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IP #776KRA,SS MONROE, P.A. A T T 0 R N E Y S A T L A W 9& F_1E_ VIA FAX AND U.S. MAIL July 8, 2004 Mr. Michael Opat Hennepin County Commissioner, District #7 A2400 Government Center 300 South 6th Street Minneapolis, MN 55487-0240 Re: City of New Hope/Tax Increment Financing Activities Dear Commissioner Opat: The City of New Hope (the "City") is proposing to create Tax Increment District No_ 04-2 (the "Tax increment District") within their existing Redevelopment Project No. 1 (the "Project Area"). The proposed Tax Increment District qualifies as. a housing tax increment district and is expected to be developed in two phases. Phase I includes a 35 -unit, 100% low-income housing tax credit development with at least 75% of the units rented to households with incomes less than 60% of the area median income and includes underground and surface parking. Phase II includes a 41 -unit market rate, for - sale condominium building also with underground and surface parking. The City Council will consider creation of this Tax Increment District at a public hearing to be held at its regular meeting on Monday, August 23, 2004 at approximately 7:00 p.m. Because the Tax lncrement District is located within your District, we are forwarding to you, on behalf of the City and pursuant to Minnesota Statutes, Section 469.175, Subdivision 2a, a copy of the proposed Tax Increment Plan and the portion of Exhibit I- A of the Redevelopment Plan for -the Project Area that is associated with the Tax Increment District. 8000 Norman Center Drive, Suite 1000 Minneapolis. MN 55437-1178 Telephone 952.885.5999 Facsimile 952.885.5869 Website www.krassmonroo.com The City would appreciate receiving any comments you may have concerning their tax increment financing activities. It also would welcome the opportunity to meet with you to discuss any questions or concerns that you may have. You may also direct questions or comments to Kirk McDonald, Community Development Director at the City (763-531- 5119) or to Jim Casserly, EDA Development Counsel (952-885-1296). Sincerely, KRASS MONROE, P.A. A" 4 Mary E. Molzahn Senior Development Analyst cc: Kirit McDonald (w/enclosures) G:IWPDATAWNEW HOPEIPIITIRNOTICE TO COMMISMNERDOC ARTICLE V TAX INCREMENT FINANCING PLAN FOR TAX INCREMENT FINANCING DISTRICT NO. 04-2 (PROJECT FOR PRIDE IN LIVING) Section 5.1 Statement of Obiectives. See Article I, Section 1.4, Statement of Objectives. Section 5.2 Restated Redevelopment Plan. See Article I, Sections 1.1 through 1.11. Section 5.3 Parcels to be Included. The boundaries of Tax Increment Financing District No. 04-2 (the "TIF District") are described in Exhibit V-A and illustrated on Exhibit V -B. Section 5.4 Parcels in Acquisition. The EDA Authority may write down or acquire and reconvey real property, or interests therein, within this TIF District or elsewhere within the Project Area at the time or times as the EDA Authority may determine to be necessary or desirable to assist or implement development or redevelopment within the Project Area or the TIF District as further described in Article 1, Section 1.11. Section 5.5 Development Activity for which Contracts have been Sicined. As of the date of adoption of the TIF Plan, the EDA Authority contemplates entering into a signed contract with Project for Pride in Living, Inc., a Minnesota corporation, for the activities discussed below. Section 5.6 Specific Development Expected to Occur. At this time it is anticipated that Phase I of the project will include a 35 -unit apartment building with underground and surface parking. The rental apartments will be a 100% low-income housing tax credit development with at least 75% of the units rented to households with incomes less than 60% of the area median income. Phase II is proposed to include a 41 -unit market rate, for -sale condominium building also with underground and surface parking. Phase I is projected for completion by December 31, 2005 and Phase 11 by December 31, 2006. Upon completion of both phases, it is expected that the City's tax base will increase by approximately $9.4 million. Section 5.7 Prior Planned Improvements. The EDA Authority shall, after due and diligent search, accompany its request to the County Auditor for the certification of or its notice of enlargement of the TIF District with a listing of all properties within the TIF District for which building permits have been issued during the eighteen (18) months immediately preceding approval of the TIF Plan by the EDA Authority. 5-1 The County Auditor shall increase the original tax capacity of the TIF District by the tax capacity of each improvement for which a building permit was issued. If said listing does not accompany the aforementioned request or notice, the absence of such listing shall indicate to the County Auditor that no building permits were issued in the eighteen (18) months prior to the EDA Authority's approval of the TIF Plan. Section 5.8 Fiscal Disparities. The City hereby elects the method of tax increment computation set forth in Minnesota Statutes, Section 469.177, Subdivision 3, clause (a) if and when commercial/industrial development occurs within the TIF District. Section 5.9 Estimated Project Costs. The estimated costs associated with this portion of Redevelopment Project No. 1 (the "Project Area") are listed on Exhibit -A. Section 5.10 Estimated Amount of Indebtedness. It is anticipated that approximately $2,626,000 of indebtedness may be incurred with respect to this portion of the Project Area. Section 5.11 Sources of Revenue. The anticipated revenue sources to finance the costs associated with the Project Area are outlined in Article 1, Section 1.5. Section 5.12 Estimated Orlainal and Captured Tax Capacity_. The tax capacity of all taxable property in the TIF District, as most recently certified by the Commissioner of Revenue of the State of Minnesota on January 2, 2004, is estimated to be $3,783. The estimated captured tax capacity of the TIF District upon completion of the proposed improvements on January 2, 2007, is estimated to be $101,962. The EDA Authority intends to utilize 100% of the captured tax capacity, for the duration of the TIF District, for purposes of determining tax increment revenues. Section 5.13 Tax Capacity Rate. The pay 2004 tax capacity rate is 1.38209. Section 5.14 Tax Increment. Annual initial tax increment has been calculated at approximately $141,921 assuming a static tax capacity rate and a valuation increase of five percent (5.0%) compounded annually. A financial analysis is provided on Exhibit V -C. Revenue has also been projected for the duration of the TIF District and is shown on Exhibit I -A. Section 5.15 Type of TIF District. The TIF District is, pursuant to Minnesota 5-2 Statutes, Section 469.174, Subdivision 11, a housing district. Section 5.16 Duration of TIF District. The duration of the TIF District is expected to be twenty-five (25) years from receipt of the first tax increment. The date of receipt of the first tax increment is estimated to be July, 2006. Thus, it is estimated that the TIF District, including any modifications for subsequent phases or other changes, would terminate in the year 2030. Section 5.17 Estimated Impact on Taxing Jurisdictions. The estimated impact on other taxing jurisdictions assumes construction would have occurred without the creation of the TIF District. If the construction is a result of tax increment financing, the impact is $0 to other entities. Notwithstanding the fact that the fiscal impact on the other taxing jurisdictions is $0, due to the fact that the financing would not have occurred without the assistance of the EDA Authority, Exhibit V -E reflects the estimated impact of the TIF District if the "but for" test were not met. Section 5.18 Modification of the TIF District and/or TIF Plan. As of August 23, 2004, no modifications to the TIF District or the TIF Plan have been made. GAWPDATAWMW HOPE1211TIb1TIF PLAN.DOC 5-3 EXHIBIT V-A PARCELS TO BE INCLUDED IN TAX INCREMENT FINANCING DISTRICT NO. 04-2 PIN 06-118-21-34-0021 including adjacent streets and rights-of-way G:\WPDATA\N\NEW HOPE\21\TIF\TIF PLAN E%HIBIT.DOC V -A-1 6701 6741 PKWY 5850 VICTORY 5632 PARK Ihm 5600 HAN ffiIBIT V -B 8901i B801 8701 C,q/(E 85 P79t IX 5777 %' 8400 5700 3420 8130 85tt Z 8431 5626 4 � 33 58x5 564t 5849 ¢ 3 650 5627 8317 5635 8119 Q 6629 5630 LL, 5632 5621 Z 0 Thru c 5600 5625 5624 5615 5821 Z 5618 m 8 5609 5819 � N 5601 5803 5600 O 3600 SBi5 D V'1 Sala TO 874a 8420 s6os 5600 aroo 56Th! AVE N CENTER EAST NORTH 9210 9211 C. P. RAIL SYSTEM 5197 51ST AVE N 51.7 5018 8520 t83168<i12�C .\ S� 8� 5017 i V -B-1 EXHIBIT V --C v -C-1 CITY OF NEW HOPE PPL - 5501 Boone Ave lRental & Condo Project) ASSUMPTIONS Area of Parcel Original Market Values (Acres) (Sq. FeO) Land Building Total 5501 Boone Ave 0&110-21-34-002 3.935 171,401 $ 342,802 $ $ 342,802 Totals 3.935 171,401 $ 342,802 $ $ 342,802 $ 2.00 per sq. ft. Original Tax Capacity 9'a of new ETC Class Rate 3,783 Commercial /Retail 0.0% 0 @ 2.00% = 0 Rental 41.4% 141,828 @ 1.25% = 1,773 Owner Occupied 58.6% 200,974 @ 1.00% = 2,010 100.0% 342,802 Phase 1 YEAR Estimated Market Value Apartment Only 1 18 units @ 100,000 per unit = 1,750,000 Estimated Tax Capacity 2005 16 units @ 1,250 per unit = 21,875 Estimated Taxes F 2006 18 units @ 1,911 per unit = 33,447 Estimated Tax Increment 18 units @ 1,429 1 per unit = 25,005 74.8% of total taxes Phase 2 (combined) Estimated Market Value Apartment Only 35 units @ 100,000 _ per unit'm 3,500,000 Estimated Tax Capacity 2006 35 units Q 1,250 per unit = 43,750 Estimated Taxes 2007 35 units @ 1,911 per unit = 66,895 Estimated Tax Increment 35 units @ 1,578 per unit = 55,2391 82.6% of total taxes Phase 3 (combined) Estimated Market Value Apartments & Condo 76 units @ 127,625 per unit = 9,699,500 28.3 x incr. in MV Estimated Tax Capacity 2007 76 units @ 1,391 per unit = 105,745 Estimated Taxes 1 2008 76 units @ 2,157 per unit = 163,963 Estimated Tax Increment 76 units @ 1,854 per unit = 140,921 85.9% of total taxes Coverage 19.3 units per acre Local Tax Rate - Pay 2004 1.38209 1.69% Eff Tax Rate Market Value Referendums & solid waste fee 0.18366% I Admin Fees 10.00% Inflation (200812009) 5.00% Present Value state 6/1/2004 6.75% Present Value Rate - Bonds 6/1/2004 5.00% v -C-1 EXHIBIT V -C (CONTINUED) CASH FLOW AND PRESENT VALUE ANALYSIS 6.015.030 601,503 5,413,527 5,413.527 1 1.909,375 1,909,375 V -C-2 (a) <----- (b) ANNUAL (c) -----> (d) <------- (e) --- (f) -- SEMI-ANNUAL (9) (h) ------------------> (I) G) Original Estimated Captured Estimated Less: Available Cumulative <-- Present Value -----> Tax Tax Tax Tax Admin Tax Avail. Tax Semi Annual Cumulative Date Capacity Capacity Capacity Increment Fees Increment Increment Balance Balance (see assumptions) (c) - (b) (d) x (e) x (e) - (f) Total of (g) P.V. of (g) Total of (i) 5.0% Inflation (prev. year) 1.38209 10.00% 6.75% 06101/04 06101/03 3,783 3,783 0 0 0 0 0 0 12101/03 3,783 3,783 0 0 0 0 0 0 06101/04 3,783 3,783 0 0 0 0 0 0 0 12101/04 3,783 3,783 0 0 0 0 0 0 0 06101/05 3,783 21,875 0 0 0 0 0 0 0 12101/05 3,783 21,875 0 0 0 0 0 0 0 1 06/01/06 3,783 43,750 18,092 12,503 1,250 11,252 11,252 9,853 9,853 12/01/06 3,783 43,750 18,092 12,503 1,250 11,252 22,505 9,532 19,385 2 06/01/07 3,783 105,745 39,967 27,619 2,762 24,857 47,362 20,369 39,754 12101/07 3,783 105,745 39,967 27,619 2,762 24,857 72,220 19,704 59,457 3 06101/08 3.783 111,032 101,962 70,461 7,046 63,415 135,634 48,626 108,083 12101/08 3,783 111,032 101,962 70,461 7,046 63,415 199,049 47,038 155,121 4 06/01/09 .3,783 116,584 107,250 74,114 7,411 66,703 265,752 47,862 202,983 12101/09 3,783 116,584 107,250 74,114 7,411 66,703 332,454 46,299 249,282 5 06/01/10 3,783 122,413 112,801 77,951 7,795 70,156 402,610 47,106 296,388 12/01/10 3,783 122,413 112,801 77,951 7,795 70,156 472,766 45,568 341,956 6 06/01/11 3,783 128,534 118,630 81,979 8,198 73,781 546,547 46,358 388,314 12/01/11 3,783 128,534 118,630 81,979 • 8,198 73,781 620,328 44,845 433,159 7 06/01/12 3,783 134,960 124,751 86,209 8,621 77,588 697,916 45,619 478,778 12101/12 3,783 134,960 124,751 86,209 8,621 77,588 775,504 44,130 522,908 8 06/01/13 3,783 141,708 131,178 90,650 9,065 81,585 857,088 44,888 567,796 12/01/13 3,783 141,708 131,178 90,650 9,065 81,585 938,673 43,422 611,218 9 06/01/14 3,783 148,794 137,926 95,313 9,531 85,782 1,024,455 44,166 655,384 12/01/14 3,783 148,794 137,926 95,313 9,531 85,782 1,110,236 42,724 698,107 10 06/01/15 3,783 156,234 145,011 100,209 10,021 90,188 1,200,425 43,452 741,559 12/01/15 3,783 156,234 145,011 100,209 10,021 90,188 1,290,613 42,033 783,593 11 06101/16 3,783 164,045 152,451 105,350 10,535 94,815 1,385,429 42,747 826,340 12/01/16 3,783 164,045 152,451 105,350 10,535 94,815 1,480,244 41,351 867,691 12 06/01/17 3,783 172,247 160,263 110,749 11,075 99,674 1,579,918 42,051 909,742 12/01/17 3,783 172,247 160,263 110,749 11,075 99,674 1,679,592 40,678 950,420 13 06/01/18 3,783 180,860 168,465 116,417 11,642 104,775 1,784,367 41,364 991,785 12/01/18 3,783 180,860 168,465 116,417 11,642 104,775 9,889,142 40,014 1,031,798 14 06/01/19 3,783 189,903 177,077 122,368 12,237 110,132 1,999,273 40,686 1,072,484 12/01/19 3,783 189,903 177,077 122,368 12,237 110,132 2,109,405 39,358 1,111,842 15 06/01/20 3,783 199,398 186,120 128,617 12,862 115,756 2,225,161 40,017 1,151,859 12/01/20 3,783 199,398 186,120 128,617 12,862 115,756 2,340,916 38,711 1,190,570 16 06/01/21 3,783 209,368 195,615 135,179 13,518 121,661 2,462,577 39,357 1,229,927 12/01/21 3,783 209,368 195,615 135,179 13,518 121,661 2,584,239 38,072 1,267,999 17 06/01/22 3,783 219,836 205,585 142,069 14,207 127,862 2,712,100 38,706 1,306,706 12/01/22 3,783 219,836 205,585 142,069 14,207 127,862 2,839,962 37,443 1,344,148 18 06/01/23 3,783 230,828 216,054 149,303 14,930 134,373 2,974,335 38,065 1,382,213 12/01/23 3,783 230,828 216,054 149,303 14,930 134,373 3,108,707 36,822 1,419,035 19 06/01/24 3,783 242,369 227,045 156,899 15,690 141,209 3,249,916 37,432 1,456,466 12/01/24 3,783 242,369 227,045 156,899 15,690 141,209 3,391,125 36,210 1,492,676 20 06/01/25 3,783 254,488 238,587 164,874 16,487 148,387 3,539,512 36,808 1,529,484 12/01/25 3,783 254,488 238,587 164,874 16,487 148,387 3,687,898 35,606 1,565,091 21 06/01/26 3,783 267,212 250,705 173,249 17,325 155,924 3,843,822 36,193 1,601,284 12101/26 3,783 267,212 250,705 173,249 17,325 155,924 3,999,746 35,012 1,636,296 22 06101/27 3,783 280,573 263,430 182,042 18,204 163,838 4,163,584 3508 1,671,883 12/01/27 3,783 280,573 263,430 182,042 18,204 163,838 4,327,421 34,426 1,706,309 23 06/01/28 3,783 294,602 276,790 191,275 19,127 172,147 4,499,569 34,991 1,741,300 12101/28 3,783 294,602 276,790 191,275 19,127 172,147 4,671,716 33,848 1,775,149 24 06101/29 3,783 309,332 290,819 200,969 20,097 180,872 4,852,588 34,403 1,809,551 12/01/29 3,783 309,332 290,819 200,969 20,097 180,872 5,033,460 33,280 1,842,831 25 06101/30 3,783 324,798 305,549 211,148 21,115 190,033 5,223,493 33,824 1,876,655 12/01/30 3,783 324,798 305,549 211,148 21,115 190,033 5,413,527 32,720 1,909,375 6.015.030 601,503 5,413,527 5,413.527 1 1.909,375 1,909,375 V -C-2 EXHIBIT V -D "BUT FOR " ANALYSIS Both the City and its EDA have long recognized the need for additional affordable housing within the City. In response to this housing need, Project for Pride in Living, Inc. ("PPL") is proposing the construction of a two phased housing project on an undeveloped site that would provide 35 low income rental units and 41 market rate for sale units, which together will increase the City's tax base by approximately $9.4 million. The site selected by PPL has significant soil problems which require pilings for construction. In addition the proposed housing project requires the relocation of a pond currently located on the northern portion of the site. These extensive soil problems and the cost to resolve them have prevented development of this site in the past. Because of the excessive costs involved with correcting and working around the sal and ponding problems and the assistance needed to provide low income housing, PPL has requested the City and EDA to assist its project with tax increment financing. Phase I is a 100% low-income housing tax credit development in which at least 75% of 35 rental units will be available to households with incomes less than 60% of the area median income. This development, including both underground and surface parking, is proposed to be completed by December 31, 2005. The assistance for this Phase I will be used for site correction costs and to help reduce the overall cost of the rental units in order to offer rental rates that low/moderate income families can afford. Due to funding requirements imposed by various public agencies providing additional support for this project, PPL has requested that the assistance be provided upfront through City general obligation bonds. Phase 11 includes a 41 -unit affordable market rate, for -sale condominium building, also with underground and surface parking, that is proposed'to be completed by December 31, 2006. In order to make these units affordable, assistance for Phase II is needed because the selling prices are less than the development and construction costs. PPL has also requested that the assistance for this Phase be provided at the beginning of construction of Phase II through City general obligation bonds. Without such assistance for each Phase, the project would not be economically feasible and could not be expected to occur solely through private investment within the reasonably foreseeable future. G:\WPDATA\N\NEW HOPE\21\TIF\TIF PLAN EXHIHIT.DOC V -D-1 EXHIBIT V -E ESTIMATED IMPACT OF MODIFICATION TO TAX INCREMENT FINANCING DISTRICT NO. 04-1 IMPACT ON TAX BASE ORIGINAL ESTIMATED CAPTURED DISTRICT TAX TAX TAX TAX AS % ENTITY BASE CAPACITY CAPACITY CAPACITY OF TOTAL City of New Hope 13,464,913 3,783 105,745 101,962 0.757% County of Hennepin 972,912,612 3,783 105,745 101,962 0.010% ISD # 281 68,883,533 3,783 105,745 101,962 0.148% IMPACT ON TAX RATE ENTITY TAX RATE % OF TOTAL TAX INCREMENT TAX RATE INCREASE City of New Hope 0.49139 35.55% 50,103 0.375% County of Hennepin 0.47324 34.24% 48,252 0.005% ISD # 281 0.34258 24.79% 34,930 0.051% Other 0.07488 5.42% 7,635 1.38209 100.00% 140,921 Assumes construction would have occurred without the creation of a Tax Increment Financing District. If construction is a result of Tax Increment Financing, the impact is $0. V -E-1 Source of Funds Tax Increment Revenue Investment Earnings Bond Proceeds Loan Proceeds Special Assessments Sales/Lease Proceeds Loan/Advance Repayments Grants Other Transfers In Total Source of Funds Use of Funds Land/building acquisition Site Improvements/preparation costs Installation of public utilities Public Parking facilities Streets and sidewalks Public park facilities Social, recreational or conference facilities Interest reduction payments Bond principal payments Bond interest payments Loan principal payments Loan/note interest payments Administrative costs Other Transfers out Total Use of Funds TIF No. 04-1 $ 6,000,000 600,000 2,625,000 150,000 $ 9,375,000 $ 700,000 700,000 700,000 2,625,000 1,575,000 1,575,000 600,000 MM $ 9,375,000 6 CITY OF NEW HOPE PROPOSED CHRONOLOGY MODIFICATION OF TIF DISTRICT NO. 03-1 (SPECIAL LAW) (RYLAND - PHASE III) MONDAY, JULY 26, 2004 CITY COUNCIL MEETING (i) call for public hearing; (ii) approve authorization to publish notice of public hearing THURSDAY, AUGUST 12, 2004 TIF PLAN PROVIDED TO COUNTY COMMISSIONER (not less than 30 days prior to publication of the notice of public hearing) THURSDAY, AUGUST 26, 2004 TIF PLAN PROVIDED TO SCHOOL DISTRICT NO. 281 AND HENNEPIN COUNTY (not less than 30 days prior to public hearing) THURSDAY, SEPTEMBER 9, 2004 NOTICE OF PUBLIC HEARING PROVIDED TO NEWSPAPER WEDNESDAY, SEPTEMBER 15, 2004 PUBLICATION OF NOTICE OF PUBLIC HEARING (not less than 10 days nor more than 30 days prior to public hearing) MONDAY, SEPTEMBER 27, 2004 EDA MEETING (i) review and approve modifications to Redevelopment Plan and existing TIF Plans; (ii) enlarge TIF District No. 03-1; (iii) modify TIF Plan; and (iv) authorize execution of Redevelopment Contract COUNCIL MEETING - PUBLIC HEARING (i) review and approve modifications to Redevelopment Plan and existing TIF Plans; (ii) enlarge TIF District No. 03-1; (iii) modify TIF Plan G:\WPDATA\N\NEW H0PS\25\TIF\CHR0N0I0GY.D0C KRASS MONROE, P.A. ATTORNEYS AT LAW Mary E. Molzahn Email marym@bmsmonroe.com trassmonroe.com Voice Mail (952) 885-4382 MEMORANDUM To; City of New Hope Attn: Amy Baldwin From: Mary E. Molzahn, Sr. Development Analyst Date: July 21, 2004 Re: TIF District #04-2/PPL Our File No. 10048-21 Enclosed please find a Notice of Public Hearing and map for publication on August 11th. After publication of the notice, we would appreciate receiving an affidavit of publication for our files. If you have any questions, please give a call. G-UPDATAINWEW HOPEO COMBALDWIN MEM 2.DOC 8000 NORMAN CENTER DRIVE • SUITE 1000 • BLOOMINGTON, MINNESOTA 55437 TELEPHONE 9521885.5999 • FACSIMILE 9521885-5969 www.krrassmonme.com NOTICE OF PUBLIC HEARING CITY OF NEW HOPE COUNTY OF HENNEPIN STATE OF MINNESOTA NOTICE IS HEREBY GIVEN THAT the City Council (the "Council") of the City of New Hope, Minnesota, will hold a public hearing on Monday, August 23, 2004, at 7:00 p.m. o'clock, or shortly thereafter, at City Hall, 4401 Xylon Avenue North, New Hope, Minnesota, 55428, relating to the following matters: (1) modification of the Restated Redevelopment Pian for Redevelopment Project No. 1 (the "Project Area") reflecting increased geographic area, increased project costs and increased bonding authority within the Project Area; (2) modification of the Tax Increment Financing Plans for Tax Increment Financing Districts Nos. 80-2, 81-1, 82-1, 85-1, 85-2, 86-1, 02-1, 03-1 (Special Law), and Tax Increment Financing District No. 04-1 (Special Law) reflecting increased geographic area, increased project costs and increased bonding authority within the Project Area; (3) creation of Tax Increment Financing District No. 04-2; and, (4) adoption of a Tax Increment Financing Plan relating thereto, all pursuant to Minnesota. Statutes, Sections 469.001 to 469.047, 469.124 to 469.134, 469.090 to 469.108 and 469.174 to 469.1799, and Laws of Minnesota 2003, Chapter 21, Article 10, Section 10, inclusive. Copies of the documentation relating to the above proposed actions will be on file and available for public inspection in the City Clerk's office. The property proposed to be included in Tax Increment Financing District No. 04- 2 is described below and set forth on the attached map: PIN 06-118-21-34-0021, including adjacent streets and rights-of-way All interested persons may appear at the hearing and present their views orally or in writing. BY ORDER OF THE CITY COUNCIL Is/ Daniell Donahiie City Manager (attach map) G:\WPDATA\N\NEW HOPE\21\TIF\NOTICE OF PUBLICATION_DOC ,'� ... w.......... r........ LIM TIF ]districts map C Project Area — the area in vrhich lax increment can be spent. Now TIF District — the area in whici) tax incrMent is generated. RESOLUTION FINDING THAT THE INCREASE IN GEOGRAPHIC AREA TO REDEVELOPMENT PROJECT NO. 1 IS CONSISTENT WITH THE COMPREHENSIVE LAND USE PLAN OF THE CITY OF NEW HOPE WHEREAS, the New Hope Economic Development Authority (the "EDA") and the City of New Hope (the "City") are proposing the enlargement of Redevelopment Project No. 1 (the "Project Area) by modifying its geographic boundaries and to amend the Restated Redevelopment Plan (the "Plan") relating thereto, pursuant to , Sections 469.001 to 469.047, 469.124 to 469.134, 469.090 to 469.108 and 469.174 to 469.1791, inclusive, as amended and supplemented from time to time, and WHEREAS, the additional property proposed to be added to the Project Area is described on the attached Exhibit A and illustrated on the attached Exhibit B, and WHEREAS, the Planning Commission has reviewed said modification to the Plan and Project Area, and has determined its consistency to the overall comprehensive land use plan of the City. NOW THEREFORE, BE IT RESOLVED BY THE NEW HOPE PLANNING COMMISSION that the adoption of the modification to the Plan for the Project Area is consistent with the City's comprehensive land use plan. Adopted this 4 day of Au us,+ , 2004 aZ�-� S Chairman ATTEST: G:\WPDATA\N\NEW HOPE\ 21 \TIF\ PLANNING COMMISSION RESOLUPION.DOC --i-7(p " TTAHennepin County Taxpayer Services Department -1 1 A-600 Hennepin County Government Center Minneapolis, Minnesota 55487-0060 August 13, 2004 James Casserly Krass Monroe, P.A. 8000 Norman Center Drive Suite 1000 Minneapolis, MN 55437-1178 Re: New Hope Project for Pride in Living Housing TIF District No. 04-2 Dear Mr. Casserly: Enclosed is a report from Richara P. Johnson, Hennepin County Deputy Administrator, to the Hennepin County Board of Commissioners, concerning the proposed New Hope Project for Pride in Living Housing TIF District No. 04-2. Please arrange to have the report entered into the record of the public hearing of the New Hope City Council on Monday, August 23, 2004, to reflect the input of Hennepin County, as provided by Minnesota Statutes, Section 469.175, Subd. 2. If you have any questions about this information, please call me at 612-348-5076. Sincerely, a C/1?7 Jean 7Bierbaum, Senior Administrative Assistant Administrative Services Division Cc Kirk McDonald, City of New Hope, 4401 Xylon Avenue North, New Hope, MN 55428 RevuNewHopePPL8232004JTransmittalLetter An Equal Opportunity Employer Recycled Paper Memo Date: August 13, 2004 To: Board of County Commissioners From: Richard P. Johnson, Deputy County Administrator Subject: New Hope Project for Pride in Living Housing TIF District No. 04-2 Hearing Date: New Hope City Council Monday, August 23, 2004 at 7:00 p.m. PROPOSAL: In response to New Hope's need for additional affordable housing, Project for Pride in Living(PPL) has proposed construction of a rental apartment and ownership condominium development. The site chosen for the development, at 5501 Boone Avenue North (06-118-21-34-0021), has remained undeveloped because it has soil problems that require pilings for construction and relocation of a pond at the northern portion of the parcel. Project for Pride in Living has requested TIF assistance to help offset the excessive costs to correct and work around the soil and ponding problems and to provide low/moderate income rental and owner -occupied housing units. The Housing TIF District will be developed in two phases. Phase I, to be constructed by 1213112005, will contain a 35 - unit apartment building with. underground and surface parking. The rental apartments will be a 100% low-income housing tax credit development with at least 75% of the units rented to households with incomes less than 60% of the area median income. Phase 11, to be constructed by 1213112006, will contain a 41 -unit market rate, for -sale condominium building with underground and surface parking. These owner -occupied units will be marketed to low/moderate income individuals or families. Tax Increment assistance will be needed because the selling prices will be less than the development and construction costs. FISCAL IMPLICATIONS: The Housing TIF District will have a duration of 25 years from receipt of the first tax increment. Thirty-five percent ($2,100,000) of the projected tax increment of $6,000,000 will be expended for Land/building acquisition ($700,000), Site improvement and preparation costs ($700,000) and public parking facilities ($700,000). Bond and loan/note interest payments will expend 52.5% ($3,150,000) of the projected tax increment The Sources and Uses of Public Funds for the New Hooe TIF District No. 04-2 are: SOURCES of FUNDS Amount USES of FUNDS Amount Tax Increment $6,000,000 Land/Building Acquisition $700,000 Investment Eamings 600,000 Site ImprovementslPreparation 700,000 'Transfers In 150,000 Public Parking Facilities 700,000 Bond Proceeds 2,625,000 Bond Principal 2,625,000 Total Project & Financing Revenue $9,375,000 Bond Interest & Loan/Note Interest 3,150,000 Administrative Costs (up to 10%) 600,000 Transfers Out 900.00 Total Financing and Project Costs $9,375,000 Continued... August13,2004 Board of County Commissioners New Hope TIF District No. 04-2 Page 2 SUMMARY: This Housing TIF District will create 35 units of 1 uu�/o low-income housing tax credit rental apartments and 41 low/moderate income for -sale condominium units. In addition to the financial assistance needed by Project for Pride in Living for construction of the low and low/moderate income housing, assistance is also needed to resolve soil and ponding problems on the development site. For these reasons, it appears that this TIF District satisfies the Hennepin County Board of Commissioners' preference for use of TIF both as a financing tool of last resort to deal with site problems and for targeting public assistance to lower income housing projects of demonstrated need, as identified in' Resolution 92-10-917R1, adopted 10/27/92. A copy of this report will be sent to the City of New Hope with a request that it be entered into the public record of the August 23, 2004, public hearing of the New Hope City Council, to reflect the County's position on this proposal. RevuNewHopePPL82320o4J EDA A.REQUEST FOR ACTION Originating Department Approved for Agenda Agenda Section Community Development 09-13-04 EDA Item No. By: Kirk McDonald, Director of CD By: Shawn Siders, CDSpecialist A RESOLUTION AUTHORIZING EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY AND PROJECT FOR PRIDE IN LIVING, INC. FOR THE REDEVELOPMENT OF 5501 BOONE AVENUE NORTH. (IMPROVEMENT PROJECT NO. 776) REQUESTED ACTION Staff requests that the EDA approve the attached resolution regarding a private redevelopment contract between the EDA and Project for Pride in Living, Inc., prepared by Krass Monroe, the city's financial consultant. If approved, this development agreement will facilitate the construction of a thirty-five (35) unit affordable rental apartment building as well as a forty-one (41) unit market rate, owner occupied condominium building. This development addresses the life cycle housing goals component outlined in the city's Comprehensive Plan. This development agreement is drafted in accordance with the provisions of the term sheet which was approved by the EDA at its meeting of May 10, 2004. Mr. James Casserly with Krass Monroe will review the details of this development agreement with the EDA. POLICY/PAST PRACTICE City goal #2 is to emphasize the maintenance and redevelopment of commercial and residential properties within the city. The EDA has been addressing the residential portion of this goal through the city's many housing activities, including coordinating with potential developers on the sale and development of city - owned property. The EDA has previously entered into contracts for private redevelopment with developers to facilitate improvements in the city_ BACKGROUND The property located at 5501 Boone Avenue North and a portion of the property located at 5425 Boone Avenue North was acquired in 1993, through eminent domain proceedings. It was anticipated that an adult daycare facility would be constructed on the site. That project did not proceed and the land has been vacant since it was acquired. MOTION BY j+�� SECOND BY i TO:: `1 3 I:IRFAIPLANNING1Hous1n 15501 BoonelQ-PPL de a rvl.doc C o Request for Action Page 2 September 13, 2004 On June 17, 2003, city staff received the initial development proposal from PPL, Inc. for the possible development of the site located at 5501 Boone Avenue North. At its meeting of June 23, 2003, the developer proposed the construction of two buildings which would contain seventy (70) housing units. The first building would consist of thirty-five (35) affordable rental units. The other would consist of thirty-five (35) market rate, owner occupied condominium units. At that meeting, the EDA directed the developer to consider adding additional market rate, owner occupied condominium units so that the number of owner occupied units is greater than the number of rental units. The developer responded to this request and proposed the construction of forty-one (41) market rate, owner occupied condominium units. On October 27, 2003, the EDA directed staff to proceed with a financial/tax increment finance analysis for the project located at 5501 Boone Avenue North. The proposal for which the financial analysis would be modeled assumed the construction of thirty-five (35) affordable rental units and forty-one (41) market rate, owner occupied condominium units. Of those thirty-five affordable rental units, it was proposed that eight of the units would be income restricted to those families that were at or below 30% of the Area Median Income (AMI). That proposal stipulated that those units would be Section 8 eligible. Based on the findings of the financing/tax increment financing analysis prepared by Krass Monroe, the EDA directed staff to proceed with developing preliminary terms for an agreement between the EDA and PPL, Inc. That action was taken by the EDA at its meeting of March 22, 2004. In that regard, the EDA approved the term sheet that had been developed by city staff and its consultants on May 10, 2004. The term sheet stipulated that the development would include the construction of thirty-five (35) affordable rental units and forty-one (41) market rate, owner occupied condominium units. On July 26, 2004, the New Hope City Council conditionally rezoned the property located at 5501 Boone Avenue North. Once the conditions of the approval set forth by the council had been addressed, the property will be rezoned from I "Industrial" to R-4 "High Density Residential." The findings of the council at that time indicated that this rezoning is in accordance with the goals and principles of the city's Comprehensive Plan and the high-density residential designation is consistent with the adjoining land uses. The EDA approved a resolution which modified the restated redevelopment plan and tax increment financing plans for the project located at 5501 Boone Avenue North at its meeting of August 23, 2004. At that meeting, there were questions regarding the disbursement of the tax revenues levied in the tax increment finance (TIS') district. The city's financial consultant, Krass Monroe, P.A. has prepared two memoranda which are attached for your convenience. Those memoranda highlight the financial advantages of establishing the TIF district. Mr. James R. Casserly and Ms. Gay Greiter in a memorandum dated September 8, 2004 note that the property is currently tax exempt and will be taxable once the property is transferred to PPL, Inc. Once developed, the property will generate approximately $163,964 in annual tax revenue. If the property were to be developed as either a commercial/industrial project, it would generate approximately $90,000 in annual tax revenue. Mr. Casserly and Ms. Greiter indicate that a portion of the proceeds from the TIF district will be used to reimburse the city for the original land acquisition cost, plus interest as well as provide approximately $14,000 annually to assist the city with its redevelopment programs in administration fees. Finally, it is noted that any inflationary increases in market value will allow the TIF district to be decertified more quickly. c , Request for Action Page 3 September 13, 2004 Mr. Greg D. Johnson and Mr. James R. Casserly, in a memorandum dated September 8, 2004 note that each taxing jurisdiction will receive a portion of the property taxes on the value of the land. The distribution of revenue for each taxing district is as follows: Property Tax Distribution - Estimate for 2008 City $1,858 1.1% County $1,790 1.1% School District (TC Levy) $1,296 0.8% Other Jurisdictions $284 0.2% School District (MV Levy) $17,814 10.9% City Admin Fees $14,092 8.6% City Land Reimbursement $28,386 17.3% Project Expenses $98,444 60.0% Total Annual Property Taxes $163,964 100.0% It is anticipated that the first full year of taxes being paid on the fully developed property will be 2008 and the enclosed analysis is predicated upon the entire project being built -out by that time. In 2008, given the current tax levy, the project will generate approximately $163,964 in annual tax revenue. Messrs. Johnson and Casserly note that over the projected life of the TIF district, PPL will require less than half of the total taxes paid for its project expenses, due to inflation. There were also questions regarding the terms of the agreement with PPL, Inc. and whether or not the proposed development has deviated from what was approved by the EDA at prior meetings. In response to those inquiries, Messrs. Steve Cramer and Christopher Wilson with PPL, Inc. provided the city with a breakdown of the number and type of units, the proposed rents as well as the income restrictions for each type of unit. A copy of that letter is attached for reference. PPL, Inc. has summarized the rental rates for the units at the 5501 Boone Avenue North development. The monthly rental rates have been compared to other apartment complexes in New Hope. In general, the rental rates that will be charged at 5501 Boone Avenue North are comparable to other apartrnent complexes in the area. The following table is an excerpt from the above referenced letter forwarded to the city from PPL, Inc. Competitive Rental Developments in New Hope* Continental Apartments Continental Village Pheasant Park Apartments 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom $670 $760-$790 N/A N/A $635-$655 $745-$755 N/A N/A $600-$810 $820-$905 $1145-$1165 N/A 5501 Boone Avenue North N/A $715-$890 $920-$1090 $1060-$1285 ~* Data Compiled by PPL from Maxfield Research and phone interviews Request for Action Page 4 September 13, 2004 REQUEST FOR ACTION Staff recommends that the EDA approve the Development Agreement between the EDA and PPL, Inc. for the following reasons: • The proposal conforms to the original term sheet that was previously approved by the EDA. • The original EDA site cost of $276,764 will be reimbursed through the increment generated from the proposed $14.5 million development. • As requested by the EDA, the ownership portion of the proposal was increased by six (6) units for a total of forty-one (41) ownership units. These provide additional needed life -cycle housing options per the city's Life Cycle Housing Study prepared in 1997. • The thirty-five (35) affordable rental units will assist in the replacement of existing affordable units that may eventually be displaced due to other redevelopment activities in the city. The property is currently tax-exempt and does not contribute to the city`s general fund. • The proposed land use is compatible with the adjoining land uses. The proposed development is in compliance with the goals and principles of the city's Comprehensive Plan. FUNDING The 10% administrative fee provided by annual taxes in the payment stream will cover the cost of administering the TIF District. ATTACHMENTS • Memorandum from J. Casserly & G. Johnson - September 8, 2004 • Memorandum from J. Casserly & G. Greiter -September 8, 2004 • PPL, Inc. Letter - September 3, 2004 • Resolution • Development Agreement NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY COUNTY OF HENNEPIN STATE OF MINNESOTA RESOLUTION NO. 2004-34 A RESOLUTION AUTHORIZING EXECUTION AND DELIVERY OF A CONTRACT FOR PRIVATE REDEVELOPMENT BY AND BETWEEN THE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY AND PROJECT FOR PRIDE IN LIVING, INC. FOR THE REDEVELOPMENT OF 5501 BOONE AVENUE NORTH BE IT RESOLVED by the New Hope Economic Development Authority (the "EDA") as follows: Section 1. Recitals. 1.01 It has been proposed that the EDA enter into a Contract for Private Redevelopment (the "Contract") with Project for Pride in Living, Inc. ("PPL") to convey to PPL and redevelop the City -owned property at 5501 Boone Avenue North (the "Site"). 1.02 The EDA has duly noticed and held a public hearing pursuant to Minnesota Statutes, Section 469.105, Subd. 2 relating to the EDA's proposed sale of the Site to PPL. Section 2. Findings. 2.01 The EDA hereby finds that the Contract promotes the objectives as outlined in its Restated Redevelopment Plan for Redevelopment Project No.1 established pursuant to Minnesota Statutes, Section 469.001 et seq. 2.02 The EDA hereby finds that it has approved and adopted Tax Increment Financing District No. 04-2 and the EDA has approved and adopted the Tax Increment Financing Plan relating thereto pursuant to Minnesota Statutes, Sections 469.174 through 469.1799, inclusive, as amended and supplemented from time to time. Section 3. Authorizations. 3.01 The President and the Executive Director (the "Officers") are hereby authorized to execute and deliver the Contract when the following condition is met: Substantial conformity to the Contract presented to the EDA as of this date with such additions and modifications as those Officers may deem desirable or necessary as evidenced by the execution thereof. Adopted by the EDA this 13th day of September , 2004. ident ATTEST: Aarn�iel. �DonahWe, Executive Director GAWPDATAIMNEW HOPE1211DOMEDA RESOL AUTHG EXEC OF REDEV AGRMOC KRASS MONROE, P.A. A T T O R N EYS AT L A W Gay Greiter, Esq. Email: ggreiter'a)�Jcrassmonroe.corn Direct (952) 885-4393 MEMORANDUM To: City of New Hope Attn: Kirk McDonald, Community Development Director From: Gay Greiter, Esq. James R. Casserly, Esq. Date: September 8, 2004 James R. Casserty, Esq. Email: jeasserly@krassmonroe.com Direct (952) 885-1296 Re: 5501 Boone Avenue N. Summary of Redevelopment Agreement with PPL Our File No. 10048-21 At your request, we have prepared the following summary of the principal terms of the Authority's proposed redevelopment agreement with Project for Pride in Living, Inc. (PPL) for the Council's review at the September 23, 2004 meeting. One of us will attend the meeting and will be available for questions. ➢ Conveyance of Land to PPL The Authority will convey the site to PPL at a closing on September 15, 2004, provided that PPL has secured financing for the Apartment Project. The closing may be extended to October 15, 2004 by agreement of both parties. ➢ City Assistance The Authority will provide a grant of up to $550,000 for the Apartment Project and up to $650,000 for the Condo Project as follows: . The Apartment Project Grant will be provided when site improvements begin. The Condo Project Grant will be provided in two parts: (1) Up to $150,000 for grading and ponding when those activities begin, provided PPL also advances $50,000 for such costs, and (2) the balance when pilings or foundation construction begins. 8000 NORMAN CENTER DRIVE, SUITE 1000 • MINNEAPOLIS, MINNESOTA 55437-1178 TELEPHONE 9521885-5999 • FACSIMILE 9521885.5969 www.krassmonme.com • No more than $350,000 of Authority assistance is to be used for ponding and grading. Final project costs will be reviewed upon project completion to make sure all of the assistance given was needed. PPL's developer. fee on each Project is subject to a dollar cap for this purpose. Any surplus assistance for one Project is not to be applied to the other Project. ➢ Obligations of the Authority and PPL The Authority and PPL have the following obligations: The Authority agrees es to: • Create a tax increment financing district (already done) • Convey the site to PPL "as is" Provide marketable title to the site Provide water and sewer to the edge of the site PPL agrees to: • Demonstrate ability to finance project construction Obtain necessary rezoning, permits and approvals and observe other governmental requirements, including bonding Pay customary City fees for approvals and construction Build 35 Apartments and 41 Condos according to approved construction plans Maintain required builder's risk, comprehensive general liability and workers' compensation insurance Qualify initial Condo buyers and Apartment residents on an ongoing basis with respect to applicable income restrictions and comply with reporting requirements • Manage the Apartment Project for at least five years and obtain City approval for any change in management If PPL fails to construct the Projects on a timely basis, the Authority may elect to take back the portion of the site that underlies the uncompleted Project or Projects. Construction Timing • Apartments — commence construction on 9115104; completion by 7131106 • Condos — commence construction on 4115105; completion by 12/31/06 G:IWPDATAWWEW HOPE1211CORWCDONA:DGG01 CONTRACTSUMM.DOC • Page 2 09/08/2004 14:12 -FAX 852 885 6969 BRASS MONROE KRASS MONROE, P.A. ATTORNEYS AT LAW ■ Jams R eamriy MEMORANDUM To: City of New Hope Attn: Kirk McDonald, Comm. Dev. Dir. Daryl Sulander, Finance Director Daniel Donahue, City Manager. From: James R. Casserly, Esq. Gay Grefter, Esq. Date: September 8, 2004 Re: PPL 1 Boone Our File No. T0048-21 ■ Gay Grahm. Esq EmAMagam-afta��em wwa:lbaunnarmcam Voice AIlyffim 81SAM 16002 You have asked us to provide you with a brief overview of the financial advantages to the City of New Hope for proceeding with the PPL project. Briefly they are as follows: • The property owned by the EDA is currently tax exempt. When It is transferred to PPL 4 will be revalued and PPL will pay taxes on the market value of the land. • PPL's use of the property meets the requirements of the $100,000 CDBG Grant Provided by Hennepin County. As a result, this amount does not have to be retumed to Hennepin County. • A tax increment district will be established to assist with the eligible project expenses. One of the expenses is the City's land cost which will now be recovered with interest from the tax increment district. • Taxes for the completed project are estimated to be $163,964. From that amount the school district would receive, using the current market value levy, the sum of $17,814. • The other taxing jurisdictions will be receiving a portion of the property taxes on the value of the land. This is noted above and is further described in the attached memo dated September 8, 2004 by Greg D. Johnson of our office. $000 NORMAN COR DRIVE, SUITE 1000 • NINNFAPouS, MINNESOTA 55437.1178 TBBHONE 9 ALSM s FAcSMLE 9521886.5969 www.krmnrrmn=.wm 09/08/2004 14:12 FAX 952 885 5969 XRASS MONROE la 003 Any increase in the local tax rate Is not considered to be tax Increment and will go to the local taxing jurisdictions, The EDA will receive over $14,000 a year to assist the City with its redevelopment programs. Any inflationary increases in market value will allow the tax increment district to be decertified more quicidy. • Any future market value referendums will not contribute to tax increment receipts but go directly to the levying jurisdiction. Any commercial/Industrial use generates approximately 55% of the local property taxes anticipated fior the residential uses. (Local CJI taxes would be approximately $90,000 versus the $164,000 for residential). We have substantial supporting documentation we can provide for the above analysis. Please let us know if you would like a more detailed report. JRC/jlt w/ attachment G'WMATAWWEW H0PE121VC'A WACD0NAID SULANDER DONAHUE MWC 0 Page 2 09/08/2004 14:12 FAX 952 885 6969 HRASS MONROE KRASS MONROE, P.A. ATTORNEYS AT LAW ■ Greg 0. Johnson, GPA Nn1aH: viofnr�sanl®fQassrnonroetom wwwaasomomw-cwvn vake Mail {964 885 MEMORANDUM To: City of New Nope Attn: Kirk McDonald, Comm. Dev. Dir. Daryl Sulander, Finance Director Daniel Donahue, City Manager. From: Greg D. Johnson, CPA James R. Casserly, Esq. Date: September 8, 2004 Re PPL 1 Boone - Distribution Our File No. 10048-21 IM 004 ■ James R. Cady F.inary.• AzwofyffiWassmunmaemm WWWJW&WNXVrMagm Valve Mail (M 80-1296 Given the current tax rates and levies, we anticipate in 2008 (the first year of full taxes) that 60% of the property taxes would be used for project expenses. The total tax bill of $163,964 Would be distributed as follows. Currently the property pays $0 taxes Property Tax Distribution - Estimate for 2008 1 City 1,858 1.1% 2 County 1,790 1.1% 3 School District (TC levy) 1,296 0.8% 4 Other Jurisdictions 284 0.2% 5 School District (MV levy) 17,814 10.9% 6 City Admin Fees 14,092 8.6% 7 City Land Reimbursement 28,386 17.3% 8 Project Expenses 98.444 60.0% Total Annual Property Taxes 153.964 100.0% Over the projected life of the TIF District, PPL will require less than half of the total taxes Paid for its project expenses, due to inflation_ Any increased tax increment resulting from inflation will be available to reduce the life of the TIF District and pay off any obligations for this project. See the attached pie chart for a graphical depiction of the distribution of taxes. Please review and let us know if you have any questions on this analysis. GAMDATAWMV HWM21140RI=0NALD SULANOER DONAHLIE 04.DOC 6000 NORMAN CENTER DRIVE, SUITE 1000 • MINNEAPOLIS, MINNESOTA 65437.1178 TELEPHONE 9621886-5999 • FACSIMILE 9520886- e&g www.Ismnroe.=n 09/08/2004 14:12 FAX 952 885 5969 BRASS MONROE it 73 m UL CL LL n c C w� 0 �CD CD 0 a Qh 005 a C 0 a LD w CL CL m 00 v � c Q a _E a m � r LL N m cc! Co Co Q 0 c C w� 0 �CD CD 0 a Qh 005 a C 0 a LD w CL CL 0910112004 WED 16;22 FAI 612 813 0160 CONNECTIONS TO WORK yglffdfr:k frrfurao' icor over 30 years August 30, 2004 Kirk McDonald Community Development Director City of New Hope 4401 Xylon Ave N New Hope, MN 55428 Dear Mr_ McDonald, At the August 23`4 Ciiy Council Meeting, Council Members raised some questions concerning the terms of our agreement with the City and the use of the term "market rate" in describing most of the units in the recital .portion of the projecL Let us begin by saying that, in our view, nothing -substantial has changed in the structure of the rental project since the -Council~ approved the term sheet. The mix of tax credit, -Section 8 and MARIF units has been the some for over a year, though the County is requiring us to lower the income restrictions on six units by 10%. The unit mix did change as the building went from three to four stories. Two, two-bedroom units became three bedroom units and one, four-bedroom unit became a three-bedroom unit for a net gain of one bedroom. The square footage of the building has. however, remained essentially the same, so, again, our feeling is that the project is basically the same as proposed last year. The following is a complete table of rents and income restrictions for our 00021003 Affordable Homing & Oornmunktr Development EmPlollment & Job Training TWO Development Human Services Pregovtfor Pride In Living - 1035 E. Franklin Avenue • Minneapolis, MN 554oa • 1512A55.51M • FAX -61.2-455.5104. - www.vplanc.org a plloppUne_org 0910112004 WEED 16:22 FAX 612 Sia 0160 CONNECTIONS TO WORK The following table compares rents at 5501 Boone Avenue with nearby apartments and illustrates that our rents are comparable to or above the market rents in the city and that we offer larger units that aren't readily available in the area. A comparable development with larger units would be our Bass Lake Court property and rents for the three and four bedroom units at Boone Avenue Apartments are about $200 per month higher than there. Competitive Rental Developments in New Hope uatar uompnea by PPL irnm Maxfield Research and phone intiarviews. However, although the rants are consistent with the market, our financing restricts our potential tenants to families earning less than 60% of the area median income (AMI). HUD defines these families as "low income," so the development agreement and other documents pertaining to the project will use similar language. In Hennepin County, 60% of the AMI for a family of four is $46,020 annually. We certainly apologize for any misunderstanding and it was not our intention to be misleading in any way. Hopefully our responses to the Council at the meeting and this .letter have answered these questions about the project. We very much value our continued relationship with the City of New Hope and are looking forward to starting construction on this project_ ,ner Christopher Wilson Director Development Manager 9003/003 1--7 2 3 4 Continental Apartments $670 $760- $790 Continental Village $635- $745- $655 $755 Pheasant Park $600- $820- $1145 - Apartments $610 $905 $1965 5501 Boone Ave $715- $920- $1060- $$90$1285 uatar uompnea by PPL irnm Maxfield Research and phone intiarviews. However, although the rants are consistent with the market, our financing restricts our potential tenants to families earning less than 60% of the area median income (AMI). HUD defines these families as "low income," so the development agreement and other documents pertaining to the project will use similar language. In Hennepin County, 60% of the AMI for a family of four is $46,020 annually. We certainly apologize for any misunderstanding and it was not our intention to be misleading in any way. Hopefully our responses to the Council at the meeting and this .letter have answered these questions about the project. We very much value our continued relationship with the City of New Hope and are looking forward to starting construction on this project_ ,ner Christopher Wilson Director Development Manager 9003/003 DATED: September 13, 2004 CONTRACT FOR PRIVATE REDEVELOPMENT By and Between ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE And PROJECT FOR PRIDE IN LIVING, INC. This document was drafted by: Krass Monroe, P.A. 8000 Norman Center Drive Suite 1000 Minneapolis, MN 55437 G:IWPOATAIMHEW HOPEUMOC4COVERAOC TABLE OF CONTENTS Page ARTICLE I Definitions Section 1.1. Definitions ............................. ARTICLE II Representations, Warranties and Covenants Section 2.1. Representations, Warranties and Covenants by the Authority.....................6 Section 2.2. Representations, Warranties and Covenants by the Redeveloper ................. 7 k1l "V Mi II Undertalan s of Authority and Redeveloper Section 3.1. Payment of Grants to Redeveloper..............................................................9 Section 3.2. Limitation on Undertalcing of the Authority..............................................10 Section 3.3. Conveyance of the Redevelopment Property .............................................10 Section 3.4. Conditions Precedent to Conveyance................................................:.......10 Section 3.5. Taxes and Special Assessments ..................................... .................11 Section 3.6. Assistance Review----------...........................................................................11 ARTICLE IV Construction of Minimum Improvements Section 4.1. Construction of Minimum Improvements.................................................12 Section 4.2. Preliminary Plans and Construction Plans.................................................12 Section 4.3. Completion of Construction.......................................................................13 Section 4.4. Certificate of Completion..........................................................................13 ARTICLE V Events of Default Section 5.1. Events of Default Defined..........................................................................14 Section 5.2. Remedies on Default ....................................... Section 5.3. Revesting Title in Authority Upon Happening of Event Section 8.2. Subsequent to Conveyance to Redeveloper............................................15 Section 5.4. Resale of Reacquired Property; Disposition of Proceeds Section 8.4. and Earnest Money..................................................................................16 Section 5.5. Copy of Notice of Default to Lender and r,'EF..........................................16 Section 5.6. Lender's or NEF's Option to Cure Defaults..............................................16 Section 5.7. No Remedy Exclusive................................................................................17 Section 5.8. Effect of Breach Relating to Apartment Project or Section 8.9. CondoProject Only.................................................................................17 Section 5.9. No Implied Waiver ................... Section 5.10. Agreement to Pay Attorney's Fees and Expenses......................................17 ARTICLE VI Prohibitions Against Assignment and Transfer Section 6.1. Representation as to Redevelopment.........................................................17 Section 6.2. Prohibition Against Transfer of Property and Assignment of Agreement......................................................................18 ARTICLE VII Insurance and Condemnation Section 7.1. Insurance....................................................................................................18 Section 7.2. Condemnation ............................................................................................20 Section 7.3. Subordination ..................................... ARTICLE VIII Additional Provisions Section 8.1. Conflict of Interest.....................................................................................21 Section 8.2. Restrictions on Use....................................................................................2.1 Section 8.3. Titles of Articles and Sections...................................................................21 Section 8.4. Notices and Demands .................................................. .......................21 Section 8.5. Indemnification of Authority.....................................................................22 Section 8.6. Counterparts...............................................................................................22 Section8.7. Law Governing.........................................................................................22 Section 8.8. Supplemental Agreements.........................................................................22 Section 8.9. Subordination of Rights Under this Agreement.........................................22 ii ARTICLE IX Termination of Agreement Section 9.1. Termination................................................................................................23 Section 9.2. Effect of Termination.................................................................................23 SIGNATURES....................................................................................................................24 SCHEDULES Schedule.A Legal Description of Redevelopment Property ....................................... A-1 Schedule B Redevelopment Property Deed................................................................B-1 Schedule C Certificate of Completion and Release of Forfeiture...............................0-1 Schedule D Site Improvements.................................................................................. D-1 Schedule E Declaration of Restrictive Covenants a3id Prohibition Against Tax Exemption (Apartment Project) .......................................E-1 Schedule F Declaration of Restrictive Covenants and Prohibition Against Tax Exemption (Condo Project)..............................................F-1 Schedule G Escrow Agreement and Receipt.............................................................. G-1 GIWPOATAUMEW HOPE%2MOC1TOC.00C iii CONTRACT FOR PRIVATE REDEVELOPMENT THIS AGREEMENT, made as of the 13th day of September, 2004, by and between the Economic Development Authority in and for the City of New Hope (the "Authority"), a public body corporate and politic (the "Authority"), having its principal offices at 4401 Xylon Avenue North, New Hope, Minnesota 55428, and Project for Pride in Living, Inc,, a Minnesota nonprofit corporation (the "Redeveloper"), having offices at 1035 East Franklin Avenue, Minneapolis, Minnesota 55404. WITNESSETH: WHEREAS, the Authority is a political subdivision of the State of Minnesota and is governed by a Board of Commissioners (the "Board"); WHEREAS, in furtherance of the Authority's objectives, there has been established a Restated Redevelopment Plan for Redevelopment Project No. 1 (the "Project Area") in the City of New Hope, Minnesota (the "City") to encourage and provide maximum opportunity for private development and redevelopment of certain property in the City which is not now in its highest and best use; WHEREAS, as of the date of this Agreement the Restated Redevelopment Plan has been prepared and approved, and the Project -Area has been established pursuant to Minnesota Statutes, Sections 469.001 through 469.047 and 469.090 through 469.108; WHEREAS, in connection with the Project Area the City Council of the City intends to create a housing tax increment financing district (the "Tax Increment District") pursuant to Minnesota Statutes Section 469.174 et seq. (the "Tax Increment Act"); WHEREAS, in connection with the establishment of the Tax Increment District the Council will approve a tax increment financing plan and will forward it to the County of Hennepin for certification of the original net tax capacity; WHEREAS, the Authority currently owns land within the proposed Tax Increment District (the "Redevelopment Property) and, in order to achieve the objectives of the Restated Redevelopment Plan, the Authority is willing to convey the Redevelopment Property to the Redeveloper subject to the Redeveloper proceeding with construction in accordance with this Agreement and the Restated Redevelopment Plan; WHEREAS, the Redeveloper plans to construct a building with 35 low to moderate income apartment units (the "Apartment Project') and a building with 41 market -rate owner -occupied condominium units (the "Condo Project") on the Redevelopment Property. The Redevelopment Property requires extensive soil correction, including ponding and pilings. Because of the high costs of site preparation and underground parking below both buildings, the Redevelopment Property would not be developed without tax increment assistance; WHEREAS, the major objectives in establishing the Project Area are to: 1. Promote and secure the prompt development or redevelopment of certain property in the Project Area, which property is not now in productive use or in its highest and best use, in a manner consistent with the City's comprehensive plan and with a minimum adverse impact on the environment and thereby promote and secure the development of other land in the City. 2. Promote and secure additional employment opportunities within the Project Area and the City for residents of the City and surrounding area, thereby improving living standards, reducing unemployment and the loss of skilled and unskilled labor and other human resources in the City. 3. Secure the increased valuation ofproperty subject to taxation by the City, County, School District and other taxing jurisdictions in order to better enable such entities to pay for governmental services and programs required to be provided by them. 4. Provide for the financing and construction of public improvements in and adjacent to the Project Area necessary for the orderly and beneficial development or redevelopment of the Project Area and adjacent areas of the City. 5. Promote the concentration of new desirable residential, commercial, office and other appropriate development or redevelopment in the Project Area so as to maintain the area in a manner compatible with its accessibility and prominence in the City. 6. Encourage local business expansion, improvement, development or redevelopment whenever possible. 7. Create a desirable and unique character within the Project Area through quality land use alternatives and design quality in new and remodeled buildings. 8. Encourage and provide maximum opportunity for private development or redevelopment of existing areas and structures which are compatible with the Restated Redevelopment Plan. 9. Create viable environments which would upgrade and maintain housing stock, maintain housing health and safety quality standards, and maintain and strengthen individual neighborhoods. 10. Stimulate private activity and investment to stabilize and balance the City's housing supply. 11. Eliminate code violations and nuisance conditions that adversely affect neighborhoods. 12. Revitalize property to create a safe, attractive, comfortable, convenient and efficient area for residential use. 13. Recreate and reinforce a sense of residential place and security which creates neighborhood cohesiveness through City investment in neighborhood infrastructure and public improvements, including landscaping, park improvements, local street modifications to reduce traffic impacts, street repaving, curb and gutter replacement, and streetlight updating. 14. Encourage infill development and redevelopment that is compatible in use and scale with surrounding neighborhoods. 2 15. Rehabilitate the existing housing stock and preserve existing residential neighborhoods wherever possible. 16. Demolish and reconstruct, where necessary, aging residential buildings to preserve neighborhoods. 17. Removal of substandard structures. WHEREAS, under the Tax Increment Act, the Authority is authorized to finance certain costs of projects with tax increment revenues derived from a tax increment financing district established within the Project Area; WHEREAS, in order to achieve the objectives of the Authority and City in creating the Project Area and in adopting the Restated Redevelopment Plan, the Authority is prepared to provide assistance in accordance with this Agreement; and WHEREAS, the Authority believes that the development and redevelopment of the Proj ect Area pursuant to this Agreement, and fulfillment generally of the terms of this Agreement, are in the vital and best interests of the Authority and the health, safety, morals and welfare'of its residents, and in accord with the public purposes and provisions of applicable federal, state and local laws under which the development and redevelopment are being undertaken and assisted; NOW, THEREFORE, in consideration of the premises and the mutual obligation of the parties hereto, each of them does hereby covenant and agree with the other as follows: ARTICLE I Definitions Section 1.1. Definitions. In this Agreement, unless a different meaning clearly appears from the context: "Act" means Minnesota Statutes, Section 469.001 et seq. "Agreement" means this Agreement, as the same maybe from time to time modified, amended, or supplemented. "Apartment Project Grant" means a grant of $550,000 to be furnished to the Redeveloper by the Authority for the Apartment Project pursuant to Section 3.1. "Apartment Project" means a building to be constructed with 35 units of 2, 3 and 4 bedrooms of low/moderate income rental housing with surface and underground parking. The Apartment Project will be a 100% low-income housing tax credit project with at least 75% of the units rented to households with incomes of no more than 60% of area median income. "Authority" means the Economic Development Authority in and for the City ofNew Hope or any successor or assigns. "Certificate of Completion" means the certification, in the form of the certificate contained in Schedule C, to be provided to the Redeveloper pursuant to Section 4.3. "City" means the City of New Hope, Minnesota, or its successors or assigns. "Closing Date" means the date set forth in Section 3.3(b) for the conveyancebythe Authority ofthe Redevelopment Property to the Redeveloper. "Condo Project Grant" means a grant ofup to $650,000 to be furnished to the Redeveloper by the Authority for the Condo Project pursuant to Section 3.1. "Condo Project" means a building to be constructed with 41 units ofmarket-rate, owner -occupied 1-, 2- and 3 -bedroom condominiums with surface and underground parking. "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 (a) will be as detailed as the plans, specifications, drawings and related documents which are submitted to the building official of the City, and (b) will include at least the following for each building: (1) site pian; (2) foundation plan; (3) floorplan for each floor; (4) elevations (all sides); (5) facade and landscape plan; (6) cross sections (length and width) and (6) such other plans or supplements to the foregoing plans as the Authority may reasonably request. "Council" means the Council of the City. "County" means the County of Hennepin, Minnesota. 4 "Declarations of Restrictive Covenants and Prolubition Against Tax Exemption" or "Declarations of Restrictive Covenants" means the restrictive covenants substantially in the form of Schedule E for the Apartment Project and Schedule F for the Condo Project. "Eligible Public Expenses" means all of the costs and expenses incurred by the City or the Authority in connection with the Redevelopment Project which are eligible to be paid or reimbursed with Tax Increment under Minnesota Statutes Section 469.176, including the Apartment Project Grant and the Condo Project Grant. "Minimum Improvements" means the Apartment Project and the Condo Project. "Minnesota Environmental Rights Act" means Minnesota Statutes, Sections 116B.01 et seq., as amended. "Mortgage" means any mortgage or security agreement in which the Redeveloper has granted or acquiesced in a security interest in the Redevelopment Property, or any portion thereof, or any improvements constructed thereon, and which is a permitted encumbrance pursuant to the provisions of Article VIII. "NEF" means NEF Assignment Corporation, as nominee, who has executed or will execute an amended and restated limited partnership agreement with PPL Boone Avenue Apartments LLC, as general partner, of which the Redeveloper is the sole member, relating to the syndication of the low income housing tax credits relating to the Apartment Project. "Party" means either the Redeveloper or the Authority, as the context may require. "Plan" means, collectively, (i) the Restated Redevelopment Plan adopted by the Authority and approved by the City for Redevelopment Project No. 1, and (ii) the Tax Increment Plan. "Project Area" means Redevelopment Project No. 1, as amended, established in accordance with the Act. "Public Improvements" means water mains and laterals and sanitary sewer mains to the edge of the Redevelopment Property, to be constructed by the Authority. "Redeveloper" means Proj ect for Pride in Living, Inc., a Minnesota nonprofit corporation, and its permitted successors and assigns. "Redevelopment Project" means the Redevelopment Property and the Minimum Improvements. "Redevelopment Property" means the real property owned by the Authority described in Schedule 0 "Redevelopment Property Deed" means a quitclaim deed substantially in the form of the deed attached as Schedule B used to convey title to the Redevelopment Property from the Authority to the Redeveloper. J "Site Improvements" means the site improvements described on Schedule D as qualified improvements of the Redevelopment Property. "State" means the. State of Minnesota. "Tax Increment" means the real estate taxes paid with respect to the Redevelopment Property which is remitted to the Authority as tax increment pursuant to the Tax Increment Act. "Tax Increment Act" means the Tax Increment Financing Act, Minnesota Statutes, Section 469.174 et seq., as amended_ "Tax Increment District" means Tax Increment Financing District No. 4, which was approved by the Authority and by the Council of the City pursuant to the Tax Increment Act. "Tax Increment Plan" means the tax increment financing plan adopted by the Authority and approved by the City in connection with the creation of the Tax Increment District. "Tax Official" means any City or 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, the State Court of Appeals or the State Supreme Court. "Termination Date" means the earliest of (i) December 31, 2032, (ii) the date of any termination of this Agreement in accordance with the provisions of Article V or (iii) the date upon which all Eligible Public Expenses have been fully reimbursed. "Unavoidable Delays" means delays which are the result of strikes, acts ofterrorism, casualties to the Minimum Improvements, the Redevelopment Property or the equipment used to construct the Minimum Improvements, delays related to financing, delays which are the result of governmental actions or changes in plans, delays which are the result of judicial action commenced by third parties, citizen opposition or action affecting this Agreement or adverse weather conditions or acts of God. ARTICLE II Representations. Warranties and Covenants Section 2.1. R resentations Warranties and Covenants by the Authori . The Authority makes the following representations as the basis for the undertaking on its part herein contained: (a) The Authority is a public body duly organized and existing under the laws of the State. Under the provisions of the Act, the Authority has the power to enter into this Agreement and cavy out its obligations hereunder. (b) The Authority has approved the Plan in accordance with the terms of the Act. (c) The Authority will undertake, in good faith, to comply with all statutory requirements of the Tax Increment Act relating to the creation of the Tax Increment District. (d) To finance the costs of certain activities to be undertaken by the Redeveloper, the Authority proposes, in accordance with the provisions of this Agreement, to provide assistance to the Redeveloper in accordance with the terms of this Agreement. (e) The Authority will cooperate with the Redeveloper with respect to any litigation commenced by third parties in connection with this Agreement. (f) The Authority makes no representation, guarantee, or warranty, either express or implied, that the. Redevelopment Property will be suitable for the Redeveloper's purposes or needs and hereby assumes no responsibility or liability as to the Redevelopment Property or its condition (whether regarding soils, pollutants, hazardous wastes or otherwise), except as stated below. The Authority will deliver the Redevelopment Property to the Redeveloper in the following condition: (i) The Authority will have performed the Public Improvements; and (ii) The Redevelopment Property will have direct access to Boone Avenue. Section 2.2. Representations Warranties and Covenants by the Redeveloper. The Redeveloper represents and warrants that: (a) The Redeveloper is a corporation organized under the laws of the State of Minnesota and has duly authorized the execution of this Agreement and the performance of its obligations hereunder. None of the execution- and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the compliance with the terms and conditions of this Agreement would result in a breach of the terms of any agreement or instrument of whatever nature to which the Redeveloper is a party or by which it is bound. (b) Subject to Unavoidable Delays, the Redeveloper will construct, operate and maintain the Minimum Improvements in accordance with the terms of this Agreement, the 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). (c) The Redeveloper will cooperate with the Authority to rezone the Redevelopment Property. (d) As of the date of execution of this Agreement, 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. (e) As of the date of execution of this Agreement, the Redeveloper 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 or which would give any person a valid claim under the Minnesota Environmental Rights Act. (f) The Redeveloper will, within one hundred twenty (120) days after the date of this Agreement for the Apartment Project and within one (1) year after the date of this Agreement for the Condo Project, use its best efforts to obtain, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all applicable local, state and federal laws and regulations which must be obtained or met before the Minimum Improvements may be lawfully constructed_ (g) The Redeveloper will pay the normal and customary City fees and expenses for the approval and construction of the Redevelopment Project including, but .not limited to, bonding requirements, building permit fees, state surcharges, sewer accessibility charges (SAC), water accessibility charges (WAGS and. park dedication fees. (h) The Redeveloper agrees that it will cooperate with the Authority and will indemnify the Authority against all costs, including the costs of defense incurred by the Authority through an attorney reasonably acceptable to the Authority and Redeveloper, with respect to any litigation commenced by third parties in connection with Redeveloper's failure to perform according to the terms and conditions of this Agreement. (i) The financing arrangements which the Redeveloper has obtained or will obtain to finance construction of the Minimum Improvements, together with financing provided by the Authority pursuant to this Agreement, will be sufficient to enable the Redeveloper to successfully complete the Minimum Improvements as contemplated in this Agreement. 'G) The construction of the Minimum Improvements, in the opinion of the Redeveloper, would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future without the use of tax increment financing provided by the City pursuant to this Agreement. (k) Until the Termination Date, the Redeveloper willmaintain the Apartment Project as rental housing in accordance with the provisions of Minnesota Statutes, Section 469.174 Subd. 11 and Section 469.1761 Subd. 3, which require that the Apartment Project or a portion thereof be occupied by persons or families of low or moderate income. (1) On February I of each year, commencing February 1, 2006 and continuing until the Termination. Date, the Redeveloper will certify to the Authority that it is in compliance with those provisions of Minnesota Statutes referred to in Section 2.2(k). The reporting forms used by the Redeveloper for certification to the Authority will be as prescribed by the Authority and will include the forms used by the Minnesota. Housing Financing Agency ("META") to verify eligibility for tax exempt housing revenue bonds or low income housing tax credits, which includes at least MHFA Form LINC-14 (Tenant income Certification) and MHFA Form LILAC -13 (Cumulative Compliance Report). (m) The Redeveloper will initially act as the manager of the Apartment Project. The Redeveloper will obtain the written approval of the Authority for the appointment of any successor manager, which approval shall not be unreasonably withheld. (n) The Redeveloper will ensure that the Condo Project initially qualifies as owner occupied housing in accordance with the provisions of Minnesota Statutes, Section 469.174 Subd.1 I and Section 469.1761 Subd. 2, which require that 95 % of the units be initially purchased and occupied by persons or families of low or moderate income. (o) Once acquired by the Redeveloper, the Redevelopment Property will not become exempt from the levy of ad valorem property taxes, or any statutorily authorized alternative, and any improvements of any kind constructed on the Redevelopment Properly will similarly not become exempt until the Termination Date. (p) The Redeveloper agrees, notwithstanding the provisions of Article VI, that it will not assign, convey or lease any interest in the Redevelopment Property or any portion thereof, or this Agreement or any portion thereof, to any tax-exempt entity under the U.S. Internal Revenue Code of 1986, as the same may be amended from time to time, without the prior written approval of the Authority (whose approval will be conditioned upon the Redeveloper obtaining an agreement upon terms reasonably satisfactory to the Authority from its assignee or lessee to make payments in lieu of tax). (q) The Redeveloper will execute, and will also cause the homeowners' association for the Condo Project to execute, appropriate maintenance and easement agreements relating to playground use and pond maintenance. ARTICLE III Undertakings of Authority and Redeveloper; Conv ance of the Redevelop -anent Pro Section 3.1. Payment of Grants to Redeveloper. (a) As consideration for the execution of this Agreement and the construction of the Apartment Project and the Condo Project by the Redeveloper and subject to the further provisions of this Agreement: (i) Apartment Project Grant. The Authority will provide a grant of up to $550,000 when the Redeveloper begins Site Improvements. The funds shall be delivered to Old Republic National Title Insurance Company (the "Title Company') by January l4' 2005. The funds shall be held in trust by the Title Company as escrow agent pursuant to an agreement substantially in the form of Schedule G. (ii) Condo Project Grant. The Authority will irrevocably commit to provide a grant of up to $650,000 as follows: (A) Up to $150,000 for grading and ponding at the time the Redeveloper begins those activities for both Projects, provided that the Redeveloper also advances $50,000 for the Condo Project grading and ponding, and (B) The balance of the Condo Project Grant will be provided: (1) when the Redeveloper begins pilings and the remaining Site Improvements for the Condo Project (if pilings for the Apartment Project and for the Condo Proj ect were constructed in separate phases) or (2) when foundation construction begins (if pilings for both of the Apartment Project and Condo Project were done at one time). The Redeveloper will perform grading and ponding for both Projects at the same time. In no event shall more than $350,000 of Authority assistance be used for ponding and grading, both Proj ects. (b) It a portion of the Site Improvement costs that must be incunred to construct the Apartment Project are more properly attributable to the Condo Project, such costs will nonetheless be counted as a portion of the Apartment Project Grant if the Condo Project is not completed (and will not result in an increase in the amount of the Apartment Project Grant). If both Projects are completed, such costs will be allocated appropriately between the Projects for purposes of the assistance review set forth in Section 3.6. Section 3.2. Limitation on Undertaking of the Authority. The Authority will have no obligation to, the Redeveloper under this Agreement to furnish the Grants if the Authority, at the time a Grant is to be delivered, is entitled under Section 5.2 to exercise any of the remedies set forth therein as a result of an Event of Default which has not been cured. If the Authority has not exercised its remedies under Section 5.2 and if a Grant is withheld due to an Event of Default which is later cured, such Grant will be delivered after such Event of Default has been cured. Section 3.3. Convffance of the Redevelopment Pro (a) Title: The Authority will convey title to, and possession of, the Redevelopment Properly to the Redeveloper by the Redevelopment Property Deed. The conveyance of title to the Redevelopment Property pursuant to the Redevelopment Property Deed will be subject to all of the conditions, covenants, restriction, and limitations imposed by this Agreement and the Redevelopment Property Deed. The Redevelopment Property Deed will be in recordable form and will be promptly recorded. The Redeveloper will pay all costs for such recording except the state deed transfer tax, if applicable. (b) Time of Conveyance. Subject to Unavoidable Delays, the Authority will execute and deliver to the Redeveloper the Redevelopment Property Deed for the Redevelopment Property on September 15, 2004, or on such later date as the Authority and the Redeveloper shall mutually agree in writing, but in no event later than October 29, 2004 '(the "Closing Date"). The Redeveloper will take possession of the Redevelopment Property on the Closing Date. (c) Price and Payment. Unless otherwise mutually agreed by the Authority and the Redeveloper, the execution and delivery of all closing documents and the payment of the Purchase Price will be made at the principal offices of the Authority. The price to be paid by the Redeveloper for the conveyance of the Redevelopment Property from the Authority to the Redeveloper will be One Dollar ($1.00), the Purchase Price. Section 3.4. Conditions Precedent to Conveyance. The obligation of the Authority to conveythe Redevelopment Property to the Redeveloper will be subject to the following conditions precedent: (a) On the Date of Closing, the Redeveloper is in material compliance with all of the terms and provisions of this Agreement; (b) The Redeveloper has secured the financing necessary to construct the Apartment Project; (c)The Redeveloper has executed the Declarations of Restrictive Covenants; and (d) The Redeveloper has paid the Purchase Price. 10 Section 3.5. Taxes and Special Assessments. The Authority will pay all real estate taxes and all special assessments pending or levied prior to the year of closing on the Redevelopment Property. Real estate taxes and installments of special assessments payable in the year of closing will be prorated as of the Date of Closing based on the Parties' respective period of ownership. Subsequent to the year of closing the Redeveloper will pay all real estate taxes and special assessments on the Redevelopment Project. Section 3.6. Assistance Review. (a) The Parties intend for the Grant for each Project to not exceed the amount necessary to cover Project costs not defrayed by sales proceeds (in the case of the Condo Project), grant and loan proceeds and other revenue sources, including Community Development Block Grants. Following completion of each Project: (i) Apartment Project. Any excess funds received by the Redeveloper above the actual total costs of utility construction, site preparation and construction will be invested in the Project in the form of additional amenities. The Redeveloper's Developer Fee for the Apartment Project may not exceed $630,000, of which at least $100,000 shall be deferred and paid from the cash flow from the Apartment Project. (ii) Condo Project. Following the sale and closing on all Condo units, the Redeveloper will provide to the Authority an accounting of grants received, gross sales revenue and the total actual costs of site preparation, construction and sales expenses. Such accounting shall include a sworn statement in a form reasonably acceptable to the Authority signed by the Redeveloper's project architect or construction manager and indicating that the indicated costs have been incurred. Any excess of grants and sales revenues over such costs will be reimbursed to the Authority. The Redeveloper's Developer Fee for the Condo Project may not exceed $450,000. (b) Each Project will be treated on a stand-alone basis for purposes of the maximum amount of each Grant to be furnished by the Authority and for purposes of this Section. Thus, surplus revenue on one Project will be disposed of as provided in subparagraph (a) above and will not be applied to any shortfall with respect to the other Project. (c) Third -party payments and soft costs (such as for planning, financing, legal, architectural and engineering) will be included in Project costs for purposes of this Section. Such payments and costs shall not be counted as Developer Fee even ifpaid to or incurred by the Redeveloper or an affiliate of the Redeveloper, as long as such payments and charges are reasonable and within normal and customary industry standards. 11 ARTICLE IV Construction of Minimum Improvements Section 4.1. Construction of Minimum Im rovements. The Redeveloper shall construct and pay for all Site Improvements described in Schedule D. The Redeveloper will construct the Minimum Improvements on the Redevelopment Property in accordance with Construction Plans approved -by the City. Section 4.2. PrelinbigU Plans and Construction Plans. (a) Preliminary Plans. Prior to the commencement of construction of the Minimum Improvements, the Redeveloper shall submit Preliminary Plans to the Authority consisting of typical floor plans and sketches of the typical exterior and interior of the.proposed Minimum Improvements which illustrate the size and character of the proposed buildings. The Preliminary Plans shall not be inconsistent with this Agreement or any applicable state and local laws and regulations, insofar as said consistency may be determined at said preliminary stage. If approval of the Preliminary Plans is requested in writing by the Redeveloper at the time of submission thereof to the Authority, the Authority shall approve or reject (in whole or in part) such Preliminary Plans in writing within thirty (3 0) days after the date of receipt thereof. If no written rejection is made within said thirty (30) days, the Preliminary Plans shall be deemed approved by the Authority. Any rejection shall set forth in detail the reasons therefor. If the Authority rejects the Preliminary Plans, in whole or in part, the Redeveloper shall submit new or revised Preliminary Plans within a reasonable time after receipt by the Redeveloper of the notice of rejection. The provisions of this Section relating to approval, rejection and resubmission of new or revised Preliminary Plans shall continue to apply until the Preliminary Plans have been approved by the Authority. The Authority's approval of the Preliminary Plans shall not be unreasonably withheld. (b) Construction Plans. Prior to the Redeveloper's commencement of construction of each Proj ect, the Redeveloper shall submit to the Authority Construction Plans for the Minimum Improvements in that Project. The Construction Plans shall provide for the construction of the Minimum Improvements and shall be in conformity in all material respects with this Agreement, the Preliminary Plans, and all applicable state and local laws and regulations. The Authority shall approve the Construction Plans in writing if (i) the Construction Plans conform in all material respects to the terms and conditions of the Preliminary Plans and this Agreement; (ii) the Construction Plans conform to all applicable federal, State and local laws, ordinances, rules and regulations; (iii) the Construction Plans are adequate to provide for the construction of the Minimum Improvements; (iv) the Construction Plans do not provide for expenditures in excess of the funds available to the Redeveloper for the construction of the Minimum Improvements; and (v) no Event of Default has occurred and is continuing. No approval by the Authority shall relieve the Redeveloper of the obligation to comply with the terms of this Agreement and applicable federal, State and local laws, ordinances, rules and regulations, or to construct the Minimum Improvements in accordance therewith. No approval by the Authority shall constitute a waiver of any Event of Default. Upon the Redeveloper's submittal of the Construction Plans to the Authority, such Construction Plans shall be deemed approved unless rejected in writing by the Authority, in whole or in part, within thirty (30) days after the date of their receipt by the Authority. Such rejection shall set forth in detail the reasons therefor. If the Authority rejects any Construction Plans in whole or in part, the Redeveloper 12 shall submit new or corrected Construction Plans within a reasonable time after written notification to the Redeveloper of the rejection. 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. The Authority's approval shall not be unreasonably withheld. Said approval shall constitute a conclusive determination that the Construction Plans (and the Minimum Improvements relating thereto, if constructed in accordance with said plans) comply with the provisions of this Agreement relating thereto. The Construction Plans shall not be rejected due to any objection which could have been raised upon review of the Preliminary Plans and corrected more economically at that time_ (c) Changes. If the Redeveloper desires to make anymaterial change in the Preliminary Plans or Construction Plans after their approval by the Authority, then the Redeveloper shall submit the proposed change to the Authority for its approval. If the Preliminary Plans or Construction Plans, as modified by the proposed change, conform to the requirements of this Section 4.2 with respect to such previously approved Construction Plans, the Authority shall approve the proposed change and notify the Redeveloper in writing of its approval. Such change in the Preliminary Plans or Construction Plans shall, in any event, be deemed approved by the Authority unless rejected in writing by the Authority, in whole or in part, within thirty (30) days after receipt of the notice of such change, setting forth in detail the reasons therefor. Section 4.3. Completion of Construction. (a) Subject to Unavoidable Delays, the Redeveloper will achieve substantial completion of the construction of the Minimum Improvements as follows: (i) AaartmentProi ect. Begin Site Improvements on or about November 15, 2004; completion of the Apartment Project by July 31, 2006. (ii) Condo Project. Begin construction of building on or about April 15, 2005; completion of the Condo Project by December 31, 2006. Site Improvements shall be constructed timely so as to permit building construction to begin as scheduled. (b) All work with respect to the Minimum Improvements to be constructed or provided by the Redeveloper on the Redevelopment Property will be in conformity with the Construction Plans. (c) 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 such successors and assigns, will diligently prosecute to completion the development of the Redevelopment Property through the construction of the Minimum Improvements thereon, and that such construction will in any event be completed within the period specified in this Section. Section 4.4. Certificate of Completion. (a) Promptly after completion of the Minimum Improvements for each building in accordance with the provisions of this Agreement relating to the obligations of the Redeveloper to construct such improvements (including the date for completion thereof), the Authority will furnish the Redeveloper with a Certificate of Completion for such Building in substantially the form attached as Schedule D. The Certificate of Completion shall be a conclusive determination and conclusive evidence of the satisfaction 13 and termination of the agreements and covenants in this Agreement and in the Redevelopment Property Deed with respect to the obligations of the Redeveloper and its successors and assigns, to construct the Minimum Improvements for each building and the date for the completion thereof. (b) if the Authority believes the Redeveloper has failed to complete the Minimum Improvements as to any building for which a Certificate of Completion is requested by the Redeveloper, the Authority shall, within thirty (30) days after such written request by the Redeveloper, provide the Redeveloper with a written statement, indicating in adequate detail in what respects the Authority believes the Redeveloper has failed to complete the Minimum 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 a Certificate of Completion. (c) The construction of the Minimum Improvements for each building shall be deemed to be completed in accordance with the Redeveloper's obligations hereunder when the City has issued a certificate of occupancy for any individual residential unit of that Building. ARTICLE V Events of Default Section 5.1. Events of Default Defined. Whenever it is used in this Agreement, the term "Event of Default" will mean any one or more of the following events: (a) Failure by the Redeveloper to complete the Minimum Improvements pursuant to the terms, conditions and limitations of this Agreement. (b) The holder of any Mortgage on the Redevelopment Property or any improvements thereon, or any portion thereof, commences foreclosure proceedings and such proceedings proceed to a sale as a result of any default under the applicable Mortgage documents. (c) Failure by the Redeveloper to substantially observe or perform any other covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement. (d) If the Redeveloper: (i) files any petition in bankruptcy or for any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under the United States Bankruptcy Act of 1978, as amended or under any similar federal or state law; or (ii) makes an assignment for the benefit of its creditors; or (iii) admits in writing its inability to pay its debts generally as they become due; or (iv) is adjudicated as bankrupt or insolvent; or if a petition or answer proposing the adjudication of the Redeveloper, as bankrupt or its reorganization under any present or future federal bankruptcy act or any similar federal or state law is filed in any court and such petition or answer is not discharged or denied within ninety (90) days after the filing thereof; or a receiver, trustee or liquidator of 14 the Redeveloper, or of the Minimum improvements, or part thereof, is appointed in any proceeding brought against the Redeveloper, and is not discharged within ninety (90) days after such appointment, or if the Redeveloper consents to or acquiesces in such appointment Section 5.2. Remedies on Default. Whenever any Event of Default referred to in Section 5.1 occurs and is continuing (and subject to Sections 5.5 and 5.6), the Authority may take any one or more of the following actions after providing thirty (30) days' written notice to the Redeveloper, but only if the Event of Default has not been cured within said thirty (30) days or if the Redeveloper is not making its best efforts to cure a default which cannot be cured within thirty (30) days: (a) The Authority may suspend its performance under this Agreement until it receives assurances from the Redeveloper, deemed adequate by the Authority, that the Redeveloper will cure its default and continue its performance under this Agreement. (b) The Authority may cancel and rescind this Agreement. (c) The Authority may withhold a Certificate of Completion. Section 5.3. Revesting Title in Authority Upon Happening of Event Subsequent to Conve ante to Redevelo er. In the event that subsequent to conveyance of the Redevelopment Property to the Redeveloper and prior to receipt by the Redeveloper of a Certificate of Completion: (a) Subject to Unavoidable Delays, the Redeveloper fails to carry out its obligations with respect to the construction of the Minimum Improvements (including the nature and the date for the initiation and completion thereof), or abandons or substantially suspends construction work, and any such failure, abandonment, or suspension is not cured, ended, remedied or assurances reasonably satisfactory to the Authority made within sixty (60) days after written demand from the Authority to the Redeveloper to do so; or (b) The Redeveloper fails to pay any real estate taxes or assessments on any portion of the Redevelopment Property which has been conveyed to the Redeveloper when due (which taxes or assessments the Redeveloper is responsible for hereunder), or creates, suffers, assumes, or agrees to any encumbrance or lien on the Redevelopment Property which is unauthorized by this Agreement, or suffers any levy or attachment to be made, or any materialmen's or mechanics' lien, or any other unauthorized encumbrance or lien to attach, and such taxes or assessments are not paid, or the encumbrance or lien removed or discharged or provision reasonably satisfactory to the Authority made for such payment, removal, or discharge, within thirty (30) days after written demand by the Authority to do so; provided, that if the Redeveloper first notifies the Authority of its intention to do so, it may in good faith contest any mechanics' or other lien filed or established and, in such event, the Authority will permit such mechanics' or other lien to remain undischarged and unsatisfied during the period of such contest and any appeal, but only if the Redeveloper provides the Authority with a bank letter of credit, a statutory lien bond as provided by Minnesota Statutes or other security in the amount of the lien, in a form satisfactory to the Authority pursuant to which the bank or other obligor will pay to the Authority the amount of any lien in the event that the lien is finally determined to be valid. During the course of such contest the Redeveloper will keep the Authority informed respecting the status of such defense; or (c) There is, in violation of Article Vl, any transfer of the Redevelopment Property or any part thereof, or any change with respect to the identity of the parties in control of the Redeveloper and 15 such violation is not cured within sixty (60) days after written demand by the Authority to the Redeveloper; Then, subject to Sections 5.5 and 5.6, the Authority will have the right to re-enter and take possession of the Redevelopment Property and to terminate (and revest in the Authority) the estate conveyed by the Redevelopment Property Deed to the Redeveloper, it being the intent of this provision, together with other provisions of the Agreement,. that the conveyance of the Redevelopment Property to the Redeveloper will be made upon, and that the Redevelopment Property Deed will contain a condition subsequent to the effect that in the event of any default on the part of the Redeveloper and failure on the part of the Redeveloper to remedy, end, or abrogate such default within the period and in the manner stated in such subdivisions, the Authority at its option may declare a termination in favor of the Authority of the title, and of all the rights and interests in and to the Redevelopment Property conveyed to the Redeveloper, and that such title and all rights and interests of the Redeveloper, and any assigns or successors in interest to and in the Redevelopment Property, will revert to the Authority, but only if the events stated in Section 5.3 (a), (b) or (c) have not been cured within the time periods provided above. Notwithstanding anything to the contrary contained in this Section, the Authority will have no right to re- enter or retake title to and possession of any part of the Redevelopment Property for which a Certificate of Completion has been issued or if the Authority has subordinated its rights to the holder of a Mortgage as provided for in Section 7.3. Section 5.4. Resale of Reac aired P=p. Dis osition of Proceeds and Earnest Mom. Upon the revesting in the Authority of title to the Redevelopment Property as provided in Section 5.3, the Authority will have no further responsibility to the Redeveloper hereunder. The Authority may sell or otherwise devote the Redevelopment Property to such other uses as the Authority may in its sole discretion determine, without reimbursement of any sums paid by the Redeveloper to the Authority under this Agreement. Section 5.5. CM ofNotice of Default to Lender and NEF. Prior to the issuance of a Certificate of Completion, whenever the Authority shall deliver any notice or demand to the Redeveloper with respect to any breach or default bythe Redeveloper in its obligations under this Agreement, the Authority shall at the same time forward a copy of such notice or demand: (i) to each holder of a Mortgage which relates to the same portion of the Redevelopment Property to which such breach or default relates (a "Holder') at the Holder's address as shown in the records of the Authority, and (ii) if such breach or default relates to the Apartment Project, to NEF at: National Equity Fund, Inc., 120 South Riverside Plaza, 15th Floor, Chicago, IL 60606, Attention: General Counsel. Section 5.6. Lender's or NEF's Ovtion to Cure Defaults. After any breach or default by the Redeveloper in its obligations under this Agreement, each Holder and/or NEF, as applicable, shall (insofar as the rights of the Authority are concerned) have the right, but not the obligation, for a period of thirty (30) days, at such Holder's or NEF's option, to cure or remedy such breach or default and (with respect to a Holder) to add the cost thereof to the debt and the lien of its Mortgage, provided, that if the breach or default relates to construction of the Minimum Improvements, such Holder or NEF shall not, either before or after foreclosure or action in lieu thereof, undertake to complete construction of the Minimum Improvements (beyond the extent necessary to preserve any such construction already completed) without first having assumed in writing the Redeveloper's obligations described inArticle IV to complete (i) the portion of the Minimum Improvements to which the Mortgage of such Holder relates or (ii) the Apartment Project, in the case of NEF 16 Section 5.7. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other available remedy or remedies, but each and every such remedy will be cumulative and will be in addition to every other remedy given under this Agreement or now or hereafter existing at law, in equity or by statute_ No delay or omission to exercise any right or power accruing upon any default will impair any such right or power or will 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. Section 5.8. Effect of Breach Relating to Apartment Projector Condo Project Onl . (a) If a breach or default by the Redeveloper hereunder relates solely to the Apartment . Project, the Authority shall be entitled to exercise the remedies provided in Sections 5.2 and 5.3 as to the Apartment Project only; provided that the Authority shall be entitled to exercise its remedies as to the entire Redevelopment Property if at the time of such breach or default neither: (i) has construction on the Condo Project begun nor (ii) has the Redeveloper secured the financing necessary to construct the Condo Project. (b) If a breach or default by the Redeveloper hereunder relates solely to the Condo Project, the Authority shall be entitled to exercise the remedies provided in Sections 5.2 and 5.3 as to the Condo Project only; provided that the Authority shall be entitled to exercise its remedies as to the entire Redevelopment Property if at the time of such breach or default neither: (i) has construction on the Apartment Project begun nor (ii) has the Redeveloper secured the financing necessary to construct the Apartment Project. Section 5.9. No implied Waiver. In the event any agreement contained in this Agreement should be breached by any Party and thereafter waived by any other Party, such waiver will be limited to the particular breach so waived and will not be deemed to waive any other concurrent, previous or subsequent breach hereunder. Section 5.1.0. Agnement to Pgy AMm 's Fees and Ex enses. Whenever any Event of Default occurs and the Authority employs attorneys or incurs other expenses for the collection of payments due or to become due or for the enforcement or performance or observance of any obligation or agreement on the part of the Redeveloper herein contained, the Redeveloper agrees that it will, on demand therefor, pay to the Authority the reasonable fees of such attorneys and such other expenses so incurred by the Authority. ARTICLE VI Prohibitions Against Assigniment and Transfer Section 6.1. R resentation as to Redevelo ent. The Redeveloper represents and agrees that its purchase of the Redevelopment Property, and its other undertakings pursuant to this Agreement, are, and will be used, for the purpose of redevelopment of the Redevelopment Property and not for speculation in land holding. The Redeveloper further recognizes that, in view of (a) the importance of the redevelopment of the Redevelopment Property to the general welfare of the Authority, and (b) the substantial financing that will be made available by the Authority for the purpose of making such 17 redevelopment possible, the qualifications and identity of the Redeveloper are of particular concern to the Authority. The Redeveloper further recognizes that it is because of such qualifications and identity that the Authority is entering into this Agreement with the Redeveloper, and, in so doing, is further willing to accept and rely on the obligations of the Redeveloper for the faithful performance of all undertakings and covenants hereby by it to be performed. Section 6.2. Prohibition Against Transfer of P=gMjanad Assi !�t nLA mg (a) Also, for the foregoing reasons the Redeveloper represents and agrees that prior to the date of the Certificate of Completion as provided in Section 4.4, except 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 constructing the Minimum Improvements, the Redeveloper 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 orpower, or transfer in any other form of this Agreement or the Redevelopment Property or any part thereof or any interest therein, or any contract or agreement to do any of the same, without the prior written approval of the Authority, unless the Redeveloper remains liable and bound by this Redevelopment Agreement in which event the Authority's approval is not required. Any such transfer will be subject to the provisions of this Agreement. (b) This Section 6.2 does not apply to (i) leases made between the Redeveloper and tenants of the Apartment Project, (ii) purchase agreements between the Redeveloper and purchasers of units in the Condo Project, (iii) assignment or transfer of this Agreement or the Redevelopment Property in whole or in part to one or more entities wholly-owned or controlled by the Redeveloper, or (iv) any transfer of the interest of a limited partner in an entity described in (iii). With respect to the Apartment Project, the Redeveloper may lend the proceeds of the Apartment Project Grant to an entity wholly-owned or controlled by the Redeveloper in connection with an assignment or transfer permitted by clause (iii)_ ARTICLE VII Insurance and Condemnation Section 7.1. 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, will 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%) ofthe 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 will be protected in accordance with a clause in form and content reasonably satisfactory to the Authority; (ii) comprehensive general liability insurance together with an Owner's Contractor's Policy with limits against bodily injury and property damage of not less than $2,000,000 for each occurrence (to accomplish the above -required limits, an umbrella excess liability policy may be used); and is (iii) workers' compensation insurance, with statutory coverage. (b) Upon completion of construction of the Apartment Project and prior to the Termination Date, the Redeveloper will maintain, or cause to be maintained, at its cost and expense, and from time to time at the request of the Authority will furnish proof of the payment of premiums on, insurance as follows: (i) Insurance against loss and/or damage to the Apartment Project 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, 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 such improvements, but any such policy may have a deductible amount of not more than $25,000. No policy of insurance will be so written that the proceeds thereof will produce less than the minimum coverage required by the 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" will mean the actual replacement cost of the Apartment Project (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items) and equipment, and may be determined from time to time at the request of the Authority, but not more frequently than once every five (5) years, by an insurance consultant or insurer, selected and paid for and approved by the Authority. All policies evidencing insurance required by this subparagraph (i) will be carried in the names of the Redeveloper, the Redeveloper's Mortgagee and the Authority as their respective interests may appear and will contain standard clauses which provide for net proceeds (the amount remaining after the deduction of expenses incurred in the collection of such proceeds, the "Net Proceeds") of insurance resulting from claims per casualty thereunder to the Apartment Project which are equal to or less than $1,000,000 for loss or damage covered thereby to be made payable directly to the Redeveloper and/or its Mortgagee, and Net Proceeds from such claims in excess of $1,000,000 to be made payable jointly to the Redeveloper, its Mortgagee and the Authority. The Authority, the Redeveloper and its Mortgagee will jointly agree on the amount of settlement. (ii) Comprehensive general public liability insurance, including personal injury liability and liability for injuries to persons and/or property, in the minimum amount for each occurrence and for each year of $2,000,000, which will be endorsed to show the Authority as additional insured. (c) All insurance required by this Article will 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. The Redeveloper will deposit annually with the Authority policies evidencing all such insurance, or a certificate'or certificates or binders of the respective insurers stating that such insurance is in force and effect. Unless otherwise provided in this Article, each policy will contain a provision that the insurer will not cancel nor modify it without giving written notice to the Redeveloper and the Authority at least thirty (30) days before the cancellation or modification becomes effective. Not less than fifteen (15) days prior to the expiration of any policy, the Redeveloper will furnish the Authority with evidence satisfactory to the Authority that the policy has been renewed or replaced by another policy conforming to the provisions of this Article, or that there is no necessity therefor under the terms hereof. In lieu of separate policies, the Redeveloper may maintain a single policy, blanket or umbrella policies, .or a combination thereof, having the coverage required herein, in which event the Redeveloper will deposit with the Authority a certificate or certificates of the respective insurers as to the amount of coverage in force upon the Minimum Improvements. 19 (d) The Redeveloper agrees to notify the Authority immediately in the case of damage exceeding $100,000 in amount to, or destruction of, the Apartment Project or any portion thereof resulting from fire or other casualty. In the event that any such damage does not exceed $750,000, the Redeveloper will forthwith repair, reconstruct and restore the Apartment Project to substantially the same or an improved condition or value -as it existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, insurance relating to such damage received by the Redeveloper will be applied to the payment or reimbursement of the costs thereof. Net Proceeds of any insurance relating to such damage up to $750,000 will be paid directly to the Redeveloper. If the Apartment Project or any portion thereof is destroyed by fire or other casualty and the damage or destruction is estimated to equal or exceed $750,000, then the Redeveloper, within one hundred and twenty (120) days after such damage or destruction, will proceed forthwith to repair, reconstruct and restore the Apartment Project to substantially the same condition or value as existed prior to the event causing such damage or destruction and, to the extent necessary to accomplish such repair, reconstruction and restoration, the Redeveloper, its Mortgagee and the Authority will apply the Net Proceeds of any insurance relating to such damage or destruction received by its Mortgagee and the Authority to the payment or reimbursement of the costs thereof. Any Net Proceeds remaining after completion of construction will be disbursed to the Redeveloper. If the damage exceeds seventy percent (70%) of the County assessor's assessed value, the Redeveloper may elect not to rebuild if all Eligible Public Expenses are or have been fully reimbursed, from Net Proceeds of insurance or otherwise. (e) If the Redeveloper is in compliance with the terms and conditions of this Agreement, then any Net Proceeds of insurance relating to such damage or destruction received by the Authority will be released from time to time by the Authority to the Redeveloper upon the receipt of: (i) A certificate of an authorized representative of the Redeveloper specifying the expenditures made or to be made or the indebtedness incurred in connection with such repair, reconstruction and restoration and stating that such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such repair, construction and restoration; and (ii) If Net Proceeds equal or exceed $750,000 in amount, the written approval of such certificate by an independent engineer. The Redeveloper will complete the repair, reconstruction and restoration of the Apartment Project, whether or not the Net Proceeds of insurance received by the Redeveloper for suchpurposes are sufficient to pay for the same. Any Net Proceeds remaining after completion of such repairs, construction and restoration will be remitted to the Redeveloper. Section 7.2. Condemnation. In the event that title to and possession of the Minimum Improvements or any material part thereof is taken in condemnation or by the exercise of the power of eminent domain or deed in lieu of condemnation, by any governmental body or other person (except the City or the Authority) prior to the Termination Date, the Redeveloper will, 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 will use such portion of the condemnation award as is necessary to reconstruct the Minimum Improvements (or, in the event only a part of the Minimum Improvements has been taken, then to reconstruct such part) within the Tax Increment District. 20 Section 7.3. Subordination. Notwithstanding anything to the contrary contained herein, the rights of the Authority with respect to the receipt and application of the proceeds of insurance or condemnation will be subject to and subordinate to the rights of any holder of any Mortgage with respect to the Redevelopment Property. ARTICLE VIII Additional Provisions Section 8.1. Conflict of Interest. No member, official, or employee of the Authority will have any personal interest, direct or indirect, in the Agreement, nor will any such member, official or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership, or association in which he is, directly or indirectly, interested. Section 8.2. Restrictions on Use. The Redeveloper will not discriminate upon the basis of race, color, creed, sex or national origin in the sale, lease, or rental or in the use or occupancy of the Redevelopment Property or any improvements erected or to be erected thereon, or any part thereof. Section 8.3. Titles o€Articles and Sections. Any titles of the several parts, Articles and Sections of the Agreement are inserted for convenience of reference only and will be disregarded in construing or interpreting any of its provisions. Section 8.4. Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand, or other communication under this Agreement by either Party to the other will be sufficiently given or delivered if it is dispatched by registered or certified mail, postage prepaid, return receipt requested, transmitted by facsimile, delivered by a recognized overnight courier or delivered personally to the following addresses: Redeveloper: Project for Pride in Living, Inc. 1035 East Franklin Avenue Minneapolis, MN 55404 Fax: (612) 455-5101 Attention: Steve Cramer, Executive Director with a copy to: Halleland Lewis Nilan Sipkins & Johnson P.A. 220 South 6th Street, Suite 600 Minneapolis, MN 55402-4501 Fax: (612) 338-7858 Attention: Ronald B. Peterson, Esq. Authority: City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Fax: (763) 531-5136 Attention: Daniel J. Donahue, City Manager 21 with a copy to: Krass Monroe, PA. 8000 Norman Center Drive, Suite 1000 Minneapolis, WN 55437-1178 Fax: (952) 885-5969 Attention: James R. Casserly, Esq. Section 8.5. Indemnification of Authority. (a) The Redeveloper releases from and covenants and agrees that the Authority, the City and its governing body members, officers, and agents, including independent contractors, consultants and legal counsel, servants and employees thereof (hereinafter, for purposes of this Section, collectively the "Indemnified Parties") will not be liable for and agrees to indemnify and hold harmless the Indemnified Parties 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 or the Redevelopment Property; provided, that this indemnification will not apply to any defect in the Minimum Improvements or the Redevelopment Property which arose after title to such Minimum Improvements or Redevelopment Property has revested in the Authority pursimt to Section 5.3. (b) Except for any willful misrepresentation or any willful or wanton misconduct of the Indemnified Parties, the Redeveloper agrees to protect and defend the Indemnified Parties, now and forever, and further agrees to hold the Indemnified Parties harmless from any claim, demand, suit, action or other proceeding whatsoever by any person or entity whatsoever arising orpurportedly arising from the actions or inactions of the Redeveloper (or of other persons acting on its behalf or under its direction or control) under this Agreement, or the construction, installation, ownership, and operation of the Minimum Improvements or the Redevelopment Property; provided, that this indemnification will not apply to (i) the warranties made or obligations undertaken by the Authority in this Agreement or (ii) any construction, installation, ownership, and operation of the Minimum Improvements or the Redevelopment Property by the Authority after title to such Minimum Improvements or Redevelopment Property has revested in the Authority pursuant to Section 5.3. (c) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein will 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. Section 8.6. Counterparts_ This Agreement is executed in any number of counterparts, each of which will constitute one and the same instrument. Section 8.7. Law Governing. This Agreement will be governed and construed in accordance with the laws of the State. Section 8.8. Supplemental Agreements. The parties agree to execute such additional agreements or instruments as shall be necessary in order to implement the intended purposes of this Agreement. Section 8.9. Subordination of Rights Linder this Agreement. In order to facilitate the obtaining of financing of the Redevelopment Project, the Authority agrees to subordinate its rights under this Agreement at any time and from time to time with the following exceptions: 22 (i) The Declarations of Restrictive Covenants and Prohibition Against Tax Exemption, and (ii) Sections 2.2(o) and (p). ARTICLE IX Termination of A eement Section 9.1. Termination. This Agreement shall terminate upon its Termination Date and the discharge of all of the Authority's and Redeveloper's respective obligations hereunder, but no such termination shall terminate the applicability of Section 5.10 or any indemnification or other rights or remedies arising hereunder due to any Event of Default which occurred and was continuing prior to such termination. Section 9.2. Effect of Termination. Upon a termination of this Agreement pursuant to this Article DC, this Agreement shall be null and void and neither Parry shall have any further obligations or liabilities hereunder except as specifically stated in this Agreement. Upon such termination the Redeveloper and Authority shall deliver to each other such documents as may be necessary to evidence the termination of this Agreement. 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 as of the date first above written. G.NWPDATAX"EW HOPE12 =C%REDEV AGREEMENT V7 (FINAL)_DOC 23 Date: , 2004 ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE ECRolfier Its President .t , A . By .,fig-Gc Daniel J. Dondiue Its Executive Director STATE OF MINNESOTA ) )ss COUNTY OF HENNEPIN ) On this_ day of IAC' , 2004, before me, a notary public within and for Hennepin County, personally appeared Don Collier and Daniel J. Donahue, to me personally known who by me duly sworn, did say that they are the President and Executive Director, respectively, of the Economic Development Authority in and for the City of New Hope, and acknowledged the foregoing instrument on behalf of said Authority. .. VALERIE J. LEONE ROTARY PUBLIC -MINNESOTA s = MY Commiesioe� E Fires &i. 31,2X5 /azztu "_Z� Notary Public Authority Signature Page — Contract for Private Redevelopment 24 Date: //J-,2004 By Its STATE OF� J }ss COUNTY OF On this A_ day 2004 before me, a notary public within and for County, personally appeared and to me personally known who by me duly sworn, did say that they are the and , respectively, of Project for Pride in Living, Inc., a Minnesota nonprofit corporation, and acknowledged the foregoing instrument on behalf of said corporation. 1 f' Notary Public Redeveloper Signature Page — Contract for Private Redevelopment 25 W, CATHERINE BORER NOTARY PUB CMI NESOTA MY COMMISSION EXPIRES I-31- 6 8� �AMd►MMM�°JV�"4+y Q Redeveloper Signature Page — Contract for Private Redevelopment 25 SCHEDULE A LEGAL DESCRIPTION OF REDEVELOPMENT PROPERTY Lot 2, Block 1, Science and Industry Center 3rd Addition A-1 SCHEDULE B REDEVELOPMENT PROPERTY DEED THIS INDENTURE, made this day of ' 2004, between the Economic Development Authority in and for the City of New Hope, a public body corporate and politic under the laws of Minnesota (the "Grantor"), and Project for Pride in Living, Inc., a Minnesota nonprofit corporation (the "Grantee'). WITNESSETH, that Grantor, in consideration of the sum of One Dollar ($1.00) and other good and valuable consideration the receipt whereof is hereby acknowledged, does hereby convey and quit claim to the Grantee, its successors and assigns forever, all the tract or parcel of land lying and being in the County of Hennepin and State of Minnesota described as follows: Lot 2, Block 1, Science and Industry Center 3rd Addition together with all hereditaments and appurtenances belonging thereto, Grantor covenants and represents that: Grantee has committed to construct certain improvements and Grantor has a right of re- entry in accordance with Sections 4.3 and 5.3, respectively, of the Contract for Private Redevelopment by and between the Economic Development Authority in and for the City ofNew Hope and Project for Pride in Living, Inc. dated as of September 13, 2004. The completion of the improvements and the release of the right of re-entry will be evidenced by the recording of the Certificate of Completion and Release of Forfeiture attached as Exhibit 1 to this deed. B-1 IN WITNESS WHEREOF, the Grantor has caused this deed to be duly executed in its behalfby its President and its Executive Director as of the day and year written above. ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By Its President By Its Executive Director STATE OF MINNESOTA ) ) ss COUNTY OF HENNEPIN ) On this day of 2-004 before me, a notary public within and for Hennepin County, personally appeared and to me personally known who by me duly sworn, did say that they are the President and Executive Director, respectively, of the Economic Development Authority in and for the City of New Hope, a public body corporate and politic under the laws of Minnesota, and acknowledged the foregoing instrument on behalf of said Authority. This instrument was drafted by: Krass Monroe, P.A. 8000 Norman Center Drive, Suite 1000 Minneapolis, MN 55437-1178 B-2 SCHEDULE C CERTIFICATE OF COMPLETION AND RELEASE OF FORFEITITRE WHEREAS, the Economic Development Authority in and for the City of New Hope, a body corporate and politic under the laws of Minnesota (the "Grantor'), by a Deed recorded in the Office ofthe County Recorder or the Registrar of Titles in and for the County of Hennepin and State of Minnesota, as Deed Document Number , has conveyed to Project for Pride in Living, Inc., a Minnesota nonprofit corporation (the "Grantee'), the following described land in County of Hennepin and State of Minnesota, to -wit: Lot 2, Block 1, Science and Industry Center 3rd Addition WHEREAS, said Deed contained certain covenants and restrictions, the breach of which by Grantee, its successors and assigns, would result in, a forfeiture and right of re-entry by Grantor, its successors and assigns, said covenants and restrictions being set forth in said Deed; and WHEREAS, said Grantee has performed said covenants and conditions insofar as it is able in a manner deemed sufficient by the Grantor to permit the execution and recording of this certification; NOW, THEREFORE, this is to certify that all building construction and other physical improvements specified to be done and made by the Grantee have been completed and the above covenants and conditions in said Deed have been performed by the Grantee therein and that the provisions for forfeiture of title and right to re-entry for breach of condition subsequent by the Grantor therein is hereby released absolutely and forever insofar as it applies to the land described herein, and the County Recorder or the Registrar of Titles in and for the County of Hennepin and State of Minnesota is hereby authorized to accept for recording and to record this instrument, and the filing of this instrument will be a conclusive determination of the satisfactory termination of the covenants and conditions of the contract referred to in said Deed, the breach of which would result in a forfeiture and right of re-entry. C-1 Date: _ c . 2004 ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By Its President By Its Executive Director STATE OF MINNESOTA ) )ss COUNTY OF HENNEPIN ) On this day of 2004 before me, a notary public within and for Hennepin County, personally appeared and to me personally known who by me duly sworn, did say that they are the President and Executive Director, respectively, of the Economic Development Authority in and for the City ofNew Hope, a public body corporate and politic under the laws of Minnesota, and acknowledged the foregoing instrument on behalf of said Authority. Notary Public C-2 SCHEDULED SITE IMPROVEMENTS • Survey (the Authority will provide any surveys in its possession) Title work • Platting • Piling and other soils correction Environmental testing and remediation Grading and importlexport of soil in accordance with City -approved grading plans Sanitary sewer from City mains Water mains and stubs on the site Storm sewers and storm water system elements (ponds, pipes, infiltration system) both on and off site according to the approved site plan, including extension of the storm water main into the existing pond • Landscaping according to City -approved landscape plans Pedestrian improvements pursuant to City -approved site plans • Retaining walls and fences • Underground parking with 35 stalls under the Apartment Project and 41 stalls under the Condo Project D-1 SCHEDULE E DECLARATION OF RESTRICTIVE COVENANTS AMID PROHIBITION AGAINST TAX EXEMPTION (Apartment Project) This Declaration is made and executed as of the 13th day of September, 2004 by Project for Pride in Living, Inc., a Minnesota nonprofit corporation ("Declarant"). RECITALS A. Declarant is fee owner of the premises located in the County of Hennepin, State of Minnesota described on Exhibit A attached hereto (the "Property"). B. The Economic Development Authority in and for the City of New Hope, a public body corporate and politic (the "Authority") has entered into a Contract for Private Redevelopment dated as of September 13, 2004 (the "Redevelopment Agreement") with the Declarant. The Redevelopment Agreement provides for certain assistance, financial and otherwise, to be provided by the Authority in connection with the construction by the Declarant of an affordable apartment building on the Property. NOW, THEREFORE, in consideration of the foregoing, Declarant, for itself and its successors and assigns, does hereby declare that the Property will be owned, used, occupied, sold and conveyed subject to the following covenants and restrictions: 1. No part of the Property or improvements constructed thereon shall become tax exempt from the levy of ad valorem property taxes, or any statutorily authorized alternative, until December 31, 2032. 2. The covenants and restrictions herein contained will run with the title to the Property and will be binding upon all present and future owners and occupants of the Property, provided, however, that the covenants and restrictions herein contained will inure only to the benefit of the Authority and may be -released or waived in whole or in part at any time, and from time to time, by the sole act of the Authority, and variances may be granted to the covenants and restrictions herein contained by the sole act of the Authority. These covenants and restrictions will be enforceable only by the Authority, and only the Authority will have the right to sue for and obtain an injunction, prohibitive or mandatory, to prevent the breach of the covenants and restrictions herein contained, or to enforce the performance or observance thereof. 3. The covenants and restrictions herein contained will remain in effect until December 31, 2032 and thereafter will be null and void. 4. If any one or more of the covenants or restrictions contained in this Declaration are held to be invalid or enforceable, the same will in no way affect any of the other provisions of this Declaration, which will remain in full force and effect. PROJECT FOR PRIDE IN LIVING, INC. IM STATE OF ) )ss COUNTY OF ) 2004 before me, a notary public within and for On this day of and County, personally appeared did say that they are the to me personally known who by me duly sworn, and respectively, of Project for Pride in Living, Inc., a Minnesota nonprofit corporation, and acknowledged the foregoing instrument on behalf of said corporation. This Instrument Drafted By KRASS MONROE, P.A. 8000 Norman Center Drive, Suite 1000 Minneapolis, MN 55437-1178 (612) 885-5999 Notary Public E-2 SCHEDULE F DECLARATION OF RESTRICTIVE COVENANTS AND PROHIBITION AGAINST TAX EXEMPTION (Condo Project) This Declaration is made and executed as of the 13th day of September, 2004 by project for Pride in Living, Inc., a Minnesota nonprofit corporation ("Declarant"). RECITALS A. Declarant is fee owner of the premises located in the County of Hennepin, State of Minnesota described on Exhibit A attached hereto (the "Property'l. B. The Economic Development Authority in and for the City of New Hope, a public body corporate and politic (the "Authority") has entered into a Contract for Private Redevelopment dated as of September 13, 2004 (the "Redevelopment Agreement"), with the Declarant. The Redevelopment Agreement provides for certain assistance, financial and otherwise, to be provided by the Authority in connection with the construction by the Declarant of a condominium building on the Property. NOW, THEREFORE, in consideration of the foregoing, Declarant, for itself and its successors and assigns, does hereby declare that the Property will be owned, used, occupied, sold and conveyed subject to the following covenants and restrictions: 1. No part of the Property or improvements constructed thereon shall become tax exempt from the levy of ad valorem property taxes, or any statutorily authorized alternative, until December 31, 2032. 2. The covenants and restrictions herein contained will run with the title to the Property and will be binding upon all present and future owners and occupants of the Property, provided, however, that the covenants and restrictions herein contained will inure only to the benefit of the Authority and may be released or waived in whole or in part at any time, and from time to time, by the sole act of the Authority, and variances may be granted to the covenants and restrictions herein contained by the sole act of the Authority. These covenants and restrictions will be enforceable only by the Authority, and only the Authority will have the right to sue for and obtain an injunction, prohibitive or mandatory, to prevent the breach of the covenants and restrictions herein contained, or to enforce the performance or observance thereof. 3. The covenants and restrictions herein contained will remain in effect until December 31, 2032 and thereafter will be null and void. 4. If any one or more of the covenants or restrictions contained in this Declaration are held to be invalid or enforceable, the same will in no way affect any of the other provisions of this Declaration, which will remain in full force and effect, F-1 PROJECT FOR PRIDE IN LIVING, INC. By Its STATE OF ) )ss COUNTY OF ) On this day of 2004 before me, a notary public within and for County, personally appeared and to me personally known who by me duly sworn, did say that they are the and, respectively, ofProject for Pride in Living, Inc., a Minnesota nonprofit corporation, and acknowledged the foregoing instrument on behalf of said corporation. This Instrument Drafted By: KRASS MONROE, P.A. 8000 Norman Center Drive, Suite 1000 Minneapolis, MN 55437-1178 (612) 885-5999 Notary Public F-2 SCHEDULE G ESCROW AGREEMENT AND RECEIPT The undersigned, Old Republic National Title Insurance Company (the `Escrow Agent), acknowledges receipt of and No/ 100 Dollars (the "Escrowed Funds") to be held by it pursuant to the Contract for Private Redevelopment dated as of September 13, 2004 (the "Redevelopment Agreement) by and between the Economic Development Authority in and for the City of New Hope, a public body corporate and politic (the "Authority") and Project for Pride in Living, Inc., a Minnesota nonprofit corporation (the "Redeveloper"). The Escrow Agent agrees to hold and disburse the Escrowed Funds as set forth herein. The Escrow Agent shall, if directed by the Authority, invest the Escrowed Funds in such accounts or instruments as shall be selected by the Escrow Agent; provided that any such investment shall comply with the guidelines or restrictions, if any, supplied by the Authority to the Escrow Agent. Any interest on the accounts or instruments shall accrue for the benefit of the Authority. The Authority and the Redeveloper shall execute a disbursement direction in substantially the form of Annex A attached hereto, directing the Escrow Agent to pay in accordance with such instructions. Upon receipt of the joint disbursement direction, the Escrow Agent shall make disbursement in accordance therewith. The Authority and the Redeveloper represent that their respective Tax I.D. Numbers are as follows: Authority, 41-6008870 ; Redeveloper, 23-7232208. The Escrow Agent shall have no responsibility for any decision concerning performance or effectiveness of the Redevelopment Agreement or to resolve any disputes concerning the Redevelopment Agreement. The Escrow Agent shall be responsible only to act in accordance with the joint and mutual direction of both the Authority and the Redeveloper or, in lieu thereof, the direction of a court of competent jurisdiction. The Authority and the Redeveloper undertake to hold the Escrow Agent harmless from all claims for damages arising out of this Escrow Agreement and do hereby agree to indemnify the Escrow Agent for all costs and expenses in connection with this escrow, including court costs and attorneys' fees, except for the Escrow Agent's failure to account for the Escrowed Funds, or acting in conflict with the terms of this Escrow Agreement. The usual and customary fees and charges of the Escrow Agent shall be paid by the Authority and the Redeveloper in equal shares. This Escrow Agreement and Receipt may be executed in one or more counterparts, each ofwhich is binding upon a party when executed and together which will constitute a single document. G-1 Date: , 2064 OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY By: ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By Its President By Its Executive Director PROJECT FOR PRIDE IN LIVING, INC. By Its By Its G-2 ANNEXA INSTRUCTIONS TO ESCROW AGENT Pursuant to that certain Escrow Agreement dated September , 2004 by and between Economic Development Authority in and for the City of New Hope, having offices at 4401 Xylon Avenue North, New Hope, MN 55428, Project for Pride in Living, Inc., having its principal offices at 1035 East Franklin Avenue, Minneapolis, MN 55404, and Old Republic National Title Insurance Company, having offices at 400 Second Avenue South, Minneapolis, MN 55401 ("Escrow Agent"}, the Escrow Agent is hereby instructed to disburse the sum of as follows: ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE By Its President By Its Executive Director PROJECT FOR PRIDE IN LIVING, INC. Its v By _ Its G-3 Originating Department Community Development By: Kirk McDonald, Director CD Curtis Jacobsen, CD Specialist COUNCIL Request for Action Approved for Agenda November 1, 2006 Discussion regarding Linden Park Condominium project (Improvement Project No. 776) Agenda Section Development. and Planning Item No. Requested Action Staff requests to update the City Council regarding recent correspondence and activities relating to the Linden Park Condominiums proposed by Project for Pride in Living (PPL). Policy/Past Practice It is city policy for staff to provide updates regarding projects in the city. Background The New Hope EDA entered into a Contract for Private Redevelopment dated September 13, 2004. with PPL relating to the construction of an apartment project and a condominium project. PPL has completed the apartment project and is now seeking to close on its construction financing with Wells Fargo Bank for the condo project. Four documents have been forwarded by PPL and its legal counsel to the city for signature by the City and EDA as appropriate. All of the transactions contemplated by the documents were specifically contemplated and permitted by Sections 6.2 and 8.9 of the Redevelopment Agreement (these provisions are attached as Exhibit A of the Krass Monroe Memo of October 31, 2006) The EDA specifically agreed to subordinate its rights under the Redevelopment Agreement if required for PPL to obtain financing. The City has executed substantially similar documents for the financing of the apartment project. The Citv's at Krass Monroe are of the opinion that the City and the EDA are Motion by t Second by To: I:\RFAIPLANNING\PLANNING\Q - Linden Park Condominiums - PPL.doc to execute each of the four documents in order to meet its contractual obligations under the Redevelopment Agreement. It is further their opinion that should the City and EDA not execute the documents until further assurances are provided that are not in the original Redevelopment Agreement, the City and EDA will be subject to a breach of contract claim. On October 27, 2006, PPL submitted correspondence indicating they understood the city concern regarding rental and that they would undertake to amend their documents to address that concern. PPL representatives met with the Mayor, City Manager, City Attorney and other staff on October 31 to address how they would further address this issue. They are requesting that the City Council execute the appropriate documents so that the closing can take place on November 3, 2006. Funding Tax increment funding as authorized in the 2004, Contract for Private Redevelopment and pass through funding in the form of a grant from the Metropolitan Council are associated with this contract. No additional or new financing is requested. Next steps Staff recommends that the documents be signed and forwarded to PPL to facilitate the construction financing of the project. Attachment(s) • PPL letter, dated October 27, 2006 • Krass Monroe memo, dated October 31, 2006 Krass Monroe memo, dated October 31, 2006 • Krass Monroe memo, dated October 31, 2006 and attachments I: \RFA\PLANNING \PLANNING \Q -Linden Park Condominiums - PPL.doc _ A PP -L Bu iditW fgiure'-€vr; over 30 years October 27, 2006 Mr. Curtis Jacobsen City of New Hope 4401 Xylon Avenue North New Hope, :VIN 55428 Dear Mr. Jacobsen: With regard to our discussion earlier this morning as to leasing provisions in the Declaration for the Linden Park Condominiums: The Declaration currently provides the following provisions: 1. All leases are subject to reasonable regulation by the association 2. All leases shall be in writing and shall not be for less than 6 months 3. All leases shall be for entire units and not for individual rooms 4. All leases must provide that they are subject to the terms of the Declaration, Rules and Regulations, and the Minnesota common Interest Community Act, and that failure to comply with these provisions shall be a default under the terms of the leases 5. Garage units may be leased only to unit owners and not for a period longer than 1 year To provide the assurances that the city is interested in seeing, which we have discussed, we would propose to add the following provisions to the declaration: 1. The Association shall not allow more than 10% of the Living Units to be leased at any one time 2. Copies of all leases affecting any units or garage units shall be submitted to the Board of Directors of the Association. The exact legal language around these provisions will need to be closely considered. I will provide you with copies of the document after it is revised. We are planning to present our reservation holders with purchase agreements in late November and early December, and will need to have the language amended and in place prior to that. I would also point out that Section 2.2, Paragraph N of our Contract for Private Development with the city requires us to ensure that the Condo Project will initially qualify as owner -occupied housing. So, we do have provisions in place that provide assurances that the development will initially be owner -occupied. We also want to be clear that, while we will put the provisions in place to reasonably limit the eventual owners' ability to rent units, to the best of our ability, there are also Affordable Housing & Community Development Employment & Job Tralning Youth Development Human Services Project for Pride In Uving ■ 1035 E. Franklin Avenue • Minneapolis, MN 55404 ■ 612.455-5100 • FAX:612.455.5101 • www.ppl-Inc.org • ppl@ppHnc.org provisions in the Declaration that allow the owners to change the terms of the Declaration with a vote of 3/ or unit owners and 213 of eligible mortgagees. Such provisions are very common for homeowner's associations throughout the state. So, as would be the case for any other housing developer, we certainly cannot guarantee that association will not take such action in the future. My hope is that the Mayor, City council and staff will find these assurances with regard to leasing to be acceptable. We appreciate the partnership we have enjoyed with the City of New Hope, and look forward to completing what we believe will be an outstanding housing development. Please contact me at (612) 455-5215, or by email at (61.2) 455- 5215, with any questions or concerns you may have. Sincerely, e✓'!cam,Z2 Matt Soucek, Housing Development Project Manager CC: Barbara McCormick, PPL Chris Wilson, PPL Chris Dettling, PPL ■ V IOV ! MKO�id�OE Gay L. Carney gcemey@krassmonroe. eom Direct 952.885.4393 Also admitted in Now York James R. Casserly Jcasserty@kressmor,rae.com Direct 952.$85.9296 MEMORANDUM To: City of New Hope Attn: Hon. Martin Opem, Sr., Mayor Attn: Daniel J. Donahue, City Manager Attn: Kirk McDonald, Community Development Director Attn: Curtis Jacobsen, Community Development Specialist cc: Jensen Anderson Sondrall, P.A. Attn: Steven A. Sondrall, Esq. From: Gay L. Cemey, Esq.V James R. Casserly, Esq. Date: October 31, 2006 Re: New Hope/Project for Pride in Living, Inc, Our t=ile No. 10048-21 The New Hope EDA entered into a Contract for Private Redevelopment dated September 13, 2004 (the "Redevelopment Agreement") with Project for Pride in Living, Inc. ("PPL") relating to PPL's construction of an apartment project (the "Apartment Project") and a condominium project (the "Condo Project"). PPL completed the Apartment Project earlier, and is now seeking to close on its construction financing with Wells l=argo Bank for the Condo Project. PPL has named the Condo Project the Linden Park Condominiums. The documents which PPL and its counsel, Angela Christy, forwarded to us for signature by the City or EDA, as appropriate, and the purpose of each is as follows: Assignment and Assumption of Redevelopment Contract-- PPL has requested that the EDA consent to the assignment of the Redevelopment Agreement to Linden Park Condominiums, LLC, a single -asset entity owned by PPL, to the extent that the Redevelopment Agreement relates to the Condo Project 8WO Norman Center Drim Suite 1000 MlnneVolis, Minnesota 55437.1178 TEL 952.885.5999 FAX 952.885.5969 www.krasSm0nrae.com Assignment and Subordination of Contract for Private Redevelopment — PPL has requested the EDA's consent to a further assignment of the Redevelopment Agreement, and subordination of the EDA's rights thereunder, to Wells Fargo Bank as security for the loan. Assignment of Contract Documents and Intangibles — PPL has requested the City to agree to the assignment of certain contracts and other intangibles to Wells Fargo Bank, also as security for the loan. Master Disbursement Agreement — PPL has requested the City to execute this Agreement, which provides -for the priority in which the grants and loans PPE. has obtained to finance the Condo Project will be disbursed. The City's portion of that financing includes a $125,000 Metropolitan Council Livable Communities grant administered by the City and a $650,000 grant provided by the City pursuant to the Redevelopment Agreement. All of the transactions contemplated by the abovementioned documents were specifically contemplated and permitted by Sections 6.2 and 8.9 of the Redevelopment Agreement. These provisions are attached as Exhibit A, with the most relevant provisions underlined. In Section 8.9, the EDA agreed to subordinate its rights under the Redevelopment Agreement if required for PPL to obtain financing for both Projects. The City and EDA executed substantially similar documents as these when the -Apartment Project was financed in 2004. We have been advised that the City has refused to execute these documents until PPL agrees to a restriction on the ability of the condo buyers to lease their units. It is our view that the City and the EDA are required to execute each of the above - referenced documents in order to meet its contractual obligations under the Redevelopment Agreement If the City and the EDA do not execute these documents, or refuse to execute the documents until additional conditions are met that were not provided for in the Redevelopment Agreement (such as the rental restriction), the City and the EDA will be subject to a breach of contract claim. Rental Restrictions It is our understanding that PPL offered to agree that no more than 10% of units may be leased at any one time. Ms. Christy and her colleague, Peter Berrie, have advised us that the financing of this transaction is based on obtaining Freddie Mac and FHA approval of the mortgages to be offered to the condo buyers. HUD guidelines for Freddie Mac and FHA mortgages do not permit a lease restriction of this nature. According to Ms. Christy, if a lease restriction such as that being discussed is entered into, the individuals and families to whom PPL has presold condo units will not be able to obtain mortgages and Wells Fargo Bank will not proceed with the financing of the Condo Project. EXHIBIT A EXCERPTS FROM THE REDEVELOPMENT AGREEMENT Section 6.2. Prohibition Against transfer of Property and Assignment of Agreement. (a) Also, for the foregoing reasons the Redeveloper represents and agrees that prior to the date of the Certificate of Completion as provided in Section 4.4, except for the purpose of obtainin-g 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 constructing the Minimum Improvements, the Redeveloper 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 form of this Agreement or the Redevelopment Property or any part thereof or any interest therein, or any contract or agreement to do any of the same, without the prior written approval of the Authority, unless the Redeveloper remains liable and bound by this Redevelopment Agreement in which event the Authority's approval is not required. Any such transfer will be subject to the provisions of this Agreement. (b) This Section 6.2 does not apply to (i) leases made between the Redeveloper and tenants of the Apartment Project, (!i) purchase agreements between the Redeveloper and purchasers of units in the Condo Project, (iii) assignment or transfer of this Agreement or the Redevelopment Property in whole or in part to one or more entities wholly-owned or controlled by the Redeveloper, or (iv) any transfer of the interest of a limited partner in an entity described in (iii). With respect to the Apartment Project, the Redeveloper may lend the proceeds of the Apartment Project Grant to an entity wholly-owned or controlled by the Redeveloper in connection with an assignment or transfer permitted by clause (iii). Section 8.9. Subordination of Rights Under this Agreement. In order to facilitate the obtaining of financing of the Redevelopment Project the Authority a Tees to subordinate its rights under this A reement at any time and from time to time with the following exceptions: (1) The Declarations of Restrictive Covenants and Prohibition Against Tax Exemption, and . . 01) Sections 2.2(o) and (p). G.\WPDATAWWEW HOPW1 GORVOPEM MCDONALD OONAHUE JACOBSEN GLO OtDOC Page 1 of 1 Jacobsen Curtis From: Gay Cerney [gcerney@krassmonroe.com] Sent: Tuesday, October 31, 2006 10:30 AM To: McDonald Kirk; Donahue Dan; Steve Sondrall; Jacobsen Curtis Cc: James Casserly Subject: PPL condo closing I spoke to Angela Christy and she is having one of her colleagues locate the regulation which disallows restrictions on private homeowners' ability to rent Fannie Mae and FHA -financed units. She thinks it's in a HUD handbook. As I may have mentioned, she is running off to another closing but will make sure someone at her firm looks that up for us. She explained that neither Fannie Mae nor FHA is providing project financing to PPL. Rather, the concern is that they will be providing the mortgage financing to the condo buyers in the secondary market. These mortgages will not be marketable in the 2ndary market without being HUD -insured. If, as Angela claims, a rental restriction would violate Fannie Mae and FHA guidelines, PPL's condo buyers would no longer be able to obtain these mortgages and PPL would lose its buyers. If PPL loses its presale buyers, the financing will fall apart because Wells Fargo. will not agree to fund the construction loan without those presales. Gay Gay Cerney I Krass Monroe, P.A. 1 8000 Norman Center Dr, Suite 1000 1 Minneapolis, MN 55437 Direct: (952) 885-4393 1 Fax: (952) 885-5969 Also admitted in New York THE INFORMATION CONTAINED IN THIS EMAIL MESSAGE AND IN ANY ACCOMPANYING ATTACHMENT IS CONFIDENTIAL AND PRIVILEGED. IT IS INTENDED ONLY FOR THE USE OF EACH RECIPIENT. IF YOU ARE NOT AN INTENDED RECIPIENT, OR THE EMPLOYEE OR AGENT RESPONSIBLE FOR DELIVERING THIS MESSAGE TO AN INTENDED RECIPIENT, YOU ARE HEREBY NOTIFIED THAT ANY DISCLOSURE, COPYING, OR DISTRIBUTION OF THE CONTENTS OF THIS TRANSMISSION IS STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS EMAIL IN ERROR, PLEASE NOTIFY US IMMEDIATELY BY TELEPHONE. ANY TAX ADVICE CONTAINED IN THIS ELECTRONIC OR WRITTEN COMMUNICATION (INCLUDING ANY ATTACHMENT) IS NOT INTENDED BY OUR FIRM TO BE USED, AND CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE OF AVOIDING ANY PENALTIES IMPOSED UNDER THE INTERNAL REVENUE CODE OR APPLICABLE STATE OR LOCAL TAX LAW PROVISIONS. NO WRITTEN ADVICE FROM OUR FIRM MAY BE USED IN PROMOTING, MARKETING OR RECOMMENDING ANY PARTNERSHIP, ENTITY, INVESTMENT PLAN OR ARRANGEMENT TO ANY TAXPAYER WITHOUT OUR EXPRESS CONSENT. THIS NOTICE IS PROVIDED PURSUANT TO U.S. TREASURY DEPARTMENT CIRCULAR 230. 10/31/2006 Page 1 of 1 Jacobsen Curtis From: Gay Cemey [gcerney@krassmonroe.com] Sent: Tuesday, October 31, 2006 10:59 AM To: Steve Sondrall Cc: Donahue Dan; Jacobsen Curtis; McDonald Kirk; James Casserly Subject: FW: PPUI-inden Park Attachments: HUD Home Mortgage Insurance.pdf; FNMA Selling.pdf Steve, See below and attached. Gay Gay Cerney I Krass Monroe, P.A. 1 8000 Norman Center Dr, Suite 1000 : Minneapolis, MN 55437 Direct: (952) 885-4393 1 Fax: (952) 885-5969 Also admitted in New York From: Wertish, Keri N. [mailto:KWertish@Megre.comJ Sent: Tuesday, October 31, 2006 10:46 AM To: Gay Cerney Cc: Christy, Angela M.; Lansing, Carol Subject: Linden Park At Angela Christy`s request, attached are copies of HUD and FNMA regulations regarding rental restrictions. Please refer to Section 8(f) on the last page of the first attachment and to Section 609.03 on page 2 of the 2nd attachment. If you have any questions or comments, please let me or Angela know. LAWYER BIOGRAPHIES I PRACTICE EXPERIENCE I CONTACT U5 Kerf N. Werttsh Attorney e E Faegre Et Benson LLA a 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402-3901 612-766-7908 / FAX 612-766-1600 KWertish@faegre,com Biography I Download My Contact Info as V -Card I www.faegre.com MINNESOTA 1 COLORADO I IOWA I LONDON I FRANKFURT I SHANGHAI 10/31/2006 www.hudclips.org Page 1 of 35 Search [Prev List] [Doc List [Next List) First Doel FPTcyoc [Curr Doc] ext Doc Last Doel fBottomDoe Next Hitl [HeI121 rText Onlyl Home Mortgage Insurance Condominium Units Directive Number: [Prev Hit]jNext HitlHit]4265.1 [Prev Hit][Next Hit] 4265.1 C - APPENDIX 24 APPENDIX 24 HUD LEGAL POLICIES. The attached policy statements will serve to assist attorneys certifying that legal documents meet HUD's objectives. Legal documents submitted to HUD for project approval must be accompanied by certification from the mortgagee's attorney or other attorney that the documents comply with State and local condominium laws, HUD regulations and with the BUR policy statements attached. NOTE: = will accept legal documents that have been accepted by FNMA, FHLMC, and/or VA. Evidence shall be submitted that the documents have been approved. Page 1 12/80 HUD -Wash., D.C. (Prev Hit]_(Next Hit]4265.1 CHG 4 APPENDIX 24 October, 1980 REVISED LEGAL POLICIES* 1. TYPES OF CONDOMINIUMS The following types of basic ownership arrangements are generally acceptable provided they are established in compliance with the applicable condominium law of the jurisdiction(s) in which the condominium is located: (a) ownership of units by individual owners coupled with an undivided interest in all common elements. (b) Ownership of units by individual owners coupled with an undivided interest in general common elements and .._..r....1. l.r..... ;1M-LTU1k7rrA0 .1 -A-14C 1 g....,1-AATnRA=1 nnZ or)r%ninn; www.hudcHps.org specified limited common elements. The agencies and corporations will consider for approval, on an individual case basis, an arrangement involving ownership of units by individual owners coupled with an undivided interest in the general common elements and/or limited common elements, with title to additional property for common use vested in an association of unit owners, where such a configuration of ownership is not precluded * The Revised Legal Policies set forth herein provide a listing of those general policies agreed to by HUD, VA, FNMA, and FHLMC with respect to provisions of legal significance usually contained in the constituent legal documentation for a condominium project. The applicable regulations and related publications of the Department of Housing and Urban Development and the Veterans Administration and the basic contracts and guides of the Federal National Mortgage Association MM) and the Federal Home Loan Mortgage Corporation (FHLMC) should be consulted for a complete statement of the respective legal policies and requirements of each Task Force member organization governing their approval of condominiums or unit mortgages. ** Not applicable to conventionally financed existing condominium projects. 12/80 Page 2 HUD -Wash., D.C. 2 Page 2 of 35 [Prev Hit] [IDText Hit] 4265.1 CH APPENDIX 24 - by the applicable condominium law. As to this type of ownership arrangement, in addition to compliance with the requirements of the organizations, respective condominium programs, there must be compliance with the applicable requirements of the organizations, respective planned unit development (PUD) programs. The above descriptions of types of ownership arrangements are not intended to exclude other variations. Other forms of ownership may be. acceptable, on an individual case basis, to any or all of the agencies and corporations. ,I---.,,----__. L ... -1 --%- __-t..J,--r__t %__ __:aa—,trbi.rra--I—A11AC , Q..,..,=nAiT1AA_ InnRQ onAmn,; www.hudclips.org Page 3 of 35 2. ESTATE OF UNIT OWNER The legal estate of each unit owner must generally be held in fee simple or acceptable leasehold estate. The acceptability of leasehold estates varies among the agencies and corporations. The declaration or equivalent document shall allocate an undivided interest in the common elements to each unit. Such interest may be allocated equally to each unit, may be proportionate to that unit's relative size or value, or may be allocated according to any other specified criteria provided that the method chosen is equitable and reasonable for that condominium. 3. CONDOMINIUM DOCUMENTATION (a) Compliance with applicable law. The declaration, by-laws and other enabling documentation shall conform to the --' -- - Page 3 12/80 HUD -bash., D. C. [Prev Hit][Next Hit]4265.1 CHG 4 APPENDIX 24 3 laws governing the establishment and maintenance of condominium regimes within the jurisdiction in which the condominium is located, and to all other laws which apply to the condominium. (b) Recordation. The declaration and all amendments or modifications thereof shall be placed of record in the manner prescribed by the appropriate jurisdiction. If recording of plats, plans, or by-laws or equivalent documents and all amendments or modifications thereof is the prevailing practice or is required -by law I.. if . f I... - ---!___L _--t__�1-�!__i L— 1.ernr►1=AVnRr1_1Mk 0/16/7.001; www.hudelips.org Page 4 of 35 within the jurisdiction where the project is located, then such documents shall be placed of record. if the by-laws are not recorded, then covenants, restrictions and other matters requiring record notice should be contained in the declaration or equivalent document. (c) Availability. The owners association shall be required to make available to unit owners, lenders and the holders and insurers of the first mortgage on any unit, current copies of the declaration, by-laws and other rules governing the condominium, and other books, records and financial statements of the owners association. The owners association also shall.be required to make available to prospective purchasers current copies of the declaration, by-laws, other rules governing the condominium, and the most recent annual audited financial statement, if such is prepared. 12/80 Page 4 HUD -Wash., D.C. (Prev Hit] [Next Hit] 4265.1 APPMWIX 24 4 *Available* shall at least mean available for inspection upon request, during normal business hours or under other reasonable circumstances. The declaration, or its equivalent, shall provide that upon written request from any of the agencies or corporation which has an interest or prospective interest in the condominium, the owners association shall be required to prepare and furnish within a reasonable time an audited financial statement of �.�...,f....__..�....�..Y:.,. ,,_�� .�......,....��..._:r....�,_�,.�..m9a=uRXrrR a1--A'),;s I: rnnI=ANnaI=InnAr 9nfi/2003 www.hudclips.org Page 5 of 35 the owners association for the immediately preceding fiscal year. 4. REAL PROPERTY DESCRIPTION (a) Property Description. The description of the units, common elements, any recreational facilities and other related amenities, and any limited common elements shall be clear and in conformity with the law of the jurisdiction where the project is located. Responsibility for maintenance and repair of all portions of the condominium shall be clearly set forth. ** (b) Developmental Plan. The description or other legally enforceable and binding document must state in a reasonable manner the overall development plan of the condominium, including building types, architectural style and the size of the units. Under the applicable 42651.4 CEG 4 APPENDIX 24 Page 5 12/80 HUD -Wash., D.C. provisions of the declaration or such other legally enforceable and binding document, the development of the condominium must be consistent with the overall plan, except that the declarant may reserve the right to change the overall plan or decide not to construct planned units or improvements to the common elements if the declaration sets forth the conditions required to be satisfied prior to the exercise of that right, the time within which the right may be exercised, and any other limitations and criteria that would be necessary Z- !-A7%C 12,^"Ia A 7%,Tn2r1=1An2r Qnw?nn'; www.hudclips.org Page 6 of 35 or appropriate under the particular circumstances. Such conditions, time restraints and other limitations must be reasonable in light of the overall plan for the condominium. S. DECLARANT'S RIGHTS AND RESTRICTIONS (a) Disclosure and Reasonableness of Reserved Rights. Any right reserved by the declarant must be reasonable and set forth in the declaration. (b) Examples of Acts and Reserved Rights Which are Usually Unacceptable. The following action on the part of the declarant, the developer, an affiliate of the declarant, the sponsor of a project, or any other party, (collectively referred to as "declarant") usually would be unacceptable. 12/80 Page 6 [Prev Hit] INext Hit] 4365.1 C APPMMIX 24 6 Binding the owners association either directly or indirectly to any cf the following agre6aente unless the owners association shall have a right of termination thereof which is exercisable without penalty at any time after transfer of control, upon not more than 90 days' notice to the other party thereto: (i) Any management contract, employment contract or lease of recreational or parking areas or facilities; (ii) Any contract or lease, including franchises and licenses, to which a declarant is a party. The requirements of (i) and (ii) of this subparagraph do not apply to acceptable ground leases. As used in this section, -*affiliate of a declarant" ` .• it ' r t- -- - -`-- 24 - "-_i :.- _� n�—I7TL7T 0._ 7—A�1%C t ormnri li www.hudelips.org shall mean any person or entity which controls, is controlled by, or is under common control with, a declarant. A.person or entity shall be deemed to control a declarant if that person or entity (i) is a general partner, officer, director, or employee of the declarant; (ii) directly or indirectly or acting in concert with one or more persons, or through one or more subsidiaries, owns, controls, or holds with power to vote, or holds proxies representing, more than 20 percent of the voting shares of the declarant; (iii) controls in any manner the election of a majority of the directors of the declarant; or (iv) has contributed more than 20 percent Page 7 .12/80 Prev Hit] [Next Hit] 4263.1 MG 4 APPENDIX 24 7 of the capital of the declarant. A person or entity shall be deemed to be controlled by a declarant if the declarant (i) is a general partner, officer, director, or employee of that person or entity; (ii) directly or indirectly or acting in concert with one or more persons or through one or more subsidiaries, owns, controls, or holds with power to vote, or holds proxies representing, more than 20 percent of the voting share of that person or entity; (iii) controls in any manner the election of a majority of the directors of that person or entity; or (ivy has contributed more than 20 percent of the capital of that person or entity. (c) Examples of Reserved Rights Which are usually Acceptable. The following rights in the common elements may usually be reserved by the declarant for a reasonable period Page 7 of 35 L+A-..11..._.._. 1L..-3-,:--t....--:f)A-TJn%T'rO-1-AIAC 7R,—I=ik'hmzl—1 MZ wmnnni wvvw.hudclips.arg Page $ of 35 Of time, subject to a concomitant obligation to restore: (1) Easement over and upon the common elements and upon lands appurtenant to the condominium for the Purpose of completing improvements for which provision is made in the declaration, but only if access thereto is otherwise not reasonably available. (2) Easement over and upon the common elements for the purpose of making repairs required pursuant to the declaration or contracts of sale made with unit purchasers. 12/80 Page 8 Prev Flit} Next Hit 4265.1 CH APPRIMIX 24 8 (3) Flight to maintain facilities in the common areas which are identified in the declaration and which are reasonably necessary to market the units. These may include sales and management offices, model units, parking areas, and advertising signs. 6. TRANSFER OF CONTROL (a) The declarant shall relinquish all special rights, expressed or implied, through which the declarant may directly or indirectly control, direct, modify, or veto any action of the owners association, its executive board, or a majority of unit.owners, and control of the owners association shall pass to the owners of units within the project, not later than the earlier of the following; ** (1) 120 days after the date by which 75 percent of the units have been conveyed to unit purchasers, or ** (2) The last date of a specified period of time following the first conveyance to a unit purchaser, htFn•//vvsv�v lvnrinlin� nrnla,�l, nnnl+�irilr�rs/nnit_l�rc rmi9rlcL713AT'1'J7ro1�7F.S 1:P.nn1,OT�iT1JP.1,illft.P. 0/7Fif"1f][1� www.hudclips.org such period of time to be reasonable for the particular project and to be subject to approval in each instance by the agency or corporation concerned. The maximum acceptable period usually will be from.three to five years for single phased condominium regimes and five to seven years for expandable condominiums. {Prey Hit)[Next Hit] 4265.1 CHG 4 APPEMIX 24 Page 9 12/80 J (b) The foregoing requirements shall not affect the declarant s rights, as a unit owner, to exercise the votes allocated to units which it owns. ** (c) Declarants should provide for and foster early participation of unit owners in the management of the pro j ect ** (d) FMA and FHLMC will consider on a case basis possible modifications or variations of the requirements in subparagraph'(a) above particularly in circumstances involving very large condominium developments. 7_ OWNERS ASSOCIATION I S RIGHTS AMID RESTRICTIONS (a) Right of Entry Upon ants and Limited Common Elements. The owners association, shall be granted a right of entry upon unit premises and any limited common elements to effect emergency repairs, and a reasonable right of entry thereupon to effect other repairs, improvements, replacement or maintenance deemed necessary. (b) Power to Grant Rights and Restrictions in Common Elements. The owners association should be granted other rights, Page 9 of 35 htty://www.hudclips.org/sub nonbud/cgi/nph-brs.cgi?d=HBNT&sl=4265.1&opl=AND&1=1OO&... 9/26/2003 www.hudclips.org Page 10 of 35 such as the right to grant utility easements under, through or over the common elements, which are reasonably necessary to the ongoing development and operation of the project. 12/80 Page -10 [Prev Hit Next Hit] 4265.1 CHG 4 APPENDIX 24 10 (c) Responsibility for Damage to Common Elements and units. A provision may be made in the declaration or by-laws for allocation of responsibility for damages resulting from the exercise of any of the above rights. (d) Assessments. (1) Levy and collection. The declaration or its equivalent shall describe the authority of the owners association to levy and enforce the collection of general and special assessments for common expenses and shall describe adequate remedies for failure to pay such common expenses. The common expenses assessed against any unit, with interest, costs and reasonable attorney's fees -shall be a lien upon such unit in accordance with applicable law. Each such assessment, together with interest, costs, and attorney's fees shall also be the personal obligation of the person who was the owner of such unit at the time the assessment fell due. The personal obligation for delinquent assessments shall, not pass to successors in title or interest unless assumed by them, or required by applicable law. common expenses as used in this Statement of Policies shall mean expenditures made or liabilities incurred 1+Hn•//+irsanxr hiiAs-1iw+e nro/c++l+ ea;?d=NRN'1`1Pral.=d?Ar% I k.nnl =AWnk1=1 nnk 9/7.fi/ _003 www.hudclips.org . Page 11 of 35 by or on behalf of the owners association, together with any assessments for the creation and maintenance of reserves. Page 11 12/80 [Prev Hit][Next Hit]4265.1 CEG 4 APPMMIX 24 11 (2) Reserves and Working Capital. There shall be established an adequate reserve fund for the periodic maintenance, repair and replacement of the common elements, which fund shall be maintained out of regular assessments for common expenses. Additionally, a working capital fund must be established for the initial months of the project operations equal to at least a two months' estimated common area charge for each unit. (3) Priority of Lien. To the extent permitted by applicable law, HM, VA, FMA and PHLMC require that the declaration shall provide any lien of the owners association for common expense charges and assessments becoming payable on or after the date of recordation of the first mortgage, shall be subordinats to the first mortgage on the unit. Such a lien for common expense charges and assessments shall not be affected by any sale or transfer of a unit, except that a sale or transfer of a unit pursuant to a foreclosure of a first mortgage shall extinguish a subordinate lien for common expense charges and assessments which became payable prior to such sale or transfer. Any such sale or transfer pursuant l,tt„'//n►urW 1,ndlrline nrn/clih nnnhtvf/roihnnh hrs.cgi?d=HRNT&.c1=4265.1&ov1=AND&1=100&... 9/26/2003 www.hudclips.org to a foreclosure shall not relieve the purchaser or transferee of a unit from liability for, nor 12/80 page 12 Page 12 of 35 [Prev Hit][Next HiU4265.1 CKG 4 APPMMIX 24 12 the unit so sold or transferred from the lien of, any common expense charges thereafter becoming due. B. UNIT OMMS' RIGHTS AND RESTRICTIONS (a) Obligation to pay expenses. The declaration or equivalent document shall establish a duty on each unit owner, including the declarant, to pay a proportionate share of common expenses upon being assessed therefor by the owners association. Such share may be allocated equally to each unit, may. -be proportionate to that unit's common element interest, relative size or value, or may be allocated according to any other specified criteria provided that the method chosen is equitable - and reasonable for that condominium. (b) Voting Rights. The declaration or equivalent document shall allocate a portion of the votes in the association to each unit. Such portion may be allocated equally -to each unit, may be proportionate to that unit's common expense liability, common element interest, relative size or value, or may be allocated according to any other specified criteria provided that the method is equitable and reasonable for that condominium. The declaration may provide different criteria for allocations of votes to the units on particular specified matters and may also provide l�rn,•Uwun,v htivi�;linc_nry/enh nnnl tidlrof/rnih-brs.csiM=HSNT&-,1=4265.1&flat=AND&1=100&... 9/26/2003 www.hudclips.org Page 13 12/80 [Prev Hit][Next Hit]4265.1 CHa 4 APPMMIX 24 12/80 13 different percentages of required unit owner approvals for such particular specified matters. (c) Ingress and Egress of Unit owners. There may not be any restriction upon any unit owner's right of ingress and egress to his or her unit. It is recommended that the declaration affirmatively provide for the right of ingress to and egress from such unit, with such right being perpetual and appurtenant to the unit ownership. (d) Easements for Encroachments - units and Common Elements. In the event any portion of the common elements encroaches upon any unit or any unit encroaches upon the common elements or another unit as a result of the construction, reconstruction, repair, shifting, settlements, or movement of any portion of the improvements, a valid easement for the encroachment and for the maintenance of the same shall exist so long as the encroachment exists. The declaration may provide, however, reasonable limits on the extent of any easement created by the overlap of units, common elements, and limited common elements resulting from such encroachments. (e) Right of First Refusal. The right of a unit owner to sell, transfer, or otherwise convey his or her unit in a condominium shall not be subject to any right of first refusal or similar restriction. It is recommended that Page 14 Page 13 of 35 (Prev Hit) LNext Hit]4265.1 C APPMMIX 24 S—A-1— ....«1Rrnn1=AKMRY1=1M2r 0/Iii/71)013 www.hudelips.org 14 the declaration affirmatively provide that a unit.owner may transfer his or her unit free of any such restriction. (f) Leasing Restrictions. (1) All leases should be in writing and be subject to the declaration and by-laws. (2�)- FNMA, HUD and VA,�agree that unit owners should be prohibited from leasing their units for an initial term Of less than 30 days. The three organizations would not object to a requirement that leases have a minimum initial term of up to six months; however, they agree that no prohibition related to the term of a lease shall apply to a lease having an initial term exceeding six months. While FHLMC does not have any requirements regarding minimum lease terms, it would not object to documents meeting the requirements of the other organizations. 4. FIRST LIEN HOLDERS, RIGHTS (a) Notices of Action. A holder, insurer or guarantor of a first mortgage, upon written request to the owners association, (such request to state the name and address of such holder, insurer or guarantor and the unit number), will be entitled to timely written notice of: (1) Any proposed amendment of the condominium instruments effecting a change in (i) he bo ie f any unit or the exclusive easement rights appertaining thereto, (ii) the interests in the general or limited common elements appertaining to any [Prev Hit](Next Hit]4265.1 CHG 4 APPENDIX 24 15 Page 14 of 35 ncv;9A=LSaA7TQ.o1--A')Ar. 1 Q.....1=A'VMJM=lnn , or)r% %nni FannieMae Project Standards . L.eoal Rmuiremernts Selling Section 609.011 association must have the right to grant permits. licess.ses, and ease- ments over the common elements for utilities, roads, and other Our_ poses necessary for the proper operation of the project. Section 608.06 The project documents must require the owners' association to Reserves for Replacement establish and maintain an adequate reserve fund for the replace. ment of improvements to the common elements and those limited common elements- that it is obligated to maiantain, The fund should be maintained out of regular assessments for common eapensm. Section 60&07 The pr Ject documents must require the owners' association to main - Insurance Coverages tain hazard and flood insurance, liability insurance, and fidelity ;nom range coverages that are consistent with our sped& require. meats, which are discussed in Chapter 7 of this Paart. Section 608.08 The prcject dac:umeats must grant the ownerd association* -and any Rights of Action aggrieved unit owner—the right of action against unit owners who fail to comply with the provisions of the project documents or the ded- sions made by the owners' association. Unit estate owners should also be grunted similar rights of action against the owners' association. Section wan If the project documents give the project developer or sponsor or the Summary Abatement owners' association the right to use summary abatement or similar means to eaforee wArla lons-agaiust the unit property or its use, they must also require that judicial proceedings be instituted before any items of construction can be altered or demolished. Sactton me The project documents-must�rovide for each unit estate owner in a Condominium Unit condominium p�+gject.tabe eck.to all the rights and duties owneea Rights and asdoned to owners under the terms of such documents. The docn- iatatls$ ments mast specify that„ when theta are unsold units in the project, the developer or sponsor also egjoys the same rights and assumes the same duties as they relate to each individual unsold unit. Section 609.01 The prgject documents must stats .that the unit owner has an unre- Right of Ingress stsicted right of ingress and egress to his or her unit. This right must and Egress be perpetual so that it passes with the unit estate as transfers of own- ership of the unit oo=. The documents must further provide that any conveyance, encumbrance, judicid sale, or other transfer (voluntary or involuntary) of an individual -interest in the common elements will be void unless the unit to which that interest is allocated is also trans- ferred. Page 667 a�o1� "Oct Standards Ma(Requirements section 609-04 Selling Section 609.02 Generally, the project documents cannot restrict the unit owner's Limitations on Abtllty right to sell, transfer, or convey his or her unit. However, they may to Sell provide for limitations that restrict occupancy to P o3' Persons of certain age groups, as long as the limitations are legally valid and necessary to maintain the character of the particular project. The project documents may provide that, in the event of a proposed sale by a unit owns% the owners' association will be granted the right of first refusal to putrhase the unit (or to provide a substitute buyer) at the same price and under the same terms and conditions that would be offered to say other purchaser, as long as « the right to purchase is exercisable only as a means ofinsuring Pwner-oocupancy of the unit that is being sold, or for some other lawful purfwsa that serves the best interests of the owners' association and fts members; the right to pur&ase and the maruw* in Which the owners' association exercises it comply with applicable law; and the right to purchase may be exercised only if the owners' association gives the unit owner written notice ofits intent to ezercise the option within 80 days after it received the unit owner's notice of the proposed sale and thea only if the owners' amodatioa (or its substitute brayer) has the ability to exercise due c teace in completing the purchase of the unit promptly and properly. The awne& a ssociation should not be given this right of first refusal 'with respect to any lease, sale, or transfer of a unit in connection with a mortgage foreclosm (or the acoggmx a of a deed in lieu of foreclosure) or with respect to any sale or transfer by the mortgage holder or other party who acquired the unit in connection with the faredosure or deed4n4i= . Section 6O9M The prglect documeata must require that any lease or rental agree- Laesing Resmiedons ment be in writing andbe suMect to the n quirementas ofthe docu- .menta and the owas& association. They generally should not include resirictioa>s relating to the term of any lease or rental agreement, Secdon 609.04 The pr elect documm" cannot restrict the unit owner's right to Restrictions on mortgage his or her unit. In addition, they cannot limit the unit iModgaging Units ownees financing pptions by requiting the use of a specific leading inadt atioa or a particular type of lender. Page SBS 1MIA4 Helping people 26 April 2011 Curtis Jacobsen New HOPE Community Development 4401 Xylon Avenue North New Hope, MN 55428 Re: pJ 7L Audited Financial Statements YE 31 DEC 2010 Bass Lake Apartments, L.P. Bass Lake Court, LP. Boone Avenue Apartments L.P Dear Mr. Jacobsen: help themselves We are submitting for your review copies of the above referenced audited financial statements for year ending December 31, 2010. Should you have questions regarding this information please do not hesitate to contact me directly at 612.455.5132. I will be happy to provide assistance. Respectfully, PpliSealberg FOR PRIDE IN LIVING, INC. L Asset Manager Encl. Affordable Housing . Employment & Job Training + Support Services a Education Project i'r� Pride in Living • 1035 East Franklin Avenue, Minneapolis, MN 55404 • 612.455.5100 + Fax: 612.455.5141 • www.ppl-inc.org . ppl@ppl-inc.org BASS LAKE APARTMENTS LLC FINANCIAL STATEMENTS WITH SUPPLEMENTAL INFORMATION FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 BASS LAKE APARTMENTS LLC FINANCIAL STATEMENTS WITH SUPPLEMENTAL INFORMATION For the Years Ended December 31, 2010 and 2009 TABLE OF CONTEN�"TS Independent Auditor's Report Financial Statements: Page Balance sheets 2 Statements of operations and member's capital 3 Statements of cash flows 4 Notes to financial statements 5 Supplemental Information: Schedule of MHOP units information 9 MA14ONEY ULBRICH CHRISTIAN'SEN RUSS P. A. 30 EAST PLATO BOULEVARD SAINT PAUL, MN 55107-1809 TELEPHONE 651.227.6695 E 651.227.9796 To the Member Project for Pride in Living, Inc. Minneapolis, Minnesota INDEPENDENT AU'DITOR'S REPORT We have audited the accompanying balance sheets of Bass Lake Apartments LLC as of December 31, 2010 and 2009, and the related statements of operations and member's capital and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bass Lake Apartments LLC as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on page 9 is presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial staternents taken as a whole. • >M04wo .40.4g. Saint Paul, Minnesota March 11, 2011 BASS LAKE APARTMENTS LLC BALANCE SHEETS December 31, 2010 and 2009 ASSETS Land Building Accumulated depreciation Cash Cash - security deposits MHOP owner account Accounts receivable - tenants, less allowance for doubtful accounts of $2,500 in 2010 and $5,000 in 2009 MHOP operating subsidy receivable Prepaid insurance Finance fees, less accumulated amortization of $1,533 in 2010 and $1,333 in 2009 Total assets Long-term debt Due to PPL Accounts payable Prepaid rent Tenant security deposits Total liabilities 2010 2009 $ 95,000 $ 95,000 1,201,270 1,201,270 (358,776) (310,725) 937,494 985,545 5,297 10,521 3,151 3,115 32,683 32,666 2,813 4,607 1,216 235 243 2,46 2,667 $ 984,140 $ 1,040,580 LIABILITIES AND MEMBER'S CAPITAL Deferred revenue MHOP grant Member's capital Total liabilities and member's capital $ 723,000 $ 723,000 220 133,435 4,146 2,313 408 1,037 3,151 3,115 730,925 862,900 386,925 398,650 (133,710) (220,970) $ 984,140 $ 1,040,580 See accompanying notes to financial statements. 2 BASS LAKE APARTMENTS LLC STATEMENTS OF OPERATIONS AND MEMBER'S CAPITAL For the Years Ended December 31, 2010 and 2009 Operating expenses: Administrative 2010 2009 Revenues: 5,377 5,329 Apartment rentals $ 69,626 $ 69,760 Less vacancies (6,362) (5,095) Maintenance and operating 63,264 64,665 MHOP operating subsidy 10,482 9,827 Interest income 17 58 Other income 3,841 4,784 Total revenues 77,604 79,334 Operating expenses: Administrative 9,274 6,808 Bad debts 5,377 5,329 Property management fee 9,012 8,675 Payroll and related costs 6,532 5,665 Maintenance and operating 23,273 15,344 Utilities 12,121 10,022 Insurance 3,076 2,754 Real estate taxes 11,023 10,292 Total operating expenses 79,688 64,889 Operating income (2,084) 14,445 Forgiveness of payable to PPL 125,870 - Interest expense - (3,218) Amortization of deferred revenue - MHOP grant 11,725 11,725 Depreciation and amortization expense (48,251) (48,251) Net income (loss) 87,260 (25,299) Member's capital: Beginning of year (220,970) (307,671) Capital contribution from PPL - 112,000 End of year $ (133,710) $ (220,970) See accompanying notes to financial statements. 3 BASS LAKE APARTMENTS LLC STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2010 and 2009 Increase (decrease) in cash Cash flows from operating activities: Net income (loss) Adjustments to reconcile the net income (loss) to net cash from operating activities: Forgiveness of payable to FPL Amortization of deferred revenue - M 40P grant Depreciation and amortization Bad debts Changes in operating assets and liabilities: Receivables Prepaid insurance Accounts payable Accrued interest Prepaid rent Net cash from operating activities Cash flows fi-om investing activities: Withdrawal from (deposit to) reserve accounts, net Net cash from investing activities Cash flows from financing activities: Repayment of long-term debt Capital contributions from PPL Net cash from financing activities Net increase (decrease) in cash Cash, beginning of year Cash, end of year Supplemental cash flow information: Cash paid for interest expense 2010 $ 87,260 (125,870) (11,725) 48,251 5,377 2009 $ (25,299) (11,725) 48,251 5,329 (2,367) (8,674) 8 (33) (5,512) (3,149) (239) (629) (340) (5,207) 4,121 (17) 1,831 (17) 1,831 (5,224) 10,521 $ 5,297 See accompanying notes to financial statements. 4 (111,200) 112,000 800 6,752 3,769 $ 10,521 $ 3,362 BASS LAKE APARTMENTS LLC NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2010 and 2009 1. ORGANIZATION Bass Lake Apartments LLC (the Company) is a limited liability company subject to Minnesota statutes. The sole member of the Company is Project for Pride in Living, Inc. (PPL), a Minnesota nonprofit organization. The Company owns and operates an 11 -unit apartment building (the Project) located in New Hope, Minnesota. The Project was acquired in July 2002. Four of the apartment units are participating in the Metropolitan Housing Opportunity Program (MHDP) as described in Note 4. The debt agreements and the MPHA development grant agreement place restrictions on the operations and sale or disposition of the property. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents - For purposes of the statements of cash flows, the Partnership considers all unrestricted investment instruments purchased with original maturities of three months or less to be cash equivalents. Escrows, reserves and tenant security deposits are not considered cash equivalents. Accounts Receivable Accounts receivable are stated at the amount management expects to collect. Management reviews receivable balances periodically and establishes an allowance based on expected collections. Property and Equipment - Property and equipment are carried at cost. The building is depreciated using the straight-line method over its estimated useful life of 25 years. The Company reviews its investment in real estate for impairment whenever events or changes in circumstances indicate that the carrying value of such property may not be recoverable. To date, management has determined that no impairment of long-lived assets exists. Finance Fees Finance fees are amortized over the term of the related debt using the straight- line method. (Continued) 5 2. 3 BASS LAKE APARTMENTS LLC NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2010 and 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes - The Company's activity is included on the income tax return of PPL. The Company is a separate legal entity for state law and bankruptcy purposes; however, under Section 7701 of the Internal Revenue Code, the Company is disregarded for all purposes of federal income tax law_ Accordingly, the Company is deemed part of PPL, a Section 501(c)(3) nonprofit organization, and as such is exempt from income taxes. LONGTERM DEBT Long-term debt consisted of the following: 20l O 2009 Mortgage payable to New Hope Economic Development Authority without interest. The mortgage is due June 1, 2032. $ 223,000 $ 223,000 Mortgage payable to the Hennepin County Housing and Redevelopment Authority under the Affordable Housing Investment Fund program without interest. If the Project is sold before the maturity date, accrued interest of 1% per year will be due. The mortgage is due April 25, 2033_ 150,000 150,000 Mortgage payable to Hennepin County under the HOME Investment Partnerships program without interest. If the Project is sold before the maturity date, accrued interest of 1% per year will be due. The mortgage is due April 25, 2033. 350,000 350,000 $ 723,000 $ 723,000 Long-term debt is secured by the Project and due in 2032 and 2033. Interest has been recorded using the stated rates of the various mortgage notes. Several mortgage .notes have stated interest rates which are less than the prevailing market rates. Interest on these mortgage notes has not been imputed because the rate is at the governmental agency's customary lending rate. (Continued) 6 BASS LAKE APARTMENTS LLC NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2010 and 2009 3. LONGTERM DEBT (Continued) Several of the debt agreements and the MHOP agreement place restrictions on the operation of the Project, which include the following: Rental rates must be approved by lenders. Tenants must meet certain income limitations to qualify for occupancy in the Project. Transfer or sale of the Project is subject to lender approval. 4. MHOP DEVELOPMENT GRANT AND OPERATING SUBSIDY The Minneapolis Public Housing Authority (MPHA) provided the Company a grant of $469,000 for the rehabilitation of 4 public housing units under the Metropolitan Housing Opportunity Program (MHDP). The grant is recorded as deferred revenue and is being recognized as revenue over the 40 year term of the grant using the straight-line method. The Company has entered into a Declaration of Restrictive Covenants with the MPHA which requires the Company to operate the 4 public housing units in accordance with the agreement for 40 years beginning in 2003. The Company also entered into a Regulatory and Operating Agreement providing for the maintenance and operation of the 4 public housing units and the payment of operating subsidy by MPHA. The Company is required to establish an Operating Subsidy Reserve Account (the MHOP Owner Account) in the initial amount of $31,000. Any excess of operating subsidy plus tenant rents over expenses relating to the 4 units must be deposited to the reserve. Withdrawals from the reserve are subject to the Regulatory and Operating Agreement with MPHA. 5. RELATED PARTY TRANSACTIONS PPL is the property management agent for the Project. PPL is reimbursed for payroll and provides accounting support and other related management functions as defined in the agreement. During 2010, PPL began a process of internal restructuring, see Note 7. As a result, it was decided to forgive $125,870 in liabilities the Company owed to PPL. (Continued) 7 5. G 7. BASS LAKE APARTMENTS LLC NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2010 and 2009 RELATED PARTY TRANSACTIONS (Continued) The Company had the following transactions with PPL: CONTINGENCIES The Company's sole asset is the Project. The Company's operations are concentrated in the New Hope, Minnesota multifamily real estate market. In addition, the Company operates in a heavily regulated environment. The operations of the Company are subject to rules and regulations of federal, state and local governmental agencies. Changes may occur with little notice or inadequate funding to pay for the related costs to comply with a change. SUBSEQUENT EVENTS PPL has restructured the ownership of certain wholly owned subsidiaries in 2011. The new owner of this entity will be PPL Properties, a new nonprofit corporation controlled by the Board of PPL. Management has evaluated subsequent events through March 11, 2011, the date on which the financial statements were available for issue, and identified no further significant events or transactions to disclose_ E:1 2010 2009 Fees charged to expense: Property and asset management fees $ 9,012 $ 8,675 Maintenance fees 3,248 3,126 Repairs contracts fees 684 493 Other miscellaneous 948 820 Amounts due to PPL 220 133,435 CONTINGENCIES The Company's sole asset is the Project. The Company's operations are concentrated in the New Hope, Minnesota multifamily real estate market. In addition, the Company operates in a heavily regulated environment. The operations of the Company are subject to rules and regulations of federal, state and local governmental agencies. Changes may occur with little notice or inadequate funding to pay for the related costs to comply with a change. SUBSEQUENT EVENTS PPL has restructured the ownership of certain wholly owned subsidiaries in 2011. The new owner of this entity will be PPL Properties, a new nonprofit corporation controlled by the Board of PPL. Management has evaluated subsequent events through March 11, 2011, the date on which the financial statements were available for issue, and identified no further significant events or transactions to disclose_ E:1 SUPPLEMENTAL INFORMATION BASS LAKE APARTMENTS LLC SCHEDULE OF MHOP UNITS INFORMATION For the Year Ended December 31, 2010 Revenues and Expenditures for MHOP Units: Revenues received: Tenant rents $ 15,650 Other 1,470 Total revenues received 17,120 Allowed operating expenses using 40.45% MHOP Percentage: Administrative 5,732 Property management fee 2,966 Asset management fee 680 Payroll and related costs 1,752 Maintenance and operating 10,304 Utilities 4,903 Payment in lieu of taxes 542 Insurance 1,244 Total allowed operating expenses 28,123 Deficiency of revenues received over allowed expenses $ (11,003) MHOP Development Operating Subsidy: For the year ended December 31, 2010 $ 10,482 Development Operating Subsidy Reserve Activity: Owner Public Account Account Balance, December 31, 2009 $ 32,666 $ - Interest 17 - Balance, December 31, 2010 $ 32,683 $ - Aggregate Stated Monthly Lease Rents for MHOP Units $ 1,304 Rents Receivable (Prepaid) for MHOP Units at December 31 $ 58 See independent auditor's report. 9 PROJECT NO. 776 Tax Increment Districts 5445 Boone Condos Res. 04-152 8/23104 Resolution Modifying The Restated Redevelopment Plan And Tax Increment Financing Plans For Redevelopment Project No. 1 And Tax Increment Financing Districts Nos. 80-2, 81-1, 82-1, 85-1, 85-2, 86-1, 02-1, 03-1 (Special Law) And 04-1 (Special Law); Creating Tax Increment Financing District No. 04-2 (Special Law) And Adopting A Tax Increment Financing Plan Relating Thereto (Improvement Project No. 776) EDA Res. 04-29 8/23104 Resolution Modifying The Restated Redevelopment Plan And Tax Increment Financing Plans For Redevelopment Project No. 1 And Tax Increment Financing Districts Nos. 80-2, 81-1, 82-1, 85-1, 85-2, 86-1, 02-1, 03-1 (Special Law) And 04-1 (Special Law); Creating Tax Increment Financing District No. 04-2 (Special Law) And Adopting A Tax Increment Financing Plan Relating Thereto (Improvement Project No. 776 EDA Res. 04-30 8/23/04 Resolution Calling For Public Hearing Regarding A Proposed Transfer Of Real Property (5501 Boone Avenue North Improvement Project No. 776) EDA Res 04-33 9/13104 Public Hearing - Resolution authorizing the transfer of real property (5501 Boone Avenue North) (improvement project no. 776) EDA Res 04-34 9/13104 Resolution authorizing execution and delivery of a contract for private redevelopment by and between the New Hope Economic Development Authority and Project for Pride in Living, Inc. for the redevelopment of 5501 Boone Avenue North (improvement project no. 776) EDA Res, 04-36 11/8/04 Resolution approving financial guarantee of the Hennepin County Housing and Redevelopment Authority affordable housing incentive fund program in the 5501 Boone Avenue North development project (improvement project no. 776) Res. 07-109 7/23/07 Resolution releasing the letter of credit for the Linden Place Apartment project and transferring outstanding amounts to the Linden Park Condominium project letter of credit (Improvement Project No. 776) Res. 07-02 9/10/07 Resolution authorizing signatures for Certificate of Completion and Release of Forfeiture related to the Linden Park Condominiums, a project by PPL (Project for Pride in Living) at 5445 Boone Avenue North (improvement project no. 776) Res, 08-34 2/25/08 Resolution authorizing a letter of credit reduction for Linden Park Condominiums, 5445 Boone Avenue North, PPL petitioner (improvement project 776)