limitation on Encumbrance of Property
ARTICLE VIII
Prohibitions Against Assignment and Transfer; Indemnification
Section 8.1. Prohibition Against Transfer of Property and
Assignment of Agreement
Section 8.2. Approvals
Section 8.3 Release and Indemnification Covenants
ARTICLE IX
Events of Default
Section 9.1.
Events of Default Defined
Section 9.2.
Authority's Remedies on Default
Section 9.3.
No Remedy Exclusive
Section 9.4.
No Additional Waiver Implied by
One Waiver
Section 9.5.
Costs of Enforcement
14
16
17
17
17
19
19
20
20
20
22
22
22
22
22
ARTICLE X
Additional Provisions
Section 10.1. Representatives Not Individually Liable
Section 10.2. Equal Employment Opportunity
Section 10.3. Restrictions on Use
Section 10.4. Titles of Articles and Sections
Section 10.5. Notices and Demands
Section 10.6. Disclaimer of Relationships
Section 10.7. Modifications
Section 10.8. Counterparts
Section 10.9. Judicial Interpretation
Section 10.10. Effect of Termination
SCHEDULE A Description of Redevelopment Property
SCHEDULE B Note
SCHEDULE C Description of Site Improvements
24
24
24
24
24
24
24
25
25
25
CONTRACT FOR PRIVATE REDEVELOPMENT
THIS AGREEMENT, made on or as of the rte/ Y.day of a Om-"tll , 2015, by
and between the New Hope Economic Development Authority, a public body corporate and
politic (hereinafter referred to as the "Authority"), having its principal office at 4401 Xylon
Avenue North, New Hope, Minnesota 55428, and Industrial Equities — New Hope, LLC, a
Minnesota limited liability company (hereinafter referred to as the "Redeveloper"), having its
principal office at 321 First Avenue N., Minneapolis, Minnesota 55401.
WITNESSETH:
WHEREAS, the Authority was created pursuant to Minnesota Statutes, sections 469.090-
469.108 (the "Act") and was authorized to transact business and exercise its powers by a
resolution of the City Council of the City of New Hope (the "City") pursuant to the Act; and
WHEREAS, in furtherance of the objectives of the Act, the Authority has undertaken a
program for the clearance and reconstruction or rehabilitation of blighted, deteriorated,
deteriorating, vacant, unused, under used or inappropriately used, areas of the City, and in this
connection is engaged in carrying out a redevelopment project known as the New Hope
Redevelopment Project No. 1 (hereinafter referred to as the "Project") in an area (hereinafter
referred to as the "Project Area") located in the City; and
WHEREAS, as of the date of this Agreement there has been prepared and approved by the
Authority and the City Council of the City a redevelopment plan for the Project (which Plan is
hereinafter referred to as the "Redevelopment Plan"); and
WHEREAS, the Redeveloper owns certain real property located within the Project Area
(which real property is referred to herein as the "Redevelopment Property"); and
WHEREAS, the Redevelopment Property contains a substandard building that will
necessitate the undertaking of extraordinary site preparation activities to prepare the
Redevelopment Property for the construction of a building thereon; and
WHEREAS, the Redeveloper has presented to the Authority a proposal for the
development of the Redevelopment Property through the construction of an approximately
48,000 square foot office\warehouse development, which proposal involves the Authority's use
of tax increment pursuant to this Agreement to reimburse the Redeveloper for a portion of the
cost of preparing the Redevelopment Property for the construction of the proposed building; and
WHEREAS, the Redeveloper has requested that the Authority assist its development by
paying certain public redevelopment costs that will be incurred to prepare the Redevelopment
Property for construction of the Minimum Improvements; and
WHEREAS, the Authority has created within the Project Area its Industrial Equities Tax
Increment Financing District (the "Tax Increment District") pursuant to Minnesota Statutes,
Sections 469.174-.1794, in order to create a funding source to finance the public redevelopment
costs of the Project; and
WHEREAS, the Authority believes that the development of the Project Area pursuant to
the Redeveloper's proposal and the fulfillment generally of this Agreement are in the vital and
best interests of the City and the health, safety, morals, and welfare of its residents, and in accord
with the public purposes and provisions of the applicable State and local laws and requirements
under which the Project has been undertaken and is being assisted, and is, therefore, willing to
provide the financial assistance outlined herein.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
ARTICLE I
Defmitions
Section I.I. Definitions. In this Agreement, unless a different meaning clearly appears
from the context:
"Act" means Minnesota Statutes, Sections 469.090-469.108, as amended.
"Agreement" means this Agreement, as the same may be from time to time modified,
amended, or supplemented.
"Authority" means the New Hope Economic Development Authority, or any successor or
assign.
"Available Tax Increment" means ninety percent (90%) of the Tax Increment that is
received by the Authority in the six (6) month period immediately preceding a Scheduled
Payment Date.
"City" means the City of New Hope.
"Construction Plans" means the plans, specifications, drawings and related documents on
the construction work to be performed by the Redeveloper on the Redevelopment Property
which were submitted to and approved by the City, together with the provisions of any resolution
of the City Council of the City approving the Construction Plans.
"County" means Hennepin County, Minnesota.
"Event of Default" means an action by the Redeveloper listed in Article IX of this
Agreement.
"Holder" means the owner of a Mortgage.
"Market Value" means the market value of real property as determined by the County
Assessor of the County for real estate tax purposes.
"Maturity Date" means the date that the Note terminates or is paid in full, whichever
occurs earlier.
"Minimum Improvements" means the construction by the Redeveloper of an
approximately 48,000 square foot office\warehouse development, and related improvements, in
accordance with the Construction Plans.
"Mortgage" means any mortgage obtained by the Redeveloper which is secured, in whole
or in part, by the Redevelopment Property and which is a permitted encumbrance pursuant to the
provisions of Article VIII of this Agreement.
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"Net Proceeds" means any proceeds paid by an insurer to the Redeveloper under a policy
or policies of insurance required to be provided and maintained by the Redeveloper pursuant to
Article V of this Agreement and remaining after deducting all expenses (including fees and
disbursements of counsel) incurred in the collection of such proceeds.
"Note" means the Authority's limited revenue tax increment note to be issued by the
Authority to the Redeveloper pursuant to Article III of this Agreement to reimburse the
Redeveloper for its payment of the Site Improvement costs.
"Project" means the Authority's Redevelopment Project No. 1.
"Project Area" means the real property located within the boundaries of the Project.
"Redeveloper" means Industrial Equities — New Hope, LLC, a Minnesota limited liability
company, or its successors and assigns, or any future owners of the Redevelopment Property.
"Redevelopment Property" means the real property described in Schedule A of this
Agreement.
"Redevelopment Plan" means the Authority's Redevelopment Plan for the Project, as
amended as of the date of this Agreement.
Cs]
"Scheduled Payment" means a Scheduled Payment as defined in the Note.
"Scheduled Payment Date" means a Scheduled Payment Date as defined in the Note.
"Site Improvements" means the site preparation costs described on the attached Schedule
"State" means the State of Minnesota.
"Tax Increment" means that portion of the real property taxes paid with respect to the
Redevelopment Property and Minimum Improvements which is remitted to the Authority as tax
increment pursuant to the Tax Increment Act.
"Tax Increment Act" means Minnesota Statutes, Section 469.174-469.179, as the same
may be amended from time to time.
"Tax Increment District" means the Authority's Industrial Equities Tax Increment
Financing District.
"Tax Official" means the County assessor; County auditor; City, County or State board of
equalization, the commissioner of revenue of the State, or any State or federal district court, the
tax court of the State, or the State Supreme Court.
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"Unavoidable Delays" means delays beyond the reasonable control of the party seeking to
be excused as a result thereof which are the result of acts of God, adverse weather conditions,
strikes, other labor troubles, delays in obtaining construction materials, machinery and/or
equipment, fire or other casualty to the Minimum Improvements, litigation commenced by third
parties which, by injunction or other similar judicial action, results in delays, or acts of any
federal, state or local governmental unit (other than the Authority in enforcing its rights under
this Agreement) which result in delays.
ARTICLE II
Representations
Section 2.1. Representations by the Authority. The Authority makes the following
representations as the basis for the undertaking on its part herein contained:
(a) The Authority is a municipal economic development authority organized and
existing under the Act. Under the laws of the State, the Authority has the power to enter into this
Agreement and to perform its obligations hereunder.
(b) The Project is a "redevelopment project" within the meaning of the Act and was
created, adopted and approved in accordance with the terms of the Act.
(c) The Authority will, at no cost to the Authority, cooperate with the Redeveloper
with respect to any litigation commenced with respect to the Redevelopment Plan, Project, or
Minimum Improvements.
Section 2.2. Representations by the Redeveloper. The Redeveloper represents that:
(a) The Redeveloper is a Minnesota limited liability company duly organized and
authorized to transact business in the State, is not in violation of any provisions of its articles of
organization, operating agreement or member control agreement or the laws of the State, has
power to enter into this Agreement and has duly authorized the execution, delivery and
performance of this Agreement by proper action of its governors.
(b) The Redeveloper will construct the Minimum Improvements in accordance with
the terms of this Agreement, the Redevelopment Plan and all local, state and federal laws and
regulations (including, but not limited to, environmental, zoning, building code and public health
laws and regulations), except for variances necessary to construct the improvements
contemplated in the Construction Plans approved by the Authority.
(c) Except for facts disclosed in any environmental assessment or report prepared on
behalf of the Authority or the Redeveloper, the Redeveloper has received no notice or
communication from any local, state or federal official that the activities of the Redeveloper or
the Authority in the Project Area may be or will be in violation of any environmental law or
regulation, and the Redeveloper, to the best of its knowledge, is aware of no facts the existence
of which would cause it to be in violation of any local, state or federal environmental law,
regulation or review procedure.
(d) The Redeveloper will, at no cost to Redeveloper, cooperate with the Authority with
respect to any litigation commenced with respect to the Redevelopment Plan, Project, or
Minimum Improvements.
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(e) Absent the financial assistance being provided by the Authority pursuant to this
Agreement the Redeveloper would not proceed with the development of the Minimum
Improvements.
ARTICLE III
Development Proposal, Site Improvements
Section 3.1. Development Proposal. The Redeveloper owns the Redevelopment Property.
Because of the condition existing on the Redevelopment Property, it is necessary to incur
extraordinary costs to prepare the Redevelopment Property for the construction of the Minimum
Improvements. Such costs render the development of the Minimum Improvements financially
infeasible absent financial assistance from the Authority. Therefore, the Authority is willing,
subject to the terms and conditions of this Agreement, to reimburse the Redeveloper for a portion
of its costs of preparing the Redevelopment Property for construction of the Minimum
Improvements. In order to encourage and assist the Redeveloper's development, the Authority
agrees that it will, by issuing the Note to the Redeveloper and using Available Tax Increment on
a pay-as-you-go basis, reimburse the Redeveloper for its payment of certain costs related to the
preparation of the Redevelopment Property for development of the Minimum Improvements, all
as is more specifically provided in this Agreement. The obligation of the Authority to issue the
Note is specifically subject to the satisfaction of all of the conditions set forth in this Agreement,
including, without limitation, Section 3.4 hereof.
Section 3.2 Site Improvements. (a) The Authority agrees that it will reimburse the
Redeveloper for the payment of certain costs in connection with the preparation of the
Redevelopment Property for construction of the Minimum Improvements (the "Site
Improvements"). The Site Improvements are described on the attached Schedule C. The
Authority agrees that it will reimburse, using Available Tax Increment on a pay-as-you-go basis,
through the issuance and payment of the Note, up to $250,000 of the costs of completing the
Site Improvements.
(b) The Redeveloper shall be solely responsible for all aspects of completing the
Minimum Improvements, including the Site Improvements. The Authority's reimbursement of
the Redeveloper for the cost of the Site Improvements shall be accomplished through the
Authority's issuance and delivery to Redeveloper of the Note. The Authority agrees that, subject
to the satisfaction of the conditions precedent contained in Section 3.4, it will issue the Note at
such time as the Redeveloper provides to the Authority invoices and certifications in such form
as the Authority may reasonably require, demonstrating that the Site Improvements have been
completed, that the Redeveloper has paid the costs of completing the Site Improvements, and
that such costs equal or exceed $250,000, or if such costs are less than $250,000, then the
amount of such costs shall be the principal amount of the Note.
Section 3.3. Issuance of Note. The Authority's reimbursement of the Redeveloper for the
cost of the Site Improvements shall be through the issuance of the Note which shall occur at the
time stated in Section 3.2 of this Agreement. The Note shall be substantially in the form of the
Note attached to this Agreement as Schedule B, with all blanks properly filled in and the
payment schedule attached thereto adjusted to reflect the date of issuance. The Note shall be
dated as of the date of its issuance and shall be payable together with simple non -compounding
interest at the rate of four and one half percent (4.5%) per year from the date of the issuance of
the Note until the Note is paid in full or terminated.
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Section 3.4. Conditions Precedent to the Issuance of the Note. The Authority's obligation
to issue the Note to the Redeveloper shall be subject to the satisfaction of all of the following
conditions precedent:
(a) the Redeveloper shall not be in default under the terms of this Agreement;
(b) the Redeveloper shall have closed on financing, or provided evidence of self-
financing pursuant to Section 7.1 of this Agreement, sufficient to pay all costs to be
incurred in connection with the acquisition and construction of the Minimum
Improvements;
(c) the Redeveloper shall have paid the costs of the Site Improvements and shall have
provided to the Authority such documentation of such costs as the Authority shall
reasonably request; and
(d) the Redeveloper shall have completed construction of the Minimum Improvements.
Section 3.5. Payment of Administrative Costs. The Redeveloper will reimburse the
Authority for all out-of-pocket costs incurred by the Authority in connection with review and
analysis of the development proposed under this Agreement, development of the Tax Increment
Plan for the Tax Increment District, and negotiation of this Agreement and any related
agreements and documents (collectively, the "Administrative Costs"). The Administrative Costs
include fees paid to attorneys, the Authority's financial advisor, and any planning and
engineering consultants retained by the Authority or City in connection with the construction of
the Improvements. As security for the Administrative Costs, the Redeveloper deposited with the
Authority the amount of $10,000, and the Authority shall pay the Administrative Costs from
such funds. If the total Administrative Costs exceed $10,000, the Redeveloper remains
responsible for such excess costs, and must pay such costs to the Authority within 10 days after
receipt of a written invoice from the Authority describing the amount and nature of the costs to
be reimbursed. After the Note has been issued and the certificate of completion referenced in
Section 4.4 has been executed and delivered, and all the Administrative Costs related to such
actions have been paid, the Authority will refund to the Redeveloper any portion of the balance
from the $10,000 deposit (if any) that is not needed to cover the Administrative Costs through
such reimbursement date. Notwithstanding anything to the contrary herein, the Redeveloper
remains obligated to pay the Administrative Costs after issuance of such certificate of
completion, including the costs of any amendments to this Agreement or to the Note.
Section 3.6. No Business Subsidy. The County assessor has estimated the current year's
Market Value of the Redevelopment Property to be $400,000. The Redeveloper represents that
the Redeveloper's investment in acquisition and site preparation of the Redevelopment Property
will be not less than $652,923. The Redeveloper represents that because this is a redevelopment
of a blighted property and the Redeveloper's investment in acquisition and site preparation will
equal at least 70% or more of the assessor's current year's estimated market value of the
Redevelopment Property ($652,923 is 163.23% of $400,000) the assistance provided to the
Redeveloper does not constitute a "business subsidy" and therefore the provisions of the
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Business Subsidy Act, Minnesota Statutes, sections 116J.993 -116J.995, do not apply. The
Redeveloper releases and waives any claim against the Authority, its governing body members
and the officers, agents, servants and employees thereof arising from the application of the
Business Subsidy Act to this Agreement, including without limitation any claim that the
Authority failed to comply with the Business Subsidy Act with respect to this Agreement.
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ARTICLE IV
Construction of Minimum Improvements
Section 4.1. Construction and Operation of Minimum Improvements. The Redeveloper
agrees that it will construct the Minimum Improvements on the Redevelopment Property in
accordance with the approved Construction Plans, together with any changes approved by the
Authority and any changes not requiring the Authority's approval, and at all times prior to the
Maturity Date will operate and maintain, preserve and keep the Minimum Improvements or
cause the Minimum Improvements to be maintained, preserved and kept with the appurtenances
and every part and parcel thereof, in good repair and condition.
Section 4.2. Construction Plans. (a) The Redeveloper has submitted and the City and
the Authority have approved a site plan for the construction of the Improvements (the "Site
Plan"). All Construction Plans for the Improvements shall be consistent with the approved Site
Plan. The Construction Plans shall provide for the construction of the Improvements and shall
be in conformity with this Agreement, the Site Plan approved by the Authority, and all
applicable state and local laws and regulations. The Authority shall approve the Construction
Plans in writing if, in the reasonable discretion of the Authority. (i) the Construction Plans
conform to the terms and conditions of this Agreement; (ii) the Construction Plans are consistent
with the Site Plans previously submitted to the Authority; (iii) the Construction Plans conform to
all applicable federal, State and local law, ordinances, rules and regulations; (iv) the Construction
Plans are adequate to provide for the construction of the Improvements; (v) the Construction
Plans do not provide for expenditures in excess of the funds which will be available to the
Redeveloper for the construction of the Improvements; and (vi) no Event of Default has
occurred. No approval by the Authority under this Section 4.2 shall relieve the Redeveloper of
the obligation to comply with the terms of this Agreement or applicable federal, state and local
laws, ordinances, rules and regulations, or to construct the Improvements. No approval by the
Authority shall constitute a waiver of an Event of Default. Such Construction Plans shall, in any
event, be deemed approved unless rejected in writing by the Authority, in whole or in part. Such
rejection shall set forth in detail the reasons therefor, and shall be made within thirty (30) days
after the date of their receipt by the Authority. The provisions of this Section relating to
approval, rejection and resubmission of corrected Construction Plans shall continue to apply
until the Construction Plans have been approved by the Authority or until this Agreement is
terminated. The Authority's approval shall not be unreasonably withheld. Notwithstanding any
other provisions of this Agreement, the issuance by the City of a building permit for the Project
shall constitute the approval of the Construction Plans by the City and the Authority as provided
herein.
(b) If the Redeveloper desires to make any material change in any Construction Plans
after their approval by the Authority, the Redeveloper shall submit the proposed change to the
Authority for its approval. If the Construction Plans, as modified by the proposed change, are
acceptable to the Authority, the Authority shall approve the proposed change and notify the
Redeveloper in writing of its approval. Any requested change in the Construction Plans shall, in
any event, be deemed approved by the Authority unless rejected, in whole or in part, by written
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notice by the Authority to the Redeveloper, setting forth in detail the reasons therefor. Such
rejection shall be made within ten (10) days after receipt of the notice of such change.
(c) Nothing in this Agreement shall be deemed to modify the City's normal
construction permitting process as it applies to the Redeveloper's plans for development and the
Redeveloper shall in all respects be required to comply with such process.
Section 4.3. Commencement and Completion of Construction. Subject to Unavoidable
Delays, the Redeveloper shall commence construction of the Minimum Improvements by May 1,
2016, or on such other date as the parties shall mutually agree. Subject to Unavoidable Delays,
the Redeveloper shall complete the construction of the Minimum Improvements by May 1, 2017.
All work with respect to the Minimum Improvements to be constructed or provided by the
Redeveloper on the Redevelopment Property shall be in conformity with the Construction Plans,
together with any changes approved by the Authority and any changes not requiring the
Authority's approval, as submitted by the Redeveloper and approved by the Authority.
The Redeveloper agrees for itself, its successors and assigns, and every successor in
interest to the Redevelopment Property, or any part thereof, that the Redeveloper, and its
successors and assigns, shall promptly begin and diligently prosecute to completion the
redevelopment of the Redevelopment Property through the construction of the Minimum
Improvements thereon, and that such construction shall in any event be commenced and
completed within the period specified in this Section 4.3 of this Agreement and subject to
Unavoidable Delays and/or mutual agreement of the parties hereto. Until construction of the
Minimum Improvements has been completed, the Redeveloper shall make construction progress
reports, at such times as may reasonably be requested by the Authority, but not more than once a
month, as to the actual progress of the Redeveloper with respect to such construction. Upon
substantial completion of the Minimum Improvements and upon request by the Redeveloper, the
Authority shall provide to the Redeveloper a certificate in recordable form stating that the
obligations of the Redeveloper with respect to the construction of the Minimum Improvements
under this Agreement have been satisfied.
Section 4.4. Certificate of Completion. (a) Promptly after completion of the Minimum
Improvements in accordance with those provisions of this Agreement relating solely to the
obligations of the Redeveloper to construct the Improvements, and upon request by the
Redeveloper, the Authority will furnish the Redeveloper with a Certificate of Completion for the
Minimum Improvements in a form acceptable for recording in the County Recorder's Office or
the Office of the Registrar of Titles. The Certificate of Completion shall be furnished to the
Redeveloper within ten (10) business day after request by the Redeveloper, and shall
conclusively satisfy and terminate the agreements and covenants in this Agreement of the
Redeveloper, and its successors and assigns, to construct the Minimum Improvements. Such
certification and such determination shall not constitute evidence of compliance with or
satisfaction of any obligation of the Redeveloper to any Holder of a Mortgage, or any insurer of a
Mortgage, securing money loaned for construction of the Minimum Improvements, or any part
thereof.
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(b) If the Authority shall refuse or fail to provide a Certificate of Completion in
accordance with the provisions of this Section 4.4 of this Agreement, the Authority shall, within
ten (10) business day after written request by the Redeveloper for the Certificate of Completion,
provide the Redeveloper with a written statement, indicating in adequate detail in what respects
the Redeveloper has failed to complete the Improvements in accordance with the provisions of
this Agreement and what measures or acts will be necessary, in the opinion of the Authority, for
the Redeveloper to take or perform in order to obtain the Certificate of Completion.
(c) Notwithstanding anything in this Agreement to the contrary, the construction of
the Minimum Improvements shall be deemed to be completed when the Authority has been
provided an affidavit executed by the Redeveloper's architect certifying that all construction
activities, including without limitation, building construction and installation of infrastructure
(other than improvements, the completion of which is not a condition to issuing a certificate of
occupancy, and landscaping) contemplated by the Redeveloper's Construction Plans approved
by the City have been completed substantially in accordance with such Construction Plans,
when the City has issued a certificate of occupancy, when the City has issued a Certificate of
Completion, or when the City has otherwise determined to its satisfaction that the Minimum
Improvements are complete (other than improvements, the completion of which is not a
condition to issuing a certificate of occupancy, and landscaping), whichever occurs first.
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ARTICLE V
Insurance and Condemnation
Section 5.1. Insurance.
(a) The Redeveloper will provide and maintain at all times during the process of
constructing the Minimum Improvements and, from time to time at the request of the Authority,
furnish the Authority with proof of payment of premiums on:
(i) Builder's risk insurance, written on the so-called "Builder's Risk -- Completed
Value Basis," in an amount equal to one hundred percent (100%) of the insurable value of
the Minimum Improvements at the date of completion, and with coverage available in
nonreporting form on the so called "all risk" form of policy. The interest of the Authority
shall be protected in accordance with a clause in form and content satisfactory to the
Authority; and
(ii) Comprehensive general liability insurance (including operations, contingent
liability, operations of subcontractors, completed operations, Broadening Endorsement
including contractual liability insurance) together with an Owner's Contractor's Policy with
limits against bodily injury and property damage of not less than $1,000,000.00 for each
occurrence (to accomplish the above -required limits, an umbrella excess liability policy
may be used).
The policies of insurance required pursuant to clauses (i) and (ii) above shall be in form and
content reasonably satisfactory to the Authority and shall be placed with financially sound and
reputable insurers licensed to transact business in the State, the liability insurer to be rated A or
better in Best's Insurance Guide. The policy of insurance delivered pursuant to clause (i) above
shall contain an agreement of the insurer to give not less than thirty (30) days' advance written
notice to the Authority in the event of cancellation of such policy or change affecting the
coverage thereunder.
(b) Upon completion of construction of the Minimum Improvements and prior to the
Maturity Date, the Redeveloper shall maintain, or cause to be maintained, at its cost and expense,
and from time to time at the request of the Authority shall furnish proof of the payment of
premiums on, insurance as follows:
(i) Insurance against loss and/or damage to the Minimum Improvements under a
policy or policies covering such risks as are ordinarily insured against by similar
businesses, including (without limiting the generality of the foregoing) fire, extended
coverage, all risk vandalism and malicious mischief, boiler explosion, water damage,
demolition cost, debris removal, and collapse in an amount not less than the full insurable
replacement value of the Minimum Improvements, but any such policy may have a
deductible amount of not more than $25,000.00. No policy of insurance shall be so written
that the proceeds thereof will produce less than the minimum coverage required by the
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preceding sentence, by reason of co-insurance provisions or otherwise, without the prior
consent thereto in writing by the Authority. The term "full insurable replacement value"
shall mean the actual replacement cost of the Minimum Improvements (excluding
foundation and excavation costs and costs of underground flues, pipes, drains and other
uninsurable items) and equipment, and shall be determined from time to time at the request
of the Authority, but not more frequently than once every three years, by an insurance
consultant or insurer, selected and paid for by the Redeveloper and approved by the
Authority.
(ii) Comprehensive general public liability insurance, including personal injury
liability (with employee exclusion deleted), and automobile insurance, including owned,
non -owned and hired automobiles, against liability for injuries to persons and/or property,
in the minimum amount for each occurrence and for each year of $1,000,000.00.
(iii) Such other insurance, including worker's compensation insurance respecting all
employees of the Redeveloper (if any), in such amount as is customarily carried by like
organizations engaged in like activities of comparable size and liability exposure; provided
that the Redeveloper may be self-insured with respect to all or any part of its liability for
worker's compensation.
(c) All insurance required in Article V of this Agreement shall be taken out and
maintained in responsible insurance companies selected by the Redeveloper which are
authorized under the laws of the State to assume the risks covered thereby. Redeveloper shall be
entitled, at its option, to use umbrella policies to satisfy the insurance requirements in Article V.
(d) The Redeveloper agrees to notify the Authority immediately in the case of damage
exceeding $25,000 in amount to, or destruction of, the Minimum Improvements or any portion
thereof resulting from fire or other casualty. In the event of any such damage, the Redeveloper
will forthwith repair, reconstruct and restore the Minimum Improvements to substantially the
same or an improved condition or value as existed prior to the event causing such damage and, to
the extent necessary to accomplish such repair, reconstruction and restoration, the Redeveloper
will apply the Net Proceeds of any insurance relating to such damage received by the
Redeveloper to the payment or reimbursement of the costs thereof.
The Redeveloper shall complete the repair, reconstruction and restoration of the Minimum
Improvements, whether or not the Net Proceeds of insurance received by the Redeveloper for
such purposes are sufficient to pay for the same. Any Net Proceeds remaining after completion
of such repairs, construction and restoration shall be remitted to the Redeveloper.
In the event of substantial or total destruction of the Minimum Improvements, the Redeveloper
may elect to not repair or reconstruct the Minimum Improvements, in which case the Authority
may, as its sole remedy, terminate its obligations under the Note.
(e) The Authority agrees that its rights under this Section relative to the application of
Net Proceeds of insurance provided under Section 5.1(a)(i) and (b)(i) and as provided in Section
5.1(d) shall be subordinate to the rights of a Holder of a Mortgage approved by the Authority;
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provided, that the Authority's right to terminate the Note for a violation of the Redeveloper's
obligations under this Section shall not be subordinated to the rights of a Holder.
Section 5.2. Condemnation. In the event that title to and possession of the Minimum
Improvements or any material part thereof shall be taken in condemnation or by the exercise of
the power of eminent domain by any governmental body or other person (except the Authority)
prior to the Maturity Date, the Redeveloper shall, with reasonable promptness after such taking,
notify the Authority as to the nature and extent of such taking. Upon receipt of any
Condemnation Award, the Redeveloper shall elect to either: (a) use the entire Condemnation
Award to reconstruct the Minimum Improvements (or, in the event only a part of Minimum
Improvements have been taken, then to reconstruct such part) within the Project Area; or (b)
retain the Condemnation Award whereupon in the event that a substantial portion of the
Redevelopment Property and Minimum Improvements have been taken, the Authority's
obligations under this Agreement and the Note shall terminate as of the date of the
Condemnation taking. For purposes of this provision, "substantial portion" means a portion that
includes all or a part of the building, comprising approximately 48,000 square feet of space, to be
constructed on the Property pursuant to the terms of this Agreement.
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ARTICLE VI
Taxes; Tax Increment
Section 6.1. Real Property Taxes. (a) The Redeveloper shall pay or cause to be paid
when due and prior to the imposition of penalty all real property taxes and installments of special
assessments payable with respect to the Redevelopment Property.
(b) The Redeveloper agrees that it will not take any of the following actions during
the term of this Agreement: (1) it will not seek administrative review or judicial review of the
applicability of any tax statute determined by any Tax Official to be applicable to the
Redevelopment Property, the Minimum Improvements or the Redeveloper or raise the
inapplicability of any such tax statute as a defense in any proceedings, including delinquent tax
proceedings; and (2) it will not seek administrative review or judicial review of the
constitutionality of any tax statute determined by any Tax Official to be applicable to the
Redevelopment Property, the Minimum Improvements or the Redeveloper or raise the
unconstitutionality of any such tax statute as a defense in any proceedings, including delinquent
tax proceedings. For purposes of the previous sentence, "tax statute" does not include any
income tax statute, and the Redeveloper shall retain all rights that it would otherwise have, but
for this Section 6.1, to contest any assessment of income tax. The Redeveloper further agrees
that with respect to the taxes payable during last three (3) years of the term of the Tax Increment
District it will not cause a reduction in the Market Value of the Redevelopment Property or
Minimum Improvements through: (A) a request to the County assessor of the County to reduce
the Market Value of all or any portion of the Redevelopment Property; (B) a petition to the board
of equalization of the City or the board of equalization of the County to reduce the Market Value
of all or any portion of the Redevelopment Property; (C) a petition to the board of equalization of
the State or the commissioner of revenue of the State to reduce the Market Value of all or any
portion of the Redevelopment Property; (D) an action in a District Court of the State or the Tax
Court of the State pursuant to Minnesota Statutes, Chapter 278, seeking a reduction in the
Market Value of the Redevelopment Property; (E) an application to the commissioner of revenue
of the State requesting an abatement of real property taxes pursuant to Minnesota Statutes,
Chapter 270; and (F) any other proceedings, whether administrative, legal or equitable, with any
administrative body within the City, the County, or the State or with any court of the State or the
federal government to reduce the Market Value of the Redevelopment Property. The
restrictions contained in the previous sentence shall not apply if prior to the Redeveloper's
initiation of any of the prohibited actions the Redeveloper notifies the Authority of its intent to
take such action, or, absent material prejudice to the Authority, if the Redeveloper so notifies the
Authority after taking such action but before any resulting reduction in the Market Value of the
Redevelopment Property or Minimum Improvements takes effect. No such action to reduce the
Market Value of the Redevelopment Property shall be valid absent such notification. If the
Redeveloper takes an action to reduce the Market Value of the Redevelopment Property with
respect to the last three (3) years of the term of the Tax Increment District the Authority shall be
entitled to withhold from any semi-annual Scheduled Payment due under the Note being made
with Tax Increment generated with respect to a year for which the Redeveloper is seeking a
reduction in the Market Value of the Redevelopment Property an amount equal to twelve and
one-half percent (12.50%) of the real property taxes that would be payable based on the Market
17
Value that the Redeveloper is seeking to reduce in each year for which the Redeveloper is
seeking a reduction. Following the conclusion of the Redeveloper's attempt with respect to a
particular year to reduce the Market Value of the Redevelopment Property (which in the case of
an action pursuant to Chapter 278 of Minnesota Statutes shall mean the entry of a final judgment
no longer subject to appeal), the Authority will re -calculate the amount of Tax Increment due the
Redeveloper with respect to that year, given the change, if any, in such Market Value for that
year resulting from such attempt. The Authority will then promptly remit to the Redeveloper an
amount of Available Tax Increment which, together with any Available Tax Increment
previously paid by the Authority to the Redeveloper for that year, will equal the amount of the
payment due for that year, as thus re -calculated by the Authority to take into account the change,
if any, in such Market Value. In the event that the amount of the Scheduled Payment withheld
by the Authority and not remitted to the Redeveloper pursuant to the previous sentence is
insufficient to reimburse the Authority for any amounts of Tax Increment that the Authority is
required to return to the County as a result of such action to reduce the Market Value of the
Redevelopment Property, the Redeveloper, or its successors or assigns, shall be obligated to pay
to the Authority the amount of such deficiency within ten (10) days after written demand by the
Authority. No interest shall accrue on any amount withheld by the Authority under this Section.
Section 6.2. Creation of Tax Increment District. The Authority and the City have created
the Tax Increment District as a "renewal and renovation district" within the meaning of the Tax
Increment Act.
Section 6.3. Tax Increment. Subject to the limitations contained in the Note and
conditioned on the creation of the Tax Increment District by the Authority and the City, the
Authority pledges to the payment of the Note the Available Tax Increment. The Redeveloper
acknowledges that the Authority has made no warranties or representations to the Redeveloper as
to the amounts of Tax Increment that will be generated or that amounts pledged pursuant to this
Section 6.3 will be sufficient to pay the Note in whole or in part. Nor is the Authority warranting
that it will have throughout the term of this Agreement and the Note the continuing legal ability
under State law to apply Tax Increment to the payment of the Note, which continued legal ability
is a condition precedent to the Authority's obligations under the Note. Notwithstanding the
foregoing, if a future change in State law reduces the amount of Available Tax Increment, the
Authority agrees that it will meet with the Redeveloper to discuss whether there exist ways in
which the effects of such reduction can be ameliorated at no cost to the Authority but the
Authority shall have no obligation to any such action unless it determines, in its sole discretion,
to do so. Tax Increment received by the Authority that is in excess of Available Tax Increment
shall be the property of the Authority and the Authority shall be free to use such excess Tax
Increment for any purpose for which such Tax Increment may be used under the Tax Increment
Act.
18
ARTICLE VII
Mortgage Financing
Section 7.1. Mortgage Financing. Before the Redeveloper commences construction of the
Minimum Improvements, the Redeveloper shall submit to the Authority evidence of a
commitment for financing, or evidence that the Redeveloper has funds, sufficient for
construction of the Minimum Improvements. If the Authority finds that the financing is
sufficiently committed, or that the Redeveloper has funds, adequate in amount to provide for the
construction of the Minimum Improvements, and subject only to such conditions as the
Authority approves then the Authority shall notify the Redeveloper in writing of its approval.
Such approval shall not be unreasonably withheld and either approval or rejection shall be given
within ten (10) days from the date when the Authority is provided the evidence of financing, or
the financing shall be deemed approved. If the Authority rejects the evidence of financing as
inadequate, it shall do so in writing specifying the basis for the rejection. In any event the
Redeveloper shall submit adequate evidence of financing within thirty (30) days after such
rejection.
Section 7.1. Limitation Upon Encumbrance of Property. Prior to the completion of the
Minimum Improvements, as certified by the Authority, neither the Redeveloper nor any
successor in interest to the Redevelopment Property, or any part thereof, shall engage in any
financing or any other transaction creating any mortgage or other encumbrance or lien upon the
Redevelopment Property, whether by express agreement or operation of law, or suffer any
encumbrances or lien to be made on or attach to the Redevelopment Property, except: (a) for the
purposes of obtaining funds only to the extent necessary for constructing the Minimum
Improvements (including, but not limited to, land and building acquisition, including the
purchase price paid, labor and materials, professional fees, real estate taxes, construction interest,
organizational and other indirect costs of development, costs of constructing the Minimum
Improvements, and an allowance for contingencies) or repaying any construction loan with
permanent financing; and (b) only upon the prior written approval of the Authority, which
approval shall not be unreasonably withheld or delayed. For the purposes of such mortgage
financing as may be made pursuant to the Agreement, the Redevelopment Property may, at the
option of the Redeveloper (or successor in interest), be divided into several parts or parcels,
provided that such subdivision, in the reasonable opinion of the Authority, is not inconsistent
with the purposes of this Agreement and is approved in writing by the Authority.
19
ARTICLE VIII
Prohibitions Against Assignment and Transfer, Indemnification
Section 8.1. Prohibition Against Transfer of Property and Assignment of Agreement. The
Redeveloper represents and agrees that prior to the completion of construction of the Minimum
Improvements, as evidenced by the issuance by the Authority of a certificate of completion:
Except by way of security for the purpose of obtaining financing necessary to enable the
Redeveloper or any successor in interest to the Redevelopment Property, or any part thereof, to
perform its obligations with respect to making the Minimum Improvements under the
Agreement, and any other purpose authorized by the Agreement, the Redeveloper (except as so
authorized) has not made or created, and will not make or create, or suffer to be made or created,
any total or partial sale, assignment, conveyance, or lease, or any trust or power, or transfer in
any other mode or form of or with respect to this Agreement or the Redevelopment Property or
any part thereof or any interest herein or therein, or any contract or agreement to do any of the
same, without the prior written approval of the Authority, which approval shall not be
unreasonably withheld or delayed.
Subsequent to completion of the Minimum Improvements the Redeveloper shall be free to
transfer the Redevelopment Property without the Authority's consent provided that the
Redeveloper notifies the Authority of the transfer, the Redeveloper provides the Authority with
copies of documents effecting the transfer, and the Redeveloper's transferee assumes the
Redeveloper's obligations under this Agreement.
In the absence of specific written agreement by the Authority to the contrary, no such
transfer or approval thereof by the Authority shall be deemed to relieve the Redeveloper, or any
other party bound in any way by this Agreement or otherwise with respect to the construction of
the Minimum Improvements, from any of its obligations with respect thereto, nor shall
Redeveloper or any other party bound by this Agreement be released from any obligations
hereunder without the written release by the Authority.
Notwithstanding anything in this Section to the contrary, the Redeveloper shall have the
right to enter into commercial leases in the ordinary course of business, covering less than all of
the building for a term of less than fifteen years, without notice to the Authority and without the
Authority's approval.
Section 8.2. Approvals. Any approval required to be given by the Authority under this
Article VIII of this Agreement may be denied only in the event that the Authority reasonably
determines that the ability of the Redeveloper to perform its obligations under this Agreement
will be materially impaired by the action for which approval is sought.
Section 8.3. Release and Indemnification Covenants. (a) The Redeveloper releases from
and covenants and agrees that the Authority and the governing body members, officers, agents,
servants and employees thereof shall not be liable for and agrees to indemnify and hold harmless
the Authority and the governing body members, officers, agents, servants and employees thereof
20
against 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 Minimum Improvements, other than caused by the
willful misconduct or negligence of the Authority or its governing body members, officers,
agents, servants and employees.
(b) Except for any willful misrepresentation, any willful or wanton misconduct, or any
negligent actions of the following named parties, or in respect to any breach of any express
representation in Section 2.1 of this Agreement, the Redeveloper agrees to protect and defend the
City and the Authority and the governing body members, officers, agents, servants and
employees thereof, now or forever, and further agrees to hold the aforesaid harmless from any
claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever
arising or purportedly arising from this Agreement, or the transactions contemplated hereby or
the acquisition, construction, installation, ownership, and operation of the Minimum
Improvements. The indemnification obligations of the Redeveloper pursuant to this subsection
shall include, but not be limited to, in any event and without regard to any fault on the part of the
Authority, any pecuniary loss or penalty (including interest thereon from the date that the loss is
incurred or penalty paid by the Authority at the rate of interest in the Note) arising out of the
Authority's creation of the Tax Increment District or the issuance and payment of the Note.
(c) The Authority and the governing body members, officers, agents, servants and
employees thereof shall not be liable for any damage or injury to the persons or property of the
company or its officers, agents, servants or employees or any other person who may be about the
Redevelopment Property or Minimum Improvements due to any act of negligence of any person
other than the Authority or its governing body members, officers, agents, servants and
employees.
(d) All covenants, stipulations, promises, agreements and obligations of the Authority
contained herein shall be deemed to be the covenants, stipulations, promises, agreements and
obligations of the Authority and not of any governing body member, officer, agent, servant or
employee of the Authority in the individual capacity thereof.
21
ARTICLE IX
Events of Default
Section 9.1. Events of Default Defined. The term "Event of Default" shall mean, whenever
it is used in this Agreement (unless the context otherwise provides), subject to Unavoidable
Delays, any failure by Redeveloper to substantially observe or perform any material covenant,
condition, obligation or agreement on its part to be observed or performed hereunder.
Section 9.2. Authority's Remedies on Default. Whenever any Event of Default by
Redeveloper referred to in Section 9.1 of this Agreement occurs, the Authority may immediately
suspend its performance under this Agreement and the Note until it receives assurances from the
Redeveloper, deemed reasonably adequate by the Authority, that the Redeveloper will cure its
default and continue its performance under the Agreement and may take any one or more of the
following actions after providing thirty (30) days written notice to the Redeveloper of the Event
of Default, but only if the Event of Default has not been cured within said thirty (30) days or if
the Event of Default is by its nature incapable of being cured within said thirty (30) days and the
Redeveloper has not provided to the Authority evidence reasonably satisfactory to the Authority
that the Event of Default will be cured and will be cured as soon as reasonably possible:
(a) Terminate this Agreement and/or the Note.
(b) Take whatever action, including legal, equitable or administrative action, which
may appear necessary or desirable to the Authority to collect any payments due under this
Agreement, or to enforce performance and observance of any obligation, agreement, or covenant
of the Redeveloper under this Agreement.
Section 9.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the
Authority or Redeveloper is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any default shall impair any
such right or power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In order to entitle
the Authority or the Redeveloper to exercise any remedy reserved to it, it shall not be necessary
to give notice, other than such notice as may be required in this Article IX.
Section 9.4. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in this Agreement should be breached by either party and thereafter waived by the
other party, such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other concurrent, previous or subsequent breach hereunder.
Section 9.5. Costs of Enforcement. Whenever any Event of Default occurs and the
Authority shall employ attorneys or incur other expenses for the collection of payments due or to
become due or for the enforcement of performance or observance of any obligation or agreement
22
on the part of the Redeveloper under this Agreement and the Authority prevails in such action or
effort, the Redeveloper agrees that it shall, within thirty (30) days of written demand by the
Authority pay to the Authority the reasonable fees of such attorneys and such other expenses so
incurred by the Authority.
23
ARTICLE X
Additional Provisions
Section 10.1. Representatives Not Individually Liable. No member, official, or employee
of the Authority shall be personally liable to the Redeveloper, or any successor in interest, in the
event of any default or breach or for any amount which may become due to the Redeveloper or
successor on account of any obligations under the terms of the Agreement.
Section 10.2. Equal Employment Opportunity. The Redeveloper, for itself and its
successors and assigns, agrees that during the construction of the Minimum Improvements
provided for in the Agreement it will comply with all applicable federal, state and local equal
employment and non-discrimination laws and regulations.
Section 10.3. Restrictions on Use. The Redeveloper agrees for itself, and its successors
and assigns, and every successor in interest to the Redevelopment Property, or any part thereof,
that the Redeveloper, and such successors and assigns, shall until the Maturity Date devote the
Redevelopment Property to, and only to and in accordance with, the uses specified in the
Redevelopment Plan and this Agreement.
Section 10.4. Titles of Articles and Sections. Any titles of the several parts, Articles, and
Sections of the Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 10.5. Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand, or other communication under the Agreement by either party to
the other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally; and
(a) in the case of the Redeveloper, is addressed to or delivered personally to the
Redeveloper at 321 First Avenue N., Minneapolis, Minnesota 55401; and
(b) in the case of the Authority, is addressed to or delivered personally to the Authority
at, 4401 Xylon Avenue North, New Hope, Minnesota 55428
or at such other address with respect to either such party as that party may, from time to time,
designate in writing and forward to the other as provided in this Section.
Section 10.6. Disclaimer of Relationships. The Redeveloper acknowledges that nothing
contained in this Agreement nor any act by the Authority or the Redeveloper shall be deemed or
construed by the Redeveloper or by any third person to create any relationship of third -party
beneficiary, principal and agent, limited or general partner, or joint venture between the
Authority and the Redeveloper and/or any third party.
Section 10.7. Modifications. This Agreement may be modified solely through written
amendments hereto executed by the Redeveloper and the Authority.
24
Section 10.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 10.9. Judicial Interpretation. Should any provision of this Agreement require
judicial interpretation, the court interpreting or construing the same shall not apply a presumption
that the terms hereof shall be more strictly construed against one party by reason of the rule of
construction that a document is to be construed more strictly against the party who itself or
through its agent or attorney prepared the same, it being agreed that the agents and attorneys of
both parties have participated in the preparation hereof.
Section 10.10. Effect of Termination. In the event that this Agreement is terminated
pursuant to any provision hereof, including, without limitation, Section 6.2, 3.4, or 9.2 or by
court order, all provisions hereof shall terminate except that the Redeveloper's representations
and agreements under Section 2.2, Section 3.5 (with respect to costs incurred prior to such
termination) and Section 8.2 and the Authority's representations under Section 2.1 shall survive
such termination and any cause of action arising hereunder prior to such termination shall not be
affected.
25
IN WITNESS WHEREOF, the Authority has caused this Agreement to be duly executed
in its name and behalf and the Redeveloper has caused this Agreement to be duly executed in its
name and behalf on or as of the date first above written.
NEW HOPE ECONOMIC
DEVELOP ENT AUTH,,ORITY
B �c��
y
z
Byr- . h-��6
INDUSTRIAL EQUITIES - NEW HOPE,
LLC
B�
*JoAAllen, Chief Manager
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged befo e me thisday of 6C&%&r
2015, by A:�O-t h : H k 4tke v1 and rk rn ,the
President and Executive Director of the New Hope Economic Development Authority, a public
body politic and corporate under the laws of the state ofyinnesota.
STATE OF /1'A/Q-:-04t, )
COUNTY OF Le-j,.,j�l)SS. )
Notary Public '
The foregoing instrument was acknowledged before me this 4 day of December 2015, by
John N. Allen, the Chief Manager of Industrial Equities - New Hope, LLC, a Minnesota limited
liability company, on behalf of the limited liability company.
Notary Public
DREw L. KAsaw
NOTARY PUKJC
MINNESOTA
so
cmMoss ll Fein. Awwr M. ion
26
SCHEDULE A
Description of Redevelopment Property
Lot 1, Block 1, Brandell Fourth Addition, City of New Hope, Hennepin County, State of
Minnesota
A-1
SCHEDULE B
S
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF HENNEPIN
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
LIMITED REVENUE TAX INCREMENT NOTE
(INDUSTRIAL EQUITIES - NEW HOPE, LLC PROJECT)
The New Hope Economic Development Authority (the "Authority"), hereby acknowledges
itself to be indebted and, for value received, promises to pay to the order of Industrial Equities —
New Hope, LLC, a Minnesota limited liability company, or its permitted assigns (the "Owner"),
solely from the source, to the extent and in the manner hereinafter provided, the principal amount
of this Note, being Dollars ($ )
(the "Principal Amount"), together with interest as described herein commencing on August 1,
2018, and continuing on each February 1 and August 1 thereafter until February 1, 2033 (the
"Scheduled Payment Dates"). From and after the date of this Note simple non -compounding
interest at the rate four and one half percent (4.5%)shall accrue on the outstanding Principal
Amount until this Note has been paid in full or terminated in accordance with its terms. Interest
shall be computed on the basis of a 360 day year consisting of twelve (12) thirty (30) day
months.
Each payment on this Note is payable in any coin or currency of the United States of
America which on the date of such payment is legal tender for public and private debts and shall
be made by check or draft made payable to the Owner and mailed to the Owner at its postal
address within the United States which shall be designated from time to time by the Owner.
The Note is a special and limited obligation and not a general obligation of the Authority,
which has been issued by the Authority pursuant to and in full conformity with the Constitution
and laws of the State of Minnesota, including Minnesota Statutes, Section 469.178, subdivision
4, to aid in financing a "project", as therein defined, of the Authority consisting generally of
defraying certain public redevelopment costs incurred and to be incurred by the Authority within
and for the benefit of its Redevelopment Project No. 1 (the "Project").
THIS NOTE IS NOT A DEBT OF THE CITY OF NEW HOPE OR THE STATE
OF MINNESOTA (THE "STATE"), AND NEITHER THE CITY, THE STATE NOR
ANY POLITICAL SUBDIVISION THEREOF SHALL BE LIABLE ON THE NOTE,
NOR SHALL THIS NOTE BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES
OTHER THAN THE AVAILABLE TAX INCREMENT, AS DEFINED BELOW.
The Scheduled Payment of this Note due on any Scheduled Payment Date is payable
solely from and only to the extent of Available Tax Increment, which consists of a portion of the
real
property taxes received as tax increment by the Authority with respect to that certain real
property described in the attached Exhibit A (hereinafter referred to as the "Redevelopment
Property"). Available Tax Increment, with respect to each Scheduled Payment Date, shall have
the meaning given to such term in that certain Contract for Private Redevelopment between the
Authority and the Owner dated as of , 2015 (the "Contract") .
The Authority shall not be in default under this Note for failure to make a Scheduled Payment
using the Available Tax Increment and no interest shall accrue with respect to the Scheduled
Payment not made until a date thirty (30) days after the Authority receives written demand for
such payment from the Owner; provided, that the Authority shall endeavor to make Scheduled
Payments when due or as soon as possible after receipt of the Owner's written demand.
The Authority shall pay on each Scheduled Payment Date to the Owner the Available
Tax Increment. All payments made by the Authority shall be applied first to accrued interest and
then to the Principal Amount. On the earlier of (i) when the Principal Amount and all accrued
interest has been paid or (ii) February 1, 2033, after the payment is made on such date, this Note
shall terminate and the Authority shall have no further obligations hereunder. Notwithstanding
the foregoing, if Hennepin County fails to pay the Authority by February 1, 2033, tax increment
derived from taxes timely paid in 2032, the Authority will make the payment to the Owner,
otherwise due on February 1, 2033, as soon as practical after the Hennepin County pays such tax
increment to the Authority.
The Authority's obligations herein are subject to the terms and conditions of the Contract.
Subject to Section 9.2 of the Contract, the Authority's payment obligations hereunder shall be
suspended and this Note may be terminated by the Authority upon the occurrence of an Event of
Default as provided in Section 9.1 of the Contract, which Contract is incorporated herein and
made a part hereof by reference. Upon such termination, the Authority's obligations to make
further payments hereunder shall be discharged. Such termination may be accomplished by the
Authority's giving of written notice to the then registered owner of this Note, as shown on the
books of the Authority.
This Note shall not be payable from or constitute a charge upon any funds of the
Authority, and the Authority shall not be subject to any liability hereon or be deemed to have
obligated itself to pay hereon from any funds except the Available Tax Increment, and then only
to the extent and in the manner herein specified.
The Owner shall never have or be deemed to have the right to compel any exercise of any
taxing power of the Authority or of any other public body, and neither the Authority nor any
director, commissioner, council member, board member, officer, employee or agent of the
Authority, nor any person executing or registering this Note shall be liable personally hereon by
reason of the issuance or registration hereof or otherwise.
This Note shall not be transferable or assignable, in whole or in part, by the Owner
without the prior written consent of the Authority, which consent shall not be unreasonably
withheld or delayed.
This Note is issued pursuant to Resolution of the Authority and is entitled to the
benefits thereof, which resolution is incorporated herein by reference.
IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things
required by the Constitution and laws of the State of Minnesota to be done, to have happened,
and to be performed precedent to and in the issuance of this Note have been done, have
happened, and have been performed in regular and due form, time, and manner as required by
law; and that this
Note, together with all other indebtedness of the Authority outstanding on the date hereof and on
the date of its actual issuance and delivery, does not cause the indebtedness of the Authority to
exceed any constitutional or statutory limitation thereon.
IN WITNESS WHEREOF, the New Hope Economic Development Authority, by its
Board of Commissioners, has caused this Note to be executed by the manual signatures of the
President and Executive Director of the Authority and has caused this Note to be dated
, 201_.
EXHIBIT A TO NOTE
Description of Redevelopment Property
Lot 1, Block 1, Brandell Fourth Addition, City of New Hope, Hennepin County, State of
Minnesota
SCHEDULE C
Description of Site Improvements
The Site Improvements consist of the demolition of the existing building on the Redevelopment
Property, the filling and compaction of the resulting hole, and the disposal of hazardous
materials, and any other work described in the VEIT proposal of September 11, 2015 (estimated
cost of $252,923), a copy of which has been supplied to Authority. However, the principal
amount of the Site Improvements to be reimbursed by the Authority pursuant to the issuance of
the Note shall be limited to $250,000.
C-1
FIRST AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT
THIS FIRST AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT
("Amendment") is made on or as of the a3 day of , 2016, by and between
the New Hope Economic Development Authority, a public bo y corporate and politic (hereinafter
referred to as the "Authority"), having its principal office at 4401 Xylon Avenue North, New Hope,
Minnesota 55428, and Industrial Equities — New Hope, LLC, a Minnesota limited liability
company (hereinafter referred to as the "Redeveloper"), having its principal office at 321 First
Avenue N., Minneapolis, Minnesota 55401.
WHEREAS, the Authority and Redeveloper have entered into that certain Contract for
Private Redevelopment dated as of December 21, 2015 (the "Agreement") pursuant to which the
Authority agreed to provide financial assistance in the form of tax increment financing to defray a
portion of the costs incurred by the Redeveloper in redeveloping certain real property located in
the City of New Hope, Minnesota (the "Redevelopment Property"); and
WHEREAS, in the course of undertaking the demolition of the improvements and structures
located on the Redevelopment Property the Redeveloper encountered adverse subsoil conditions
that were more extensive than had been anticipated; and
WHEREAS, the Redeveloper has requested that the Authority increase the amount of
financial assistance to be provided to the Redeveloper pursuant to the Agreement to offset a portion
of the cost of curing such adverse subsoil conditions:
WHEREAS, the Authority has considered the request by the Redeveloper and has agreed
to increase the amount of financial assistance to be provided pursuant to the Redeveloper because
by doing so it will enhance the viability of the Redeveloper's development on the Redevelopment
Property.
NOW THEREFORE, the Authority and the Redeveloper do hereby agree as follows:
Section 1. All capitalized terms used in this Amendment, not defined in this
Amendment, shall have the meaning of such terms in the Agreement.
Section 2. During the process of preparing the Redevelopment Property for the
construction of the Minimum Improvements the Redeveloper discovered certain adverse subsoil
conditions that must be remediated in order to allow the construction of the Minimum
Improvements. A description of the work to be done to correct the subsoil conditions to allow the
construction of the Minimum Improvements is contained on Exhibit A to this Amendment. The
Redeveloper has represented that the cost of such work will be $300,000. The Authority is willing
to increase the principal amount of the Note to be issued pursuant to the Agreement to offset a
portion of the costs actually incurred and paid by the Redeveloper for the cost of correcting the
adverse subsoil conditions. Therefore, there will be added to the principal amount of the Note to
be issued in accordance with the terms of the Agreement an amount equal to two-fifths (2/5s) of
the amount actually incurred and paid by the Redeveloper to correct the adverse subsoil conditions,
up to a maximum principal increase of $120,000. The Redeveloper shall provide to the Authority
such invoices, certifications and other documentation as the Authority may require to document
the amount of such costs that have been incurred and paid by the Redeveloper. If the amount
incurred and paid by the Redeveloper for such subsoil remediation work is less than $300,000,
then the increase in the principal amount of the Note that would otherwise be issued pursuant to
the Agreement will be limited to two-fifths (2/5s) of such lesser amount. All requirements and
conditions precedent relating to the issuance of the Note in the principal amount of $250,000, as
contemplated by the Agreement prior to this Amendment, shall remain in effect. The maximum
principal amount of the Note to be issued pursuant to the Agreement, as amended by this
Amendment, is $370,000.
Section 3. All other provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Authority has caused this Amendment to be duly executed
in its name and behalf and the Redeveloper has caused this Amendment to be duly executed in its
name and behalf on or as of the date first above written.
STATE OF MINNESOTA)
)SS.
COUNTY OF HENNEPIN)
NEW HOPE ECONOMIC
DEVELOP ENT AUTHORITY
By
INDUSTRIAL EQUITIES — NEW HOPE,
LLC /
ohn N. Allen, Chief Manager
The foregoing instrument was acknowledged before me thisn�3 day of, 2016, by
Ko -au t) I.�Ge i �- and iG iTI c �� 4 5 tVie President
and Executive Director of the New Hope Economic Development Authority, a public body politic
and corporate under the laws of the state of Minnesota. V-) C
Notary Public
STATE OF 1Y)r) )
SS. VALERIE LEONE
NOTARY PUBUC•MINNESOTA
COUNTY OF i 1 i MyCmmWmE)#msJan.31,2020
The foregoing instrument was acknowledged before me thi ,B day of , 2016, by
John N. Allen, the Chief Manager of Industrial Equities — New Hope, LLC, a Minn sota limited
liability company, on behalf of the company.
Notary Public
EXHIBIT A
Description of Subsoil Remediation Work
ARNT CONSTRUCTION
P.O. BOX 549
OFFICE: 651/426-1296
To: Tom Ryan, RJ Ryan Construction
From: Nicholas J. Arnt, P.E.
Fax #: tiyan@rjryan.com
Re: New Hope Industrial Center
Date: April 19, 2016
Pages: 1 Page(s) including cover sheet
, X t i�, � L
COMPANY INC.
HUGO, MINNESOTA 55038
FAX: 651/426-3760
We are pleased to provide a breakdown of our bid on the above referenced project. Our is as
follows:
Earthwork $73,600.00
Soil Correction $426,400.00 (Export 20,700 CY Import 23,000 CY LV)
Utilities $125,000.00
If you have any questions please don't hesitate to call.
An Equal Opportunity Employer
ME8:14!1
Request for Action
May 23, 2016
Approved by: Kirk McDonald, City Manager
Originating Department: Community Development
By: Aaron Chirpich, CD Specialist
Agenda Section
EDA
Item Number
4
Agenda Title
Resolution authorizing the execution of a first amendment to contract for private redevelopment with
Industrial Equities, New Hope, LLC (improvement project no. 971).
Requested Action
A request for additional TIF assistance has been made by the owner of the Industrial Equities New Hope
project. Staff requests the EDA approve a resolution approving an amendment to the original redevelopment
contract with Industrial Equities New Hope, LLC. The proposed amendment will authorize payment of
additional TIF assistance to the project.
Policy/Past Practice
Over the years, the city has re -negotiated the terms of redevelopment agreements once a project has started.
When redeveloping sites that contain older buildings, it is not unusual to encounter adverse site conditions
that were unknown prior to the commencement of construction activities. When such situations arise, it is
common practice for the Council to amend redevelopment agreements if warranted.
Background
In early 2015, Industrial Equities purchased the vacant and distressed industrial building located at 9449
Science Center Drive with the intent of redeveloping the site. Shortly after acquisition, the owner approached
the EDA with a request for TIF assistance to pay for demolition, abatement and soil corrections on the site.
The original amount requested was $250,000. In November of 2015, the EDA agreed to support the project by
providing the requested amount of assistance. Subsequently, the Industrial Equities TIF district was
established and the project moved toward completion.
Demolition of the building and clearing of all other site improvements began in late February of 2016.
Following the demolition of the primary building, the excavating contractor discovered unexpected poor
soils beneath the building and around the perimeter of the foundation. Engineers that have examined the site
speculate that the building was built in a natural depression in order to limit the amount of excavation
needed to accommodate the original basement. The footings of the former building extended well below the
basement slab. The deeper than usual footings were built in an effort to compensate for the poor soil
conditions that were not remediated at the time of construction in 1960. Because the poor soils were found
beneath the building, it would have been impossible to plan for such a find. Extensive soil borings were
completed by the owner on the balance of the site prior to requesting assistance from the EDA.
As a result of encountering the poor soils underneath the building, the owner has requested that the EDA
increase the amount of TIF assistance for the project. The estimated cost increase for the additional soil
corrections is $300,000.
The Industrial Equities Renewal and Renovation TIF District has a maximum duration of 16 years. Based
upon current estimates, the repayment term for the original $250,000 TIF note is 10 years. The EDA can
choose to extend the duration of the assistance to include the full 16 years. Increasing the duration of the
I:\RFA\COMM DEV\Development\Q & R Amendment to Industrial Equities TIF Agreement 5-23-16 Project 971.docx
Request for Action, Page 2
district could provide the developer with an additional $120,000 to help pay for the additional soil
corrections.
Staff from Ehlers has assessed the request for additional assistance, and they have found that the request is
reasonable. If additional assistance is provided, the projected cash -on -cost return to the developer would
actually decrease. Therefore, providing additional funding will not unduly enrich the developer.
Recommendation
The Council reviewed the request for additional TIF assistance at the 4/18 work session. The majority of the
Council was supportive of the request and advised staff to proceed with drafting an amendment that would
authorize the additional assistance. As such, staff recommend that the EDA approves the attached resolution
approving an amendment to the redevelopment contract with Industrial Equities. The key provisions and
outcomes of the amendment are as follows:
• The maximum amount of additional assistance (applied to the TIF note principle) is capped at
$120,000.
• The owner will have to certify all costs for additional soil correction work.
• If the actual costs incurred by the owner for additional soil corrections are less than the estimated
$300,000, the amount of additional TIF assistance provided by the City will decrease proportionally.
• The duration of the TIF district will be extended to the full 16 years allowed by statute.
Attachments
• Resolution
• Draft Amendment
• Ehlers Memo
• Work Session Minutes 4/18/16
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION NO. 16- 10
RESOLUTION AUTHORIZING THE EXECUTION OF A FIRST AMENDMENT TO
CONTRACT FOR PRIVATE REDEVELOPMENT WITH INDUSTRIAL EQUITIES —
NEW HOPE, LLC
(IMPROVEMENT PROJECT NO. 971)
BE IT RESOLVED BY THE BOARD OF COMMISSIONERS OF THE NEW HOPE
ECONOMIC DEVELOPMENT AUTHORITY (the "Authority") AS FOLLOWS:
WHEREAS, the Authority and the City of New Hope, Minnesota (the "City") have entered
into a Contract for Private Redevelopment (the "Contract") with Industrial Equities — New Hope,
LLC (the "Redeveloper"), providing for the redevelopment of certain real property located within
the City (the "Redevelopment Property") through the construction of an office/warehouse
development thereon (the "Minimum Improvements"); and
WHEREAS, in the course of preparing the Redevelopment Property for the construction of
the Minimum Improvements the Redeveloper discovered certain unforeseen adverse soil
conditions on the Redevelopment Property that will require the expenditure of a substantial amount
of additional funds to remediate; and
WHEREAS, the Redeveloper has requested that the Authority consider increasing the
amount of the financial assistance being provided by the Authority under the Contract to offset a
portion of the cost of remediating the adverse soil conditions; and
WHEREAS, the Authority has considered the Redeveloper's request and believes that it is
in its best interest to provide certain additional assistance to the Redeveloper; and
WHEREAS, there has been presented to the Authority's Board of Commissioners a
proposed First Amendment to Contract For Private Redevelopment (the "Amendment") between
the Authority and the Redeveloper setting forth the terms of the Authority's provision of additional
financial assistance to the Redeveloper in connection with the remediation of the adverse soil
conditions discovered on the Redevelopment Property.
NOW, THEREFORE, be it hereby resolved by the Board of Commissioners of the
Authority that he appropriate officers of the Authority are hereby authorized to execute the
Amendment in substantially the form presented to the Board of Commissioners, subject to such
non -substantive changes as may be approved by the Executive Director and the Authority's legal
counsel
Adopted this <3ild day of May, 2016.
Attest:
Presi ent
Memo
To: Jeff Sargent, Community Development Director
From: Jason Aarsvold, Ehlers
Date: April 13, 2016
Subject: Analysis of Request for Additional Assistance — Industrial Equities: 9449
Science Center Drive
In June of 2015, the City received a proposal from Industrial Equities to redevelop the property
at 9449 Science Center Drive. The proposed project included demolition of the existing
structure, environmental remediation, soil corrections, and construction of a new, 48,000 square
foot office/warehouse building.
After determining the project could not commence as envisioned without assistance, The City
Council and Economic Development Authority approved a Plan for the Industrial Equities Tax
Increment Financing (TIF) District on November 23`d, 2016. At the same time, the EDA
approved a Contract for Private Redevelopment (CPR) with Industrial Equities — New Hope,
LLC.
Following this approval, Industrial Equities proceeded with demolition of the existing structure.
During this process, the developer encountered subsurface soil conditions that were much
worse than assumed previously, requiring corrections that will add approximately $300,000 to
the project budget. A review of the bids for this work verified the increased cost.
Industrial Equities requested consideration of additional funding as a means to off -set these
unanticipated expenses. The City may, at its discretion, choose to consider this request.
Outlined below is an assessment of the maximum potential assistance available given the
duration limit of the existing TIF district, and a revised analysis of the developer's pro forma.
Maximum Available TIF
The Industrial Equities TIF District is a Renewal and Renovation district with a maximum
duration of 16 years. After reviewing the developer's pro forma and extraordinary
redevelopment costs, the maximum present value amount of assistance was set at $250,000,
which is reflected in the executed CPR. Based on current estimates, a TIF note issued in this
amount could be repaid within approximately 10 years.
The City Council and EDA can choose to extend the duration of the assistance to include the full
16 years. Based on our estimates, doing so could increase the present value amount of the TIF
note by $120,000.
EHLERS
LEADERS IN PUBLIC FINANCE
w vw.ehlers-inc.com
Minnesota phone 651-697-8500 3060 Centre Pointe Drive
Offices also in Wisconsin and Illinois fax 651-697-8555 Roseville, MN 55113-1122
toll free 800-552-1171
Jeff Sargent, Director of Community Development
Analysis of Request For Additional Assistance — Industrial Equities
April 13, 2016
Page 2
Analysis
Ehlers' initial "but -for" analysis concluded a TIF note in the amount of $250,000 was warranted
based on the actual anticipated qualified redevelopment costs and the fact that the anticipated
return on investment was below typical industry standards. Using the revised project cost
assumptions, we updated this analysis to evaluate the impact on these measures.
Extending the TIF payments to the full 16 year duration of the district could increase the present
value amount of the TIF note by $120,000. This covers approximately 40% of the additional
$300,000 in qualified redevelopment costs. The table below summarizes the cash on cost rate
of return given the various scenarios considered.
umu We Cash o"Jwtn
• • Cost R :urn (year 16)
E)asting $250,000 TIF Note, before additional soil costs 5.38%
Added soil costs without additional TIF 5.06%
Added soil costs with 16 years of TIF 5.32%
The project, as envisioned before discovering the increased costs, was projected to achieve a
cumulative 5.38% cash -on -cost return with $250,000 in city assistance. As the table shows, if
the city chooses to provide 16 years of assistance, the projected return will still be below what
was anticipated in the current agreement.
Conclusion
The City has complete discretion as it relates to the request for additional assistance from the
developer and is obligated only by the terms of the existing CPR. Our analysis confirms the City
does have some ability to provide additional assistance if desired. In addition, given the revised
project costs and resulting impact on the project's return on investment, we conclude that
providing the full 16 years of TIF would not unduly enrich the developer. With the added
assistance, the developer's return is still less than what had been projected before discovering
the increased expenses.
If you have any questions, please feel free to contact me at 651-697-8512.
result in a cost savings. Chief Larson stated the savings by eliminating a station would
be a revenue of approximately $800,000 from the sale of assets. She stated it would not
affect the response time (first unit on scene) but could affect the first engine on scene.
Mayor Hemken emphasized the data is only being collected at this point. Mr.
McDonald stated it may be beneficial to obtain community input. Council Member
London commended Chief Larson for exploring various issues. Chief Larson spoke of
the need to consider the need for fire services while being fiscally responsible.
Council Member Hoffe congratulated West Metro for the successful recruiting efforts.
Mr. McDonald commended Chief Larson and staff for keeping station 3 in good repair.
IMP. PROJECT 971 Mayor Hemken introduced for discussion item 11.3, Discuss a request to increase the
Item 11.3 amount of TIF assistance for the Industrial Equities redevelopment project at 9449
Science Center Drive (improvement project no. 971).
Mr. Aaron Chirpich, community development specialist, provided background of the
project. He stated in early 2015, Industrial Equities purchased the vacant and distressed
industrial building located at 9449 Science Center Drive with the intent of redeveloping
the site. He stated the city provided $250,000 in TIF assistance to pay for demolition,
abatement and soil corrections on the site. He stated demolition of the building and
clearing of all other site improvements began in late February of 2016. Following the
demolition of the primary building, the excavating contractor discovered unexpected
poor soils beneath the building and around the perimeter of the foundation. Engineers
who have examined the site speculate the building was built in a natural depression in
order to limit the amount of excavation needed to accommodate the original basement.
The footings of the former building extended well below the basement slab. The deeper
than usual footings were built in an effort to compensate for the poor soil conditions
that were not remediated at the time of construction in 1960. Because the poor soils
were found beneath the building, it would have been impossible to plan for such a
find.
Mr. Chirpich stated the owner has notified staff there is an additional $300,000 of soil
correction work needed on the property due to poor soils discovered underneath the
building.
Mr. Chirpich stated the Industrial Equities Renewal and Renovation TIF District has a
maximum duration of 16 years. Based upon current estimates, the repayment term for
the original $250,000 TIF note is 10 years. The City Council can choose to extend the
duration of the assistance to include the full 16 years. Increasing the duration of the
district could provide the developer with an additional $120,000 to help pay for the
additional soil corrections. He indicated staff from Ehlers has assessed the request for
additional assistance and have found the request reasonable. If additional assistance is
provided, the projected cash on cost return to the developer would actually decrease.
Therefore, providing additional funding will not unduly enrich the developer. He
stated the City Council has complete discretion in this matter and is obligated only by
the terms of the existing development agreement. Mr. Chirpich indicated at this point
staff is seeking direction from the Council. If Council desires to amend the agreement,
City Council Work Session April 18, 2016
Page 3
the item would be presented at a future council meeting. Mr. Chirpich indicated Jason
Aarsvold from Ehlers is available for questions.
Mr. John Allen and Matt Allen from Industrial Equities were recognized. Mr. John
Allen pointed out the only way the condition would have been known is if borings
could have been done through the building's floor. He indicated the poor soils compel
him to ask for additional TIF assistance to assist with additional excavation and
grading costs.
Mr. Jason Aarsvold, Ehlers, indicated the extra work is justified and by extending the
duration of assistance to include the full 16 years it would increase the present value
amount of the TIF note by $120,000. He stated this covers approximately 40% of the
additional $300,000 in qualified redevelopment costs. He also reported on the cash- on-
cost rate of return (the existing $250,000 TIF note (10 years) will achieve a cumulative
5.38% cash -on -cost return compared to 5.32% for 16 years of assistance).
Council Member London indicated he does not support additional funding. He
commented Mr. Allen was aware the site had environmental issues. Discussion ensued
regarding the value of the property.
Mayor Hemken pointed out if the additional costs are $300,000 and the additional TIF
assistance is $120,000, the developer must absorb the difference of $180,000.
Council Member Lammle commented this instance is not the first time developers have
encountered poor soils, and it is not the first time the Council has considered additional
funding in order to accomplish a development. He provided full support of the request
to move the project forward. Council Members Elder and Hoffe concurred.
Mr. Allen indicated the development will be unique and beneficial for New Hope. He
thanked the Council for their understanding and support.
Mr. Jeff Sargent, director of community development, indicated the issue will be
presented to Council sometime in May.
PERFORMANCE Mayor Hemken introduced for discussion item 11.4, Update on Performance
MEASUREMENT Measurement Report.
REPORT
Item 11.4 Mr, Kirk McDonald, city manager, stated Jeff Alger has updated the report with 2015
data, and the report now contains three years of data. He stated staff would like to
publish the report on the city's website.
Mr. Jeff Alger, community development assistant, stated the Performance
Measurement Report was first presented in November of 2015. He reported since that
time nearly all data for 2015 has been added to the report. He reviewed the new data
contained in the report dated March 18, 2016. He commented regarding the challenge
to obtain comparable data from other cities.
Mayor Hemken requested hard copies of the report for all council members.
City Council Work Session April 18, 2016
Page 4
FIRST AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT
THIS FIRST AMENDMENT TO CONTRACT FOR PRIVATE REDEVELOPMENT
("Amendment") is made on or as of the A,3 day of 131 , 2016, by and between
the New Hope Economic Development Authority, a public bo y corporate and politic (hereinafter
referred to as the "Authority"), having its principal office at 4401 Xylon Avenue North, New Hope,
Minnesota 55428, and Industrial Equities — New Hope, LLC, a Minnesota limited liability
company (hereinafter referred to as the "Redeveloper"), having its principal office at 321 First
Avenue N., Minneapolis, Minnesota 5 540 1.
WHEREAS, the Authority and Redeveloper have entered into that certain Contract for
Private Redevelopment dated as of December 21, 2015 (the "Agreement") pursuant to which the
Authority agreed to provide financial assistance in the form of tax increment financing to defray a
portion of the costs incurred by the Redeveloper in redeveloping certain real property located in
the City of New Hope, Minnesota (the "Redevelopment Property"); and
WHEREAS, in the course of undertaking the demolition of the improvements and structures
located on the Redevelopment Property the Redeveloper encountered adverse subsoil conditions
that were more extensive than had been anticipated; and
WHEREAS, the Redeveloper has requested that the Authority increase the amount of
financial assistance to be provided to the Redeveloper pursuant to the Agreement to offset a portion
of the cost of curing such adverse subsoil conditions:
WHEREAS, the Authority has considered the request by the Redeveloper and has agreed
to increase the amount of financial assistance to be provided pursuant to the Redeveloper because
by doing so it will enhance the viability of the Redeveloper's development on the Redevelopment
Property.
NOW THEREFORE, the Authority and the Redeveloper do hereby agree as follows:
Section 1. All capitalized terms used in this Amendment, not defined in this
Amendment, shall have the meaning of such terms in the Agreement.
Section 2. During the process of preparing the Redevelopment Property for the
construction of the Minimum Improvements the Redeveloper discovered certain adverse subsoil
conditions that must be remediated in order to allow the construction of the Minimum
Improvements. A description of the work to be done to correct the subsoil conditions to allow the
construction of the Minimum Improvements is contained on Exhibit A to this Amendment. The
Redeveloper has represented that the cost of such work will be $300,000. The Authority is willing
to increase the principal amount of the Note to be issued pursuant to the Agreement to offset a
portion of the costs actually incurred and paid by the Redeveloper for the cost of correcting the
adverse subsoil conditions. Therefore, there will be added to the principal amount of the Note to
be issued in accordance with the terms of the Agreement an amount equal to two-fifths (2/5s) of
the amount actually incurred and paid by the Redeveloper to correct the adverse subsoil conditions,
up to a maximum principal increase of $120,000. The Redeveloper shall provide to the Authority
such invoices, certifications and other documentation as the Authority may require to document
the amount of such costs that have been incurred and paid by the Redeveloper. If the amount
incurred and paid by the Redeveloper for such subsoil remediation work is less than $300,000,
then the increase in the principal amount of the Note that would otherwise be issued pursuant to
the Agreement will be limited to two-fifths (2/5s) of such lesser amount. All requirements and
conditions precedent relating to the issuance of the Note in the principal amount of $250,000, as
contemplated by the Agreement prior to this Amendment, shall remain in effect. The maximum
principal amount of the Note to be issued pursuant to the Agreement, as amended by this
Amendment, is $370,000.
Section 3. All other provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Authority has caused this Amendment to be duly executed
in its name and behalf and the Redeveloper has caused this Amendment to be duly executed in its
name and behalf on or as of the date first above written.
STATE OF MINNESOTA)
)SS.
COUNTY OF HENNEPIN)
NEW HOPE ECONOMIC
DEVELOPMENT AUTHORITY
By �
By,� `+
INDUSTRIAL EQUITIES - NEW HOPE,
LLC
By
John . Allen, Chief Manager
// The foregoing instrument was acknowledged before me this day ofd Ut 2016, by
IWA; ff I t tJa-e ti- and /YL bo-MLt-4 td President
and Executive Director of the New Hope Economic Development Authority, a public body politic
and corporate under the laws of the state of Minnesota _ y-:,
Notary Public
STATE OF
S S . VALERIE LEONE
COUNTY OF {,lr✓ NOIARYPUBUC•MJNNESOTA
" My Commission Expires Jen. 31,22-31, "^,
The foregoing instrument was acknowledged before me thiso73 day of�' 2016, by
John N. Allen, the Chief Manager of Industrial Equities - New Hope, LLC, a Minnesota limited
liability company, on behalf of the company.
Notary Public
----------
-------------------
9VALERIE LEONE
NOTARY PUBLIC - MINNESOTA
My Commission Expires Jan. 31, 2020 '
EXHIBIT A
Description of Subsoil Remediation Work
ARNT CONSTRUCTION
P.O. BOX 549
OFFICE: 651/426-1296
To: Tom Ryan, RJ Ryan Construction
From: Nicholas J. Arnt, P.E.
Fax #: tryan@rjryan.com
Re: New Hope Industrial Center
Date: April 19, 2016
Pages: 1 Page(s) including cover sheet
COMPANY INC.
HUGO, MINNESOTA 55038
FAX: 651/426-3760
We are pleased to provide a breakdown of our bid on the above referenced project. Our is as
follows:
Earthwork $73,600.00
Soil Correction $426,400.00 (Export 20,700 CY Import 23,000 CY LV)
Utilities $125,000.00
If you have any questions please don't hesitate to call.
An Equal Opportunity Employer
Hennepin
June 30, 2016
Hennepin County
Taxpayer Services Department
Property Tax
A-600 Government Center
300 South Sixth Street
Minneapolis MN 55487 www.hennepin.us
Jeff Sargent
4401 Xylon Ave North
New Hope, MN 55428
Dear Mr. Sargent:
Enclosed is the Certification as to Original Tax Capacity and Original Tax Capacity Rate of Real
Property in the Industrial Equities Tax Increment Financing District as follows, in the City of New Hope:
Industrial. Equities Tax Increment Financing District (County No. 1618)
Original Tax Capacity: $ 7,250
Original Tax Capacity Rate: 146.063%
Attached to the Certification, and identified as Exhibit A, is a list of the parcels of real property in TIF
District No. 1618, and the Estimated Market Value and Original Tax Capacity determined for those
parcels as of January 2, 2015, this being the estimated market value most recently certified by the
Commissioner of Revenue as of June 15, 2016, the date when the certification request was received.
Sincerely,
Shawn Wink Sr. Special Property Tax Administrator
Property Tax Division
Resident and Real Estate Services Department
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STATE OF MINNESOTA)
)ss
COUNTY OF HENNEPIN)
CERTIFICATION AS TO ORIGINAL TAX CAPACITY AND ORIGINAL TAX CAPACITY RATE OF
REAL PROPERTY IN THE INDUSTRIAL EQUITIES TAX INCREMENT FINANCING DISTRICT
(COUNTY NO. 1618) IN THE CITY OF NEW HOPE.
I, the undersigned, being duly deputized by the Director of the Resident and Real Estate
Services Department of Hennepin County, Minnesota, hereby certify to the New Hope EDA, in
accordance with the request of said Authority and pursuant to the provisions of Minnesota
Statutes, Section 469.177, Subdivision 1, that the original tax capacity of all real property in the
Industrial Equities Tax Increment Financing District (County No. 1618) is $7,250 and the Original
Tax Capacity Rate is 146.063%.
I also certify that the foregoing original tax capacity is comprised of the tax capacity of
each parcel of real property within the above designated Tax Increment Financing District as
determined by the assessment as of January 2, 2015, this being the estimated market value most
recently certified by the Commissioner of Revenue as of June 15, 2016 the date when the
certification request was received.
I also certify that attached hereto as Exhibit A and made a part of this certification is a full,
true and complete list of all parcels of real property comprising the Industrial Equities Tax
Increment Financing District (County No. 1618) and of the original tax capacity determined for
each parcel and included in the aggregate amount stated above.
WITNESS my hand and official seal this 30th day, June, 2016.
(SEAL)
Shawn Wink, Sr. Special Property Tax Administrator
Resident and Real Estate Services Department, Hennepin County
CITY OF NEW HOPE
SITE IMPROVEMENT AGREEMENT
THIS AGREEMENT is entered into by and among Industrial Equities - New Hope, LLC, a
Minnesota limited liability company ("Owner") and the City of New Hope, a Minnesota municipal
corporation (hereinafter "City"), this _ day of Maq, , 2016.
If
WHEREAS, Owner is the fee owner of the real property in the City of New Hope, County of
Hennepin, State of Minnesota commonly known as 9449 Science Center Drive, New Hope, MN, PID
No. 07-118-21-22-0013 and legally described as follows:
Lot 1, Block 1, Brandell Fourth Addition, Hennepin County, Minnesota
(hereinafter "Property");
WHEREAS, Owner intends to develop the Property;
WHEREAS, on July 27, 2015, by Resolution No. 2015-122, the City Council approved
Owner's request for site and building plan review for the construction of a new 48,000 square foot
industrial building ("Building") as set forth in New Hope Planning Case 15-14 (hereinafter "Plans"),
located on the Property; and
WHEREAS, Owner's request was granted subject to the following conditions:
1. Owner shall enter into a site improvement agreement with the City to ensure the
completion of all required improvements (to be prepared by the City Attorney).
2. Owner shall enter into a storm water maintenance agreement with the City (to be
prepared by the City Attorney).
3. The design of the fire access turnaround on the southwest corner of the building shall
be subject to the review and final approval of the City Fire Marshal.
4. The site utility plan shall be subject to review and final approval by the City
Engineer and Public Works.
5. The grading, drainage, and storm water management plans shall be subject to review
and final approval by the City Engineer.
6. Owner shall not store snow in the fire access turnarounds located at the southwest
and southeast corners of the Property.
7. All rooftop equipment shall be painted to match the building and screened from
adjoining public rights of way with building parapets.
8. Owner shall submit a comprehensive sign plan for the Property detailing all sign
locations and sizes.
9. Owner shall provide a financial guarantee and performance bond for landscaping and
site improvements (amount to be determined by City Engineer and building official).
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. INCORPORATION OF RECITALS. The recitals above are incorporated herein by
reference, specifically including the conditions for the site and building plan approval set out in
New Hope Resolution No. 15-122.
2. THE WORK. The Work shall consist of the site improvements described in all Plans
provided by Owner as part of New Hope Planning Case 15-14, including the Secured Work as
described below, and including any amendments to the Plans which are approved by the City
Council. The Work shall be performed by Owner to the City's satisfaction and in compliance
with all applicable codes, ordinances, standards, and policies of the City.
3. THE SECURED WORK. The Secured Work includes all on-site exterior amenities shown
on the Plans that are listed below.
Description of work per plans estimated cost
(a) Utilities
$13,000.00
(b) Grading and Restoration
$27,000.00
(c) Streets/Driveway
$17,000.00
Subtotal
$57,000.00
Contingency (50%)
$28,500.00
Required Financial Guarantee
$85,500.00
4. COMPLETION. Owner agrees that the Secured Work shall be completed in its entirety on or
before the eighth month anniversary of the date the building permit is issued, or December 31,
2016, whichever comes first, except as this period of time is extended by resolution of the
2
Council, or by the City taking no action to require completion hereunder on a timely basis, or
by reason of strikes and force majeure as set forth in Section 6 below. It is understood and
agreed that failure of the City to promptly take action to draw upon the financial guarantee to
enforce this Agreement after the expiration of the time in which the Work is to be completed
hereunder will not waive, estop or release any rights of the City and the City can take action at
any time thereafter to require completion of the Work, and payment for same. Furthermore, the
term of this Agreement shall be deemed to be automatically extended until such time as the
City Council declares Owner in default thereunder, and the statute of limitations shall not be
deemed to commence running until the City Council has been notified in writing by Owner that
Owner has either complied with this Agreement, or that it refuses to for any reason. These
provisions shall be applicable to any person who shall give a financial guarantee to the City as
required below.
5. COST OF WORK. Owner shall pay for all costs of persons doing work or furnishing skill,
tools, machinery or materials, or insurance premiums or equipment or supplies and all just
claims for the same, and the City shall be under no obligation to pay Owner, or any
subcontractor any sum whatsoever on account thereof, whether or not the City shall have
approved the subcontract or subcontractor, and Owner shall hold the City harmless against any
such claims, and provide the City with all necessary lien waivers.
6. DEFAULT. In the event of default by Owner as to any of the Secured Work to be performed
hereunder, the City may, at its option, perform the Secured Work and Owner shall promptly
reimburse the City for any expense incurred therein by the City, provided Owner is first given
written notice by United States Mail of the Secured Work in default and required to be done by
Owner not less than thirty (30) days being given thereby to Owner to remove the default status,
subject to force majeure, said notice being addressed to Owner at the address set forth below;
provided, however, that the thirty (30) day notice period for cure shall be extended for such
time as may be reasonably necessary to cure the default so long as Owner undertakes
reasonable curative measures within such initial thirty (30) day period and proceeds with
reasonable diligence thereafter to complete such measures Notice given in this manner shall
be sufficient as described, by agreement of the parties hereto. Notice to Owner shall also
constitute, without further action, notice to any contractor or subcontractor, whether they are
approved and accepted by the City or not. In the event of emergency, as determined by the
City Engineer, the thirty (30) day notice requirement to Owner shall be and hereby is waived in
its entirety by Owner, and Owner shall reimburse the City for any reasonable expense so
incurred by the City in the same manner as if mailed notice as described above had been given.
It is understood by the parties, however, that the responsibility of Owner is limited by strikes
and force majeure. Alternatively, in the event of default by Owner as to any of the Secured
Work to be performed hereunder, and Owner's failure to remove the default within the cure
period described in the first sentence of this Section i.e., thirty (30) days as such cure time may
be extended in accordance with the "provided, however" language, the City may, at its option,
require Owner to restore the Property to the condition existing as of the date hereof by delivery
of written notice to Owner at the address set forth below. Upon receipt of such written notice
of default, Owner shall promptly commence efforts to restore the Property to the condition
existing as of the date hereof and complete such restoration no later than six (6) months
following receipt of notice of default from the City.
3
7. ADMINISTRATION COSTS. Owner agrees to reimburse the City for the actual costs to the
City associated with Planning Case 15-14 and this Agreement, including but not limited to,
planning consultant, engineering and attorney's fees. Owner agrees that the financial guarantee
shall not be released until all administration costs have been paid to the City.
8. HOLD HARMLESS. Owner agrees to indemnify and hold harmless the City and its agents,
employees, and representatives against any and all claims, demands, losses, damages and
expenses (including attorney's fees) arising out of or resulting from Owner's negligent or
intentional acts, or any violation of any safety law, regulation or code in the performance of this
Agreement by Owner, without regard to any inspection or review made or not made by the
City, its agents, employees, or representatives. In the event any City employee, agent or
representative shall come under the direct or indirect control of Owner, or the City, upon the
failure of Owner to comply with any conditions of this Agreement, performs said conditions
pursuant to the financial guarantee or paragraph 2 of this Agreement, the City shall indemnify
and hold harmless Owner and its employees, agents and representatives for the negligent or
intentional acts of the City in the performance of Owner's required work under this Agreement.
9. COST OF ENFORCEMENT. Owner agrees to reimburse the City for all costs reasonably
incurred by the City in the enforcement of this Agreement, or any portion thereof, including
court costs and reasonable engineering and attorney's fees.
10. FINANCIAL GUARANTEE. Owner shall furnish the City with a financial guarantee in the
amount of $85,500.00 in the form of an irrevocable letter of credit. Said financial guarantee
shall be furnished to the City as security to assure completion of the items of Secured Work as
set forth above, and payment of the costs of administration as set forth above. The City shall
release the financial guarantee to Owner within ten (10) days following the date that the City
Council approves and accepts all of the Secured Work undertaken and all administrative costs
are paid in full. The City Council may reduce the amount of the financial guarantee upon
partial completion of the Secured Work and payment of all outstanding administrative costs.
11. NOTICE. The address of Owner, for purposes of this Agreement are as follows, and any
notice mailed by the City to any of these addresses shall be deemed sufficient notice under this
Agreement, until notice of a change of address is given to the City in writing
Industrial Equities — New Hope, LLC
Attn: John N. Allen
321 First Avenue North
Minneapolis, MN 55401
E-mail: mallen ,industrialequities.com; jnanaplesggmail.com
12. SEVERABILITY. If any portion, section, subsection, paragraph, sentence, clause or phrase of
this Agreement is for any reason held to be invalid, such decision shall not affect the validity of
the remaining portion of this Agreement.
13. SUCCESSION. This Agreement shall be binding upon Owner and its heirs, successors or
assigns, as the case may be.
14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, we have hereunto set our hands and seals.
5
SIGNATURE AND NOTARY PAGES FOR SITE IMPOVEMENT AGREEMENT
City of New Hoe f /
By:
Kathi Hemken
Its
By:
Kirk McDonald
Its: City Manager
STATE OF MINNESOTA )
SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this 4 �hdaY of
2016, by Kathi Hemken, and Kirk McDonald, the Mayor and City Manager, respectively, of/the City
of New Hope, a Minnesota municipal corporation, on behal of said manic' corporation.
4
Notary Public
VALERIE LEONE
NOTARY PUBLIC- MINNESOTA
,:NOTARY::
y Commission Expires Jan. 31, 2020
R
Owner
Industrial Equities — New Hope, LLC,
a Minnesota limited liability company
J N en
hief Manager
STATE OF MINNESOTA )
ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this -day ofAl,aM,
2016, by John N. Allen the Chief Manager of Industrial Equities — New Hope, LLC, a Minnesota
limited liability company, on behalf of said limited liability company.
Notary Public
AMY LYNN WOLLMUTH
NOTARY PUBLIC
_ MINNESOTA
My Cam fission Ewes Jan. 31, 2021
DRAFTED BY:
JENSEN SONDRALL PERSELLIN & WOODS, P.A.
8525 Edinbrook Crossing, #201
Brooklyn Park, MN 55443(763) 424-8811
P:\Attomey\SAS\l Client Files\2 City of New Hope\99-21514 - Industrial Equities - Site Plan\Site Improvement Agreement - 4-12-16- v3 clean.doc
EDA
Request for Action
Originating Department
Approved for Agenda
Agenda Section
Community Development
November 23, 2015
EDA
Item No.
By: Jeff Sargent, Director of CD
By: Kirk McDonald, City Manager
4
Resolution adopting a modification to the redevelopment plan for Redevelopment Project No. 1, establishing
the Industrial Equities Tax Increment Financing District therein and adopting a tax increment financing plan
therefor (project no. 971)
Requested Action
A public hearing was held at the City Council meeting relating to this item. The Economic Development
Authority (EDA) is also requested to pass a resolution adopting the modification and establishing the TIF
district.
Policy/Past Practice
It is a past practice of the City Council to consider/approve providing financial assistance such as Tax
Increment Finance (TIF) Districts for redevelopment projects in the city.
Background
It has been found necessary to create a TIF District in order to accommodate the redevelopment of the
property located at 9449 Science Center Drive, as defined in the TIF plan. In order to create a TIF District, the
EDA must approve the findings as outlined in the attached resolution. The TIF District will facilitate the
redevelopment of a substandard property and the construction of a new 48,000 square foot office warehouse
project in the city. The TIF assistance will specifically be used for the demolition of the existing structure,
abatement of asbestos containing materials and some site restoration work.
The necessity of the TIF District will authorize the expenditures for land/building acquisition, site
improvements and preparation, utilities, administrative costs and other qualifying improvements. Stacie
Kvilvang from Ehlers & Associates will be in attendance to answer any questions regarding the creation of
this district.
Motion by 1 J 1,- Second by �1=�
To:
I:\RFA\COMM DEV\Public Hearin s\Q & R -TIF District Industrial Equities public hearing (EDA) 11-23-15.doc
Request for Action
November 23, 2015
Page 2
Any time a modification is made to the city's TIF plan, including the creation of a new district, the entire
Redevelopment Plan and Tax Increment Financing Plan for the city must be modified, hence the long title of
the resolution.
Attachment(s)
• Resolution
• Tax Increment Financing District Overview, prepared by Ehlers
NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
CITY OF NEW HOPE
HENNEPIN COUNTY
STATE OF MINNESOTA
RESOLUTION NO. 2015-22
RESOLUTION ADOPTING A MODIFICATION TO THE REDEVELOPMENT
PLAN FOR REDEVELOPMENT PROJECT NO. 1, ESTABLISHING THE
INDUSTRIAL EQUITIES TAX INCREMENT FINANCING DISTRICT
THEREIN AND ADOPTING A TAX INCREMENT FINANCING PLAN
THEREFOR.
WHEREAS, it has been proposed by the Board of Commissioners (the "Board") of the New Hope
Economic Development Authority (the "EDA") and the City of New Hope (the "City") that the EDA
adopt a Modification to the Redevelopment Plan (the "Redevelopment Plan Modification") for
Redevelopment Project No. 1 (the "Project Area") and establish the Industrial Equities Tax Increment
Financing District (the "District") and adopt a Tax Increment Financing Plan (the "TIF Plan") therefor
(the Redevelopment Plan Modification and the TIF Plan are referred to collectively herein as the "Plans"),
all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.090 to
469.1082, and Sections 469.174 to 469.1794, inclusive, as amended (the "Act"), all as reflected in the
Plans and presented for the Board's consideration; and
WHEREAS, the EDA has investigated the facts relating to the Plans and has caused the Plans to
be prepared; and
WHEREAS, the EDA has performed all actions required by law to be performed prior to the
adoption of the Plans. The EDA has also requested the City Planning Commission to provide for review
of and written comment on the Plans and that the Council schedule a public hearing on the Plans upon
published notice as required by law.
NOW, THEREFORE, BE IT RESOLVED by the Board as follows:
The EDA hereby finds that the District is in the public interest and is a "renewal and renovation
district" under Minnesota Statutes, Section 469.174, Subd. 10 (a)(1), and finds that the adoption
of the proposed Plans conform in all respects to the requirements of the Act and will help fulfill a
need to develop an area of the State of Minnesota which is already built up and that the adoption
of the proposed Plans will help provide employment opportunities in the State and in the
preservation and enhancement of the tax base of the City and the State because it will discourage
commerce and industry from moving their operations to another state or municipality and thereby
serves a public purpose.
2. The EDA further finds that the Plans will afford maximum opportunity, consistent with the sound
needs for the City as a whole, for the development or redevelopment of the Project Area by
private enterprise in that the intent is to provide only that public assistance necessary to make the
private developments financially feasible.
The boundaries of the Project Area are not being expanded.
4. The reasons and facts supporting the findings in this resolution are described in the Plans.
5. The EDA elects to calculate fiscal disparities for the District in accordance with Minnesota
Statutes, Section 469.177, Subd. 3, clause b, which means the fiscal disparities contribution
would be taken from inside the District.
6. Conditioned upon the approval thereof by the City Council following its public hearing thereon,
the Plans, as presented to the EDA on this date, are hereby approved, established and adopted and
shall be placed on file in the office of the Executive Director of the EDA.
7. Upon approval of the Plans by the City Council, the staff, the EDA's advisors and legal counsel
are authorized and directed to proceed with the implementation of the Plans and for this purpose
to negotiate, draft, prepare and present to this Board for its consideration all further plans,
resolutions, documents and contracts necessary for this purpose. Approval of the Plans does not
constitute approval of any project or a Development Agreement with any developer.
Upon approval of the Plans by the City Council, the Executive Director of the EDA is authorized
and directed to forward a copy of the Plans to the Minnesota Department of Revenue and the
Office of the State Auditor pursuant to Minnesota Statutes 469.175, Subd. 4a.
9. The Executive Director of the EDA is authorized and directed to forward a copy of the Plans to
the Hennepin County Auditor and request that the Auditor certify the original tax capacity of the
District as described in the Plans, all in accordance with Minnesota Statutes 469.177.
Approved by the Board on November 23, 2015.
Kathi Hemken, President
ATTEST:
,7Q 1111�
Kirk McDonald, Executive Director
Tax Increment Financing District Overview
City of New Hope
Industrial Equities Tax Increment Financing District
The following summary contains an overview of the basic elements of the Tax Increment Financing Plan
for Industrial Equities Tax Increment Financing District. More detailed information on each of these topics
can be found in the complete Tax Increment Financing Plan.
Proposed action: v Establishment of Industrial Equities Tax Increment Financing District
(District) and the adoption of a Tax Increment Financing Plan (TIF Plan).
v Modification to the Redevelopment Plan for Redevelopment Project No. 1
includes the establishment of the Industrial Equities Tax Increment
Financing District, which represents a continuation of the goals and
objectives set forth in the Redevelopment Plan for the Redevelopment
Project No. 1.
Type of TIF District: A renewal and renovation district
Parcel Number: 07-118-21-22-0013
Proposed The District is being created to facilitate the redevelopment of a substandard
Development: property and construction of a new 48,000 square foot office warehouse
project in the City. Please see Appendix A of the TIF Plan for a more
detailed project description.
Maximum duration: The duration of the District will be 15 years from the date of receipt of the
first increment (16 years of increment). The City elects to receive the first tax
increment in 2018. It is estimated that the District, including any
modifications of the TIF Plan for subsequent phases or other changes, would
terminate after December 31, 2033, or when the TIF Plan is satisfied.
Estimated annual tax Up to $63,770
increment:
` EHLERS
LEADERS IN PUBLIC FINANCE
Authorized uses: The TIF Plan contains a budget that authorizes the maximum amount that
may be expended:
Land/Building Acquisition ............................................
Site Improvements/Preparation.....................................
Public Utilities...............................................................
Other Qualifying Improvements ...................................
Administrative Costs (up to 10%) .................................
PROJECT COSTS TOTAL ..........................................
Interest...........................................................................
PROJECT COSTS TOTAL .......................................
... $250,000
... $250,000
.....$50,000
..... $14,280
..... $80,082
... $644,362
... $236,543
See Subsection 2-10, on page 2-5 of the TIF Plan for the full budget
authorization.
Form of financing: The project is proposed to be financed by a pay-as-you-go note, and interfund
loan.
Administrative fee: Up to 10% of annual increment, if costs are justified.
Interfund Loan If the City wants to pay for administrative expenditures from a tax increment
Requirement: fund, it is recommended that a resolution authorizing a loan from another
fund be passed PRIOR to the issuance of the check.
4 Year Activity Rule After four years from the date of certification of the District one of the
(¢ 469.176 Subd. 6) following activities must have been commenced on each parcel in the District:
• Demolition
• Rehabilitation
• Renovation
• Other site preparation (not including utility services such as sewer and
water)
If the activity has not been started by approximately November 2019, no
additional tax increment may be taken from that parcel until the
commencement of a qualifying activity.
5 Year Rule Within 5 years of certification revenues derived from tax increments must be
(§ 469.1763 Subd. 3) expended or obligated to be expended.
Any obligations in the District made after approximately November 2020,
will not be eligible for repayment from tax increments.
The reasons and facts supporting the findings for the adoption of the TIF Plan for the District, as required
pursuant to M.S., Section 469.175, Subd. 3, are included in Exhibit A of the City resolution.
Page 2
EHLERS
LEADERS IN PUBLIC FINANCE
MAP OF REDEVELOPMENT PROJECT NO. 1 AND THE
INDUSTRIAL EQUITIES TAX INCREMENT FINANCING DISTRICT
Page 3
jaEHLERS
LEADERS IN PUBLIC FINANCE
Agenda Title
Request for Action
April 18, 2016
Approved by: Kirk McDonald, City Manager
Originating Department: Community Development
By: Aaron Chirpich, CD Specialist
Agenda Section
Work Session
Item Number
11.3
Discuss a request to increase the amount of TIF assistance for the Industrial Equities redevelopment
project at 9449 Science Center Drive. (improvement project no. 971).
Requested Action
A request for additional TIF assistance has been made by the owner of the Industrial Equities New
Hope project. Staff would like to discuss this request with the Council. Jason Aarsvold from Ehlers
will be in attendance to help answer any questions.
Policy/Past Practice
It is a practice of staff to discuss potential amendments to TIF agreements with the City Council
prior to proceeding with the formal amendment process.
Background
In early 2015, Industrial Equities purchased the vacant and distressed industrial building located at
9449 Science Center Drive with the intent of redeveloping the site. Shortly after acquisition, the
owner approached the City with a request for TIF assistance to pay for demolition, abatement and
soil corrections on the site. The original amount requested was $250,000. In November of 2015, the
City Council agreed to support the project by providing the requested amount of assistance.
Subsequently, the Industrial Equities TIF district was established and the project moved toward
completion.
Demolition of the building and clearing of all other site improvements began in late February of
2016. Following the demolition of the primary building, the excavating contractor discovered
unexpected poor soils beneath the building and around the perimeter of the foundation. Engineers
that have examined the site speculate that the building was built in a natural depression in order to
limit the amount of excavation needed to accommodate the original basement. The footings of the
former building extended well below the basement slab. The deeper than usual footings were built
in an effort to compensate for the poor soil conditions that were not remediated at the time of
construction in 1960. Because the poor soils were found beneath the building, it would have been
impossible to plan for such a find. Extensive soil borings were completed by the owner on the
balance of the site prior to requesting assistance from the City.
As a result of encountering the poor soils underneath the building, the owner has requested that the
City increase the amount of TIF assistance for the project. The estimated cost increase for the
additional soil corrections is $300,000.
I:\RFA\COMM DEV \Development\WS -Discuss request for additional TIF assistance for Industrial Equities 4-18-16.docx
Request for Action, Page 2
The Industrial Equities Renewal and Renovation TIF District has a maximum duration of 16 years.
Based upon current estimates, the repayment term for the original $250,000 TIF note is 10 years. The
City Council can choose to extend the duration of the assistance to include the full 16 years.
Increasing the duration of the district could provide the developer with an additional $120,000 to
help pay for the additional soil corrections. The City Council has complete discretion in this matter
and is obligated only by the terms of the existing development agreement.
Staff from Ehlers has assessed the request for additional assistance and they have found that the
request is reasonable. If additional assistance is provided, the projected cash on cost return to the
developer would actually decrease. Therefore, providing additional funding will not unduly enrich
the developer.
Cost Estimates
As part of the review process, staff requested soil correction quotes from the developer. The
developer has provided quotes that substantiate the request for additional funding. The original bid
for earthwork was $200,835. Following the discovery of the unexpected poor soils, the developer
secured a new quote for earthwork that includes correcting the soils underneath the building. The
total of the revised bid is $500,000.
Attachments
• Ehlers memo
• Engineer's memo from developer
Memo
To: Jeff Sargent, Community Development Director
From: Jason Aarsvold, Ehlers
Date: April 13, 2016
Subject: Analysis of Request for Additional Assistance — Industrial Equities: 9449
Science Center Drive
In June of 2015, the City received a proposal from Industrial Equities to redevelop the property
at 9449 Science Center Drive. The proposed project included demolition of the existing
structure, environmental remediation, soil corrections, and construction of a new, 48,000 square
foot office/warehouse building.
After determining the project could not commence as envisioned without assistance, The City
Council and Economic Development Authority approved a Plan for the Industrial Equities Tax
Increment Financing (TIF) District on November 23rd, 2016. At the same time, the EDA
approved a Contract for Private Redevelopment (CPR) with Industrial Equities — New Hope,
LLC.
Following this approval, Industrial Equities proceeded with demolition of the existing structure.
During this process, the developer encountered subsurface soil conditions that were much
worse than assumed previously, requiring corrections that will add approximately $300,000 to
the project budget. A review of the bids for this work verified the increased cost.
Industrial Equities requested consideration of additional funding as a means to off -set these
unanticipated expenses. The City may, at its discretion, choose to consider this request.
Outlined below is an assessment of the maximum potential assistance available given the
duration limit of the existing TIF district, and a revised analysis of the developer's pro forma.
Maximum Available TIF
The Industrial Equities TIF District is a Renewal and Renovation district with a maximum
duration of 16 years. After reviewing the developer's pro forma and extraordinary
redevelopment costs, the maximum present value amount of assistance was set at $250,000,
which is reflected in the executed CPR. Based on current estimates, a TIF note issued in this
amount could be repaid within approximately 10 years.
The City Council and EDA can choose to extend the duration of the assistance to include the full
16 years. Based on our estimates, doing so could increase the present value amount of the TIF
note by $120,000.
vmw,ehiers- inc. corn
E H L E R S Minnesota phone 651-697-8500 3060 Centre Pointe Drive
• LEADERS IN PUBLIC FINANCE Offices also in Wisconsin and Illinois fax 651-697-8555 Roseville, MN 55113-1122
toll free 800-552-1171
Jeff Sargent, Director of Community Development
Analysis of Request For Additional Assistance — Industrial Equities
April 13, 2016
Page 2
Analysis
Ehlers' initial "but -for" analysis concluded a TIF note in the amount of $250,000 was warranted
based on the actual anticipated qualified redevelopment costs and the fact that the anticipated
return on investment was below typical industry standards. Using the revised project cost
assumptions, we updated this analysis to evaluate the impact on these measures.
Extending the TIF payments to the full 16 year duration of the district could increase the present
value amount of the TIF note by $120,000. This covers approximately 40% of the additional
$300,000 in qualified redevelopment costs. The table below summarizes the cash on cost rate
of return given the various scenarios considered.
Development Scenario
Existing $250,000 TIF Note, before additional soil costs 5.38%
Added soil costs without additional TIF 5.06%
Added soil costs with 16 years of TIF 5.32%
The project, as envisioned before discovering the increased costs, was projected to achieve a
cumulative 5.38% cash -on -cost return with $250,000 in city assistance. As the table shows, if
the city chooses to provide 16 years of assistance, the projected return will still be below what
was anticipated in the current agreement.
Conclusion
The City has complete discretion as it relates to the request for additional assistance from the
developer and is obligated only by the terms of the existing CPR. Our analysis confirms the City
does have some ability to provide additional assistance if desired. In addition, given the revised
project costs and resulting impact on the project's return on investment, we conclude that
providing the full 16 years of TIF would not unduly enrich the developer. With the added
assistance, the developer's return is still less than what had been projected before discovering
the increased expenses.
If you have any questions, please feel free to contact me at 651-697-8512.
Chosen Valley Testing, Inc.
Geotechnical Engineering and Testing • 31 15t Avenue S • Rice, MN 56367 • Telephone (320) 393-3306 Fax (320) 393-3309
John Allen
Industrial Equities, LLP
321 First Avenue North
Minneapolis, MN 55401
JNAnaples(&Gmail.com
mal len(&industrialeauities.com
Re: Unexpected Soil Corrections
Proposed Office/Warehouse
Highway 169 and Science Center Drive
New Hope, Minnesota
CVT Number: 7811.15.MNS
Dear Mr. Allen:
April 11, 2016
This letter is being written with regard to the unexpected subsurface conditions encountered at the above
site. As you are aware, the demolition of the building and subsequent test pits at the site indicated
conditions quite different from the borings and there is around 23,000 yards of soil correction needed on
the site.
In general, the existing building appears to have been placed at the location of a natural depression in the
geology. Because the building had a basement, we suspect that this location may have been chosen to
limit the amount of earthwork excavation need to dig the basement. Although that may have been the
intent, the natural soils below the basement are extremely soft. As a consequence, all of the basement
footings extend well below the basement slab. The excavated spoil materials were then used as backfill
outside the building, resulting in additional unsuitable materials which need to be removed from the site.
Sincerely,
Chosen Valley Testing, Inc.
Colby T. Verdegan, PE
President/Sr. Geotechnical Engineer
M I N N E S O T A I O W A W I S C O N S I N