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041293 EDA OFFICIAL FILE COPY C~Y OF NEW HOPE EDA AGENDA EDA Regular Meeting//5 April 12, 1993 Agenda//5 President Edward J. Erickson Commissioner W. Peter Enck Commissioner Gerald Otten Commissioner Terri Wehling Commissioner Marky Williamson 1. Call to Order 2. Roll Call 3. Approval of Minutes of March 22, 1993 4. Consideration of Request by LaNel Financial Group, Inc. for Changes to New Hope Terrace Assessment Agreement 5. Resolution Authorizing Commencement of Eminent Domain Proceedings to Acquire Property at 5009 Winnetka Avenue North (//505) 6. Resolution Authorizing the President and Executive Director to Execute Purchase Agreement and Lease for Foremost Property at 7528 42nd Avenue North (Improvement Project No. 474) 7. Resolution Authorizing the President and Executive Director to Sign Contamination Remediation and Right of Entry Agreement (Improvement Project No. 474) 8. Consideration of Request for Extension on Development Contract Improvements, Autohaus, Inc., 7709 42nd Avenue North (Improvement Project No. 467) 9. Adjournment CITY OF NEW HOPE 4401XYLON AVENUE NORTH HENNEPIN COUNTY, MINNESOTA 55428 Approved EDA Minutes March 22, 1993 Meeting #4 CALL TO ORDER President Erickson called the meeting of the Economic Development Authority to order at 9:51 p.m. ROLL CALL Present: Erickson, Otten, Wehling, Williamson Absent: Enck APPROVE MINUTES Motion was made by Commissioner Otten, seconded by Commissioner Williamson, to approve the EDA regular and executive session minutes of February 22, 1993. All present voted in favor. Motion carried. NEW HOPE TERRACE President Erickson introduced for discussion Item 4, APARTMENTS Presentation of Interim Audit Report Prepared by Item 4 Springsted Relative to the Assessment Agreement and Tax Increment Financing on the Emerald Pointe Apartment Complex (formerly New Hope Terrace). Mr. Donahue indicated that on February 22, 1993, the EDA authorized proceeding with an audit and directed staff to report back no later than April 12th. He informed the EDA that part of the information is available and a final report will be presented at the April 12th meeting. NEW HOPE COMMUNITY President Erickson introduced for discussion Item 5, REVITALIZATION Resolution Appointing Directors to the Board of the New CORPORATION Hope Community Revitalization Corporation. Item $ EOA RESOLUTION Commissioner Wehling introduced the following resolution 93-04 and moved its adoption: "RESOLUTION APPOINTING DIRECTORS Item $ TO THE BOARD OF THE NEW HOPE COMMUNITY REVITALIZATION CORPORATION". The motion for the adoption of the foregoing resolution was seconded by Commissioner Otten and upon vote being taken thereon; the following voted in favor thereof: Erickson, Otten, Williamson, Wehling; and the following voted against the same: None; Absent: Enck; whereupon the resolution was declared duly passed and adopted, signed by the president which was attested to by the executive director. ADJOURNMENT Motion was made by Commissioner Williamson, seconded by Commissioner Wehling, to adjourn the meeting, as there was New Hope EDA March 22, 1993 Page 1 no further business to come before the EDA. All voted in favor. The New Hope Economic Development Authority adjourned at 9:52 p.m. Respectfully submitted, Valerie Leone City Clerk New Hope EDA March 22, 1993 Page 2 ru/-t ~~~~,)~~ REQUEST FOR ACTION Originating Dep~ment Approved for ~enda ~enda Section City Manager ~ 4-12-93 Ito~ No. BT: Dan Donahue BT:~ 4 / CONSIDE~TION OF REQUEST BY LANEL/FINANCIAL GROUP, INC. FOR CHANGES TO NEW HOPE TER~CE ASSESSMENT AGREEMENT LaNel Financial Group has asked the EDA to amend the assessment agreement on the New Hope Terrace Project (36th Avenue west of the railroad tracks). This would lower the market value of the project from $6.4 million to around $5 million (to be determined by the Hennepin County Assessor). With the lowering of market value is a lowering of taxes. The request comes about due to the artificial setting of market value by the assessment agreement and the owners inability to sustain the needed profit for the investors. Renew: Ad~stratlon: F~ce: ~A-O01 SPRINGSTED 222 South Ninth Street Suite 2825 PUBLIC FINANCE ADVISORS Minneapolis, MN 55402-3368 (612) 333-9177 Fax: (612) 333-2363 Home Office 85 East Seventh Place 16655 West Bluemound Road Suite 100 Suite 290 Saint Paul, MN 55101-2143 Brookfietd, WI 53005-5935 (612) 223-3000 (414) 782-8222 Fax: (612) 223-3002 Fax: (414) 782-2904 6800 College Boulevard Suite 600 Overland Park, KS 66211-1533 (913) 345-8062 Fax: (913) 345-1770 1800 K Street NW Suite 831 Washington, DC 20006-2200 April 7, 1993 (202) 466-3344 Fax: (202) 223-1362 Mr. Daniel J. Donahue, City Manager City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Re: New Hope Terrace Assessment Agreement Dear Mr. Donahue: We have been asked by the City of New Hope (the "City) to provide an analysis of the projected financial status of the Assessment Agreement (the "Agreement") which is currently in place for the New Hope Terrace Project (the "Project") as the Agreement relates to the valuation of the Project for real estate tax purposes. In conducting our analysis, we have relied upon information received from City staff and Hennepin County. In addition, we have met with representatives of La Nel Financial Group, Inc. to discuss their interest in the Project. We have previously provided an analysis of the Project and the consequences to the City of an adjustment to the Agreement in the form of reducing the valuation of the subject property. This analysis was contained in a letter dated March 18, 1993. That letter and its analysis is incorporated by reference into this document. The City has asked us to perform additional analysis on this matter. We have been asked to determine the effect on the financial status of La Nel Financial on the current Agreement and the effect of a reduction in the taxes payable under the Agreement. This letter represents the results of our analysis on this issue. We have met with representatives of La Nel Financial Group and reviewed the operating results of the Project for 1992. From that information we have projected out through 2003 an income statement and cash flow for the Project. We have limited the projections to 2003 as that is the final year for payment of the Bonds which were issued in support of the Project. These projections were adjusted to reflect a higher rent income than shown in 1992. This adjustment was made to reflect a stronger rental market in the future. The information we have received from La Nel Financial was provided to us under a Confidentiality Agreement between Springsted and La Nel. The information we reviewed is considered by La Nel to be in the nature of a trade secret and we have agreed not to disclose the information. New Hope, Minnesota April 7, 1993 Page 2 The income and cash flow statements which were generated based on the actual 1992 operating results of the Project were reviewed by La Nel representatives to make Sure that the projections were an accurate depiction of the probable course of future events. These projections were also compared to industry standards for similar structures as compiled and published by the Institute of Real Estate Management. We have not included in our analysis the effect of a sale of the property by La Nel Financial in the future. Future events and projected sale prices are too speculative to provide information which may be relied upon for this analysis. We then analyzed the projections to determine the Internal Rate of Return (IRR) to La Nel and the Return on Equity (ROE) of the Project. We prepared three versions of the income and cash flow statements. These versions are described below. Version I. The first version of the income and cash flow is based on a continuation of the current Agreement and reflects no change in the valuation for real estate tax purposes. Version II. The second version reflects a change to the Agreement and reflects a reduced value for the Project to be used in the calculation of real estate taxes. Version III. .The third version reflects the current Agreement and also takes into account a holdback of certain funds by the lender. The current mortgage on the Project includes a holdback from La Nel Financial. The effect of the holdback is to have La Nel make payments on the full amount of the mortgage, while a portion of the proceeds of the mortgage are held in escrow, earning interest at a rate substantially below the rate of the mortgage. INTERNAL RATE OF RETURN Under Version I of the income and cash flow, the IRR of the Project is negative through 2003. Under Version II of the income and cash flow, the IRR of the Project is positive through 2003, but is less than 2%. Under Version III of the income and cash flow, the IRR of the Project is negative through 2003. Under this version, the IRR is twice as large as the IRR under Version I. Since the IRR under Version I is negative, the Version III IRR is twice as large a negative number as found in Version I. RETURN ON EQUITY Under Version I of the income and cash flow, the ROE of the Project is below 7% through 2003. Under Version II of the income and cash flow, the ROE of the Project through 2003 is less than 10%. New Hope, Minnesota April 7, 1993 Page 3 Under Version III of the income and cash flow, the ROE of the Project through 2003 is less than 6%. SUMMARY The results of our analysis indicate that in general, the IRR of the project will be negative if the current Agreement is continued. Accounting for the holdback on the mortgage, the IRR is an even larger negative figure. The ROE in Version I and Version III will be positive, but not exceedingly high. If the current Agreement is adjusted to reflect a revised valuation for real estate tax purposes, the IRR will be positive, but not at a high level, After you have an opportunity to review this letter, please contact us if you have any questions or comments about the analysis contained herein or any other area related to the Project or the Agreement. Yours truly, Robert Thistle Vice President ~~ REQUEST FOR ACTION originating Depar/~nent Approved for Agenda Agenda Section Hanager 4-27-92 EDA Dan Donahue ~ Item No. By: By: DISCUSSION REGARDING REOUEST BY LaNEL FINANCIAL GROUP, INC. TO AHEND ASSESSHENT AGREEHENT FOR NEN HOPE TERRACE APARTHENTS This is back on the agenda as a discussion item. LaNe] is the new owner o/: New Hope Terrace Apartments on 36th Avenue west o/: the railroad tracks. They have acquired, in addition to the comp]ex, an agreement that previously existed with the City and the original developers. That agreement required the market value to go up every year by a minimum o/: 2% regardless o/: any actions by the assessor. Since the sale paid o/:/: the old housing bonds, the new owners have voided all subsidies /=or ]ow and moderate income renters. Proposed by way o/: negotiations between LaNel and city sta/:/: is a scheme to retain 10 o/: the original 30 low and moderate income apartments i/: the city would release LaNe] /:rom the assessment agreement and allow the market value to be set by the assessor free o/: any arti/:icial limits such as a 2% increase /:or every year. Since the apartments were partially developed through TIF bonds, those bonds and their repayment are very important to the city. That is the reason /:or the assessment agreement--to guarantee money would be available through the year 2004 to pay o/:/: the bonds. At the current time there is in excess o/: $500,000 in reserves. This would more than meet 2 years o/: bond payments. The EDA is considering the LaNel request as a way to provide housing for citizens in need and meet its /:uture obligations to pay of{ the bonds. Yet to be developed is a specific plan to guarantee that a sufficient ~]ow o~ TIF money would always be available. Renew: Ad~stratlon: F~ce: LaNel Financial Group, Inc. 4601 Excelsior Blvd., Suite 601 Minneapolis, MN 55416 (612) 920-5338 Apr il 1, 1992 Daniel J. Donahue City Manager City of New Hope 4401 Xylon Ave. N. New Hope, MN 55428 Re: New Hop~ Terrace Apartments Dear Dan, As a follow up to our meeting on Wednesday and as an effort to address the concerns that the City has with our proposal of March 5, 1992, we would make the following suggestions. 1) The City agree to reduce the market value amount specified in the assessment agreement to what ever level we are able to negotiate value with the county assessor. What ever that number turns out to be would then be the minimum value for the assessment agreement going forward with the actual fair market value being determined each year through the normal county assessment procedure, but not less than that initial minimum value. 2) In consideration of the above, we will agree to retain ten units under the low income housing criteria as defined in the housing revenue bonds initially issued on this project. 3) The ten units would remain low income for the full term of the tax increment bonds. 4) In the event, and only in the event that the legislature approves the current legislation allowing the use of excess tax increment to assist or subsidize low income housing, the City would agree to make up the difference between the low income rent paid by the residents and the then current market rate of those units from the excess tax increment funds. Dan, it should be clear that if the legislature fails to act we would still be obligated to maintain the ten units of low income housing. This proposal would bring in line the real estate taxes to a tic and actual market value, allowing this project to operate in an economically sound fashion and be the asset that everyone hopes it will be to the City of New Hope. Additionally, the community will have available to its residents affordable housing. Please let me know if you have any questions and also when you expect this to be presented to the City Council. Very truly yours, Paul G. Brewer President PGB/lp cc: Frank Lang Greg Bronk LaNel Financial Group, Inc. 4601 Excelsior Blvd., Suite 601 Minneapolis, MN 55416 (612) 920-5338 March 5, 1992 Daniel J. Donabue City Manager City of New Hope 4401 Xylon Ave. N. New Hope, MN 55428 Re~ New Hope Terrace Apartments Dear Dan, After our discussion with you on Tuesday concerning the real estate market value of New Hope Terrace and the issue of low income housing units, we would make the following proposal: On the condition that the City will set the market value for real estate tax purposes and the Assessment Agreements at $5,000,000, which is consistent.with our recent purchase price, we will agree to retain 10 units under the low income housing criteria that was in existence when the Housing Revenue Bonds were in place. It is our understanding that a bill is currently before the State Legisla=ure that would allow for the use of excess tax increment funds to assist or subsidize low income housing. In the even= that that bill passes, our proposal would involve the City making up =he difference from excess tax increment funds between the low income ten= paid by the residents on the 10 units and the then current market rate of those units (approximately $230 per unit per month). In the event that the State does not approve the current pending legislation, we would phase out the 10 units equally over a two year period. Dan, we would like to proceed as quickly as possible on the market value issue so that we know how to deal with the current residents as we are now in =he process of giving notice on the low income units of rental increases ~=rch 5, 1992 Page Two We understand that it may be some time before final resolution on the legislation takes place, but we are willing to take that risk so long as we do have the opportunity to phase out those units over the two year period. Very~yours, Paul G. Brewer President PGB/lp EUA REQUF. T FOR ACTION Originating Deparhnent Approved Mr Agenda Agenda Section Manager 4-13-92 EDA Item No. Dan Oonahue By: By: 6 DISCUSSION REGARDING REQUEST BY LaNEL FINANCIAL GROUP, INC. TO AMEND ASSESSMENT AGREEMENT FOR NEW HOPE TERRACE APARTMENTS LaNel is the new owner of New Hope Terrace Apartments on 36th Avenue west of the railroad tracks. They have acquired, in addition to the complex, an agreement that previously existed with the City and the original developers. That agreement required the market value to go up every year by a minimum of 2% regardless of any actions by the assessor. Since the sale paid off the old housing bonds, the new owners have voided all subsidies for low and moderate income renters. Proposed by way of negotiations between LaNel and city staff is a scheme to retain 10 of the original 30 low and moderate income apartments if the city would release LaNel from the assessment agreement and allow the market value to be set by the assessor free of any artificial limits such as a 2% increase for every year. Since the apartments were partially developed through TIF bonds, those bonds and their repayment are very important to the city. That is the reason for the assessment agreement--to guarantee money would be available through the year 2004 to pay off the bonds. At the current time there is in excess of $500,000 in reserves. This would more 'than meet 2 years of bond payments. The EDA is considering the LaNel request as a way to provide housing for citizens in need and meet its future obligations to pay off the bonds. Yet to be developed is a specific plan to guarantee that a sufficient flow of TIF money would always be available. MOTION BY SECOND BY Renew: Adminl~ration: Finance: RFA-O01 ~ NEW HOPE TERRACE President Pro tem Enck introduced for discussion Item 6, PROPERTY Discussion Regarding Market Value of New Hope Terrace item 6 Property. Mr. Donahue explained that the New Hope Terrace Apartment building on 36th near the railroad tracks was built with tax increment funds. He stated the building was recently sold to LaNel. He stated currently there is a developer's agreement that includes an assessment agreement with a 2% escalator. The assessment agreementhas established a market value of 6.2 million dollars for payable 1992. He stated LaNel, the new owners, recently purchased the property for 5 million. He stated LaNel has approached the City about amending the developer's agreement whereby the market value could be lowered and thus the taxes paid could be lowered. The original development used housing bonds where it was required to set aside 20% {or 30 units) to persons who qualified under income guidelines. With the new purchase of the building, the old bonds were paid off and thus there is no longer a requirement to provide for the 20% set aside. Mr. Donahue informed the EDA that persons receiving notification of this discontinuation will press the City Council for action to reinstate part of the low and moderate income housing. He indicated that he has spoken with Ember Reichgott and Ann Rest regarding the situation and they are very interested. Mr. Donahue reiterated that LaNel would like the market value lowered. At the current time the Hennepin County Assessor has provided an unofficial valuation of 5.5 million for the property, and does not feel the market value would be set at 5 million dollars. He indicated that he believes the only way the City could provide relief would be to use excess tax increments towards the lost low and moderate income units. At the present time, state law forbids the use of excess increment or any increment to go into direct housing subsidy. However, there is a tax increment amendment bill before the Legislature which would allow tax increments to be used directly for housing subsidy. President Pro tem Enck stated he is uncomfortable eliminating 1.2 million of tax capacity to one particular property owner since it would set a precedent. He noted the tax loss not only affects the city but also includes the school district, county, watersheds, etc. He felt this would impose a burden upon others in the taxing New Hope EDA March 23, 1992 Page 4 district since the current value is built into the tax capacity for generating revenues. Commissioner Williamson stated that many apartment buildings within the City are deteriorating and may need help in the future. She commented that if a developer purchases these apartments at a distressed value and is willing to make some sort of a deal with the City, it may be in the City's best interests to do so. She expressed concern for low and moderate income persons not having decent places to reside. President Pro tem Enck agreed that in the future that may the case; however, in this case there is a binding contract. Commissioner Otten indicated he would prefer to retain the original development contract. Commissioner L'Herault inquired of the number of units which would be made available if the value is dropped to 5.5 million. Mr. Donahue stated many scenarios are being discussed. He stated if the bill passes regarding use of excess tax increment funds, the developer would be willing to designate 10 units. In the event that the State does not approve the pending legislation, LaNel would phase out the 10 units over a two year period. Mr. Donahue suggested deferring action until a decision is made regarding the tax increment bill. Commissioner Williamson indicated the sale of the property has been taking place for over a year and will be no surprise to most of the apartment dwellers. She indicated there had been rumors of losing the low income housing if the apartments changed ownership. AD~OURNNENT Motion was made by Commissioner Williamson, seconded by Commissioner L'Herault, to adjourn the EDA meeting as there was no further business to come before the Council. All present voted in favor. The New Hope EDA adjourned at 10:21 p.m. Respectfully submitted, Valerie Leone City Clerk New Hope EDA March 23, 1992 Page 5 Commissioner L'Herault, approving revised corrective action design workplan for 42nd/Nevada Avenue soil contamination cleanup and authorizing advertisement for bids to excavate and treat impacted soils. All present voted in favor. Motion carried. BID/SOIL CLEANUP President Pro tem Enck introduced for discussion Item 5, Item $ Approval of Bid Submitted by Bergerson-Caswell, Inc. for Groundwater Quality Monitoring Well Abandonment and Construction for 42nd/Nevada Avenue Soil Cleanup (Project #462), in the amount of $2,296. Mr. McDonald stated the bid is for abandoning a well and constructing a new well. The MPCA is requesting that a monitoring well at the location of the soils to be excavated be abandoned prior to excavation and that an additional groundwater monitoring well be constructed near Park Ridge Way Apartments after the excavation of contaminated soils. MOTION Motion was made by Commissioner L'HeraUlt, seconded by Commissioner Otten, approving bid submitted by Bergerson- Caswell, Inc. for groundwater quality monitoring well abandonment and construction for 42nd/Nevada Avenue soil cleanup (Project #462), in the amount of $2,296. All present voted in favor. Motion carried. NEW )lOPE TERI)J~CE President Pro Tem Enck introduced for discussion Item 6, APARTMENTS Discussion Regarding Request by LaNel Financial Group, Item 6 Inc. to Amend Assessment Agreement for New Hope Terrace Apartments. Mr. Donahue explained that LaNel is the new owner of New Hope Terrace Apartments on 36th Avenue west of the railroad tracks. He indicated that LaNel has approached the City regarding changing the assessment agreement which was originally made in 1986-87 between the City and the developers of the property which guaranteed a certain minimum market value of the apartment project in order to pay off housing bonds. Mr. Donahue stated the life of the bonds will run through 2004 and the City does not need to change the assessment agreement if it does not desire to do so. He reviewed scenarios discussed with LaNel which may advantageous to the City. One of the options is to retain 10 of the original 30 low and moderate income apartments for the life of the bond issue (until year 2004) if the City would amend the assessment agreement. The amendment would include allowing the market value to be set by the assessor free of any artificial limits such as a 2% New Hope EDA April 13, 1992 Page 2 increase. He noted a minimum market value should be established to ensure a certain tax flow until the bonds are paid off. Mr. Donahue illustrated tax projections based on the current assessment agreement. He stated the owners would be required to pay $269,000 in taxes next year. If the agreement was amended, based on $5.5 million, $233,000 would be generated in taxes, or a tax savings to the apartment owners of $36,000. The City's analysis would show that if the owners provided 10 units of apartments at $200 per month or $24,000/year, LaNel would have a net tax savings of $12,000. He also reviewed the projections for year 2003. The cost of providing the 10 units would be $29,000 and the owner would have a tax savings of approximately $15,000. Mr. Donahue stated 2/3 of the savings would be for the public good and 1/3 to the apartments owner. He informed the EDA that Paul Brewer from LaNel Financial Group is present to answer or clarify questions. Commissioner Williamson questioned the current market value. Mr. Donahue stated the payable 1993 market value is $6.4 million (which would generate $269,000 in taxes). Mr. Donahue stated at the current time there is an excess of $500,000 in reserves which would meet two years of bond payments. Under the current agreement it is projected to be $1.5 million. When the bonds are paid off, the money is to be redistributed to the taxing jurisdictions or 7% to the City (17% less 10%). He stated if the EDA agrees to the change, the excess increment will not continue to build, but rather the funds will subsidize the housing. The approximate cost would be between $120,000 to $150,000. President Pro tem Enck commented that this happens to be one project which the City planned well. Mr. Donahue noted that he is aware of no other city which has undertaken changes to assessment agreements to benefit low and moderate income housing. Mr. Brewer, LaNel, was recognized and stated New Hope Terrace Apartments was purchased for $5.5 million dollars which was substantially less than the value stated on the assessment agreement. He noted when the property was purchased real estate taxes were considered. He stated it New Hope EDA April 13, 1992 Page 3 is their goal to get taxes in line with the value. He stated he recognized the property had 30 units designated as low income rentals which the previous owner rented for less than the market rental rate. He stated the units were primarily rented by low-income elderly persons. Mr. Brewer continued stating that in this area LaNel currently has over 1,000 units of multi-family housing, two of which are Anthony James and Broadway Village Apartments which are mostly elderly. Because of this, LaNel did not want to lose the current tenants at New Hope Terrace even though they were subsidized, yet at the same time the property could not be economically operated with 30 low- income units. Mr. Brewer reviewed his proposal regarding reduction of the market value. He stated it would not jeopardize the tax increment financing which exists on the property as there is sufficient reserves. He emphasized the assessment agreement amendment would not only benefit LaNel as a property owner operating on an economic basis but would also meet and retain some of the City's low-income housing needs. Commissioner L'Herault questioned whether the negotiated purchase price was a reflection of the tax situation. Mr. Brewer stated that was not the controlling factor as a number of buyers were competing for the property. He noted the elimination of the low income units makes up part of the difference. However, it would be nice to retain the current low-income tenants since they have proven to be good tenants. Commissioner L'Herault again questioned if the tax burden was reflected in the purchase price. Mr. Brewer replied that he could not say that it had a direct impact although it may have indirectly entered into the offer. He stated the purchase price was determined based upon the projected revenues generated from the property. President Pro tem Enck stated the change in valuation would amount to $450,000 over a lO-year period. He pointed out that the City has an obligation to the taxing districts bymaintainingthe agreement. He remarked that a benefit would be given to one {property owner and recipients of low-income housing) at the expense of another {taxing districts such as the schools). He expressed displeasure with the City being perceived as New Hope EDA April 13, 1992 Page 4 the cause behind the elimination of the low-income housing units. He pointed out that the agreement was in place when the property was purchased and the apartment complex was purchased at a discounted price. Mr. Donahue asked the EDA for direction as to whether or not to proceed. He reiterated President Pro tem Enck's comment regarding the benefit to one at the expense of another. Ms. Colleen Barstein was recognized and stated she resides at the New Hope Terrace Apartment. She has been living with her mother in a 2-bedroom subsidized apartment for four years. She indicated she was shocked to learn of the $250 increase in rent with the elimination of the subsidized rent. Ms. Barstein stated she would like to continue living in New Hope and urged the EDA to reach a compromise for the continuation of the subsidized program. She indicated without the subsidized housing, people will be forced to move out or pay the $700 rent. It will be difficult to find another place to live especially since many of the affected persons are elderly. She noted they view the apartments as their home. She commented that the merchants at Winnetka Commons Shopping Center may be affected by the tenants relocating. President Pro tem Enck expressed empathy and stated it is a difficult dilemma. He inquired of the occupancy rate. He noted even if there was a change in the agreement, 2 of the 3 tenants would be adversely impacted since there would be only 10 rather than 30 subsidized units. Mr. Brewer stated the apartments are 95% occupied and the market in New Hope is good. Commissioner Otten inquired of alternate subsidized housing within the City. Mr. Donahue reported that the options are limited. Section 8 is the predominant program; however, the waiting list is about 5 years. He stated Metro Housing was contacted regarding emergency housing in the form of vouchers but the hardship would not qualify under its "emergency" program. He mentioned senior apartment complexes within the City: Anthony James, Chardon Courts, St. Therese, and North Ridge Apartments. Commissioner Williamson questioned how the program was New Hope EDA April 13, 1992 Page 5 subsidized or how the apartment owners were reimbursed. Mr. Brewer explained that there was no reimbursement; the owners were required to provide 20~ of the units at a reduced rate that met the federal guidelines. Mr. Sondrall, City Attorney, reported that an annual certification was submitted to the City and the County. Commissioner Williamson stated it is a serious issue and she hopes Mr. Brewer can find a way to continue the program. She stated it is difficult to find subsidized housing as clean and well operated as New Hope Terrace Apartments. She asked how many units of the subsidized units are currently occupied. Mr. Brewer replied that there are 16 or 17 apartments. Ms. Williamson questioned whether Mr. Brewer is confident that he could maintain a 95% occupancy at the full-market rate. Mr. Brewer replied that he believes they can. He noted that New Hope has an overall vacancy of 3% and the market is very tight. He noted last year Anthony James Apartments had 1/10 of 1% vacancy. He stated the normal turnover on an apartment project is 50-60% of its units whereas in a senior complex, turnover of 15-20% is high. Commissioner Otten inquired whether Hennepin County will be assessing the property. Mr. Donahue stated the assessment agreement Sets the market value and the escalator is an automatic 2% until the life of the contract. Commissioner Otten noted it is a private venture and it appears there is little the City can do regarding the market value set by the contract. He conveyed he does not feel the City should be lowering the taxes at this time. Commissioner Williamson indicated philosophically she agrees with Commissioner Otten; however because the City originally put stipulations on the property at the time of construction, she feels the City has a responsibility to the residents to maintain the subsidized housing end of the agreement. Commissioner L'Herault stated it was a package and one has to use caution when identifying only part of the New Hope EDA April 13, lg92 Page 6 agreement. Commissioner L'Herault asked whether it can be approached another way without impacting the taxing districts. President Pro tem Enck stated the lower market value will enable the bonds to be paid off; however, there will be less money going into the pool and little surplus to be redistributed at the end of the contract. He noted he does not feel the City should be changing contracts and he has not seen anything sufficient enough to warrant a change to the contract. Mr. Donahue commented that in the year 2004, the City would gain $250,000 with the contract as is. If the contract is changed as proposed, the City would gain $100,000. Therefore, the housing subsidy program could be viewed as costing the City $150,000. Mr. Donahue inquired whether the EDA desires staff to discuss the matter with the County and/or School District for their input. Commissioner Williamson indicated that she would like President Erickson's input regarding the proposal. President Pro tem Enck commented that it is appropriate to have all members actively participate in the decision. He directed staff to bring the item back on the April 27th agenda for discussion. AUTOHAUS - #467 President Pro tem Enck introduced for discussion Item 7, Item 7 Request for Extension on Development Contract Improvements - Autohaus (#467). Mr. Donahue stated staff has met with Autohaus and is recommending to table further consideration on this item until the May 11th meeting. NOTION Motion was made by Commissioner Otten, seconded by L'Herault, to table until Nay 11, lgg2, the request by Autohaus for an extension on their development contract improvements. All present voted in favor. Motion carried. OTHER BUSINESS Mr. Donahue informed the EDA that PRISM continues to be Prism interested in obtaining the City-owned property on 42nd/Nevada Avenue for a new facility. He stated they have retained an architect and have developed conceptual drawings which they wish to present to the EDA. The drawings are in the Mayor's office for the EDA to review. He informed the .EDA that PRISM would like to meet New Hope EDA April 13, 1992 Page 7 A condition of the Development Agreement is that the EDA will furnish a certificate of completion certifying that all obligations of the developer have been completed in the construction of the project. MOTION Motion was made by Commissioner Enck, seconded by Item 5 Commissioner Williamson, to authorize the Executive Director to Sign Certificate of Completion for the Winnetka West Barrier-Free Housing Project (#466). All present voted in favor. Motion carried. NEd HOPE TERRACE President Erickson introduced for discussion Item 6, APARTRENTS Discussion Regarding Request by LaNel Financial Group, Item 6 Inc. to Amend Assessment Agreement for New Hope Terrace Apartments. The EDA resumed d~scussions previously held on March 23, 1992, and April 13, 1992. Mr. Donahue explained that LaNel Financial Group is requesting that the City amend its assessment policy regarding the New Hope Terrace project. The assessment policy was developed at the time of the original construction in 1986 which had a minimum market value and required a 2% escalation of that market value every year. In 1993, that market value will be at $6.4 million. They are requesting an amendment to the assessment agreement that would allow the county assessor to set the market value for 1993 and that would be the minimum amount or floor that the market value could not go under for the life of the bond issue through the year 2004. If the City agrees to the amendment, LaNel will retain ten of the thirty units for low to moderate income housing. LaNel is projecting that the average subsidy wilt be $230 per month. For ten units this would amount to approximately $28,000 per year. President Erickson interjected that the City needs to ensure that the "floor" is beneficial to the City of New Hope in that it would never be so low that the bonds could not be paid. Mr. Donahue stated that if the EDA wishes to pursue this change, he would discuss the specifics with Hennepin County. He noted he personally would like the EDA to grant the request to LaNel as it would save ten of the subsidized units. However, on the down side, the City's risk is increased since the bonds are not yet paid off. He New Hope EDA April 27, (992 Page 2 pointed out that certain things can happen which may be out of the City's control {i.e. if the new owners file bankruptcy} and there may not be adequate reserves to pay the bonds. Mr. Sondrall, City Attorney, noted that taxes will have a priority even in a bankruptcy case. The value of the property may decline during a bankruptcy case since the building may be allowed to deteriorate. President Erickson responded favorably to the amendment to the assessment policy since 1) it would allow ten out of the thirty renters to remain until the year 2003; 2) there will be cash flow to maintain and upkeep the premises; and 3) the new owners are stable and experienced in rental management. Mr. Paul Brewer, President of LaNel Financial Group, Inc., was recognized. He reiterated their proposal to retain ten units in exchange for readjustment to the property's market value. He reviewed planned improvements to the property including patio maintenance, caulking of siding, exterior staining/painting, landscaping, insulation to the pipes in the underground garage to reduce heat loss, wallpaper border and lighting in hallway, carpet replacement, and a new identification sign. He presented a chart showing the net cash flow with a reduction of taxes to 5 million and also based on 5.5 million. Mr. Greg Bronk of LaNel addressed the EDA. The current taxes are $268,000 based on a $6,267,000 value. If the value is reduced to $5,000,000, the taxes would be. reduced to $203,207 or $65,000 reduction. The cost of the ten low income units would average $27,600 annually. Therefore, the net reduction of taxes would be $37,800. He next reviewed taxes based on a $5,500,000 value. The taxes would be $223,000 or a $45,000 reduction. After the ten unit subsidy, the net reduction of taxes would be $17,500. He stated the additional cash flow created by reduced taxes will be used to partially fund the fore- mentioned improvements. Commissioner Otten questioned whether there is any legal precedent. He remarked of the circumstances where a private contract is being altered to provide a trade-off between taxes and low-income housing. New Hope EDA April 27, 1992 Page 3 Mr. Sondrall replied that he does not believe there is a legal precedent. The EDA is considering re-negotiating the assessment agreement. He stated it will not affect other agreements currently in effect. Mr. Donahue stated he has learned of assessment agreement modifications made by other cities; namely St. Anthony and Bloomington. However, he was not aware of any specific instances where the changes were made for a direct housing subsidy. Mr. Sondrall stated there is a legitimate public purpose if the EDA desires to amend the agreement. The EDA must protect the City in meeting the financial obligation of the bonds as well as to ensure quality housing for low to moderate income persons. Commissioner Williamson questioned whether there would be any surplus if the market value was lowered. Mr. Donahue stated the surplus will be less than if the agreement is not amended. Certain provisions could be made in the agreement to act as safety nets. Commissioner Enck commented that he does not believe New Hope has the prerogative to use the bonds as requested. The amendment would have an adverse affect on all New Hope tax payers, school district, and the county. He noted LaNel purchased the property as a distressed sale buying a 5.5 to 6.0 million dollar structure for 5 million dollars and the corporate profits could be utilized to subsidize the low to moderate income units. President Erickson pointed out that the other taxing districts will not receive any tax dollars until the bonds are paid off. As soon as a complex starts creating a negative cash flow, maintenance and upkeep decreases which in turn draws a different clientele. The new owners have no legal obligations to retain any low to moderate income units; however, LaNel is willing to compromise in exchange for lower taxes. If the City does not assist, there will be no low to moderate income units in the building. The petitioners are good owners as proven by Anthony James and Broadway Village Apartments operations in the City. Commissioner L'Herault conveyed that he agrees with Commissioner Enck in that the owners were aware of the assessment agreement when they made the purchase. He expressed empathy that tenants may be evicted since they cannot afford the full rent. He continued by stating on the other hand LaNel would be saving $65,000 for retaining only ten people in the apartment building. New Hope EDA April 27, 1992 Page 4 President £rickson asked Mr. Donahue to explain the actual cost to the City. Mr. Donahue stated the City would give up a certain tax flow that goes into the tax increment issue. He stated there is a $532,000 fund balance and anything in excess of the principal and interest goes into the reserve balance which is saved over time. In the year 2003, when the final interest and principal payments are made, the County divides the money by the taxing jurisdictions. He projected that the current assessment agreement would bear the City $250,000. He stated if the proposal is accepted and the value is set around $5 million, the City's share would be lowered to $100,000. President Erickson suggested tabling the item until the County could establish the market value and the City Attorney could prepare a draft agreement. Commissioner Williamson questioned whether the EDA could determine the market value rather than the County. Mr. Donahue stated if the value does not appear to be a safe enough amount, an escalator could be built into the contract in order to minimize the City's risk. Commissioner Otten stated he is pleased that LaNel has purchased the property but feels the EDA should not be making amendments to the assessment agreement at the taxpayers' expense. Commissioner Williamson reported on the difficulty she experienced reaching her decision on the matter. She commended LaNel for wanting to negotiate a possible solution to the housing problem. She encouraged them to solve the problem and maintain the 10-30 units on their own. She pointed out that as an elected official the situation has to be viewed as to how it impacts the city as a whole, and she does not feel she can support it. Commissioner Otten stated he wants to see the new owners make a success of the operation. He noted his concern with the compromise being based on the low to moderate income housing issue. He remarked that the current assessment agreement does not appear to jeopardize the financial standing of the new owners or prevent them from running a successful operation. MOTION Motion was made by Commissioner Enck, seconded by Item 6 Commissioner L'Herault, to make no amendments to the assessment agreement for New Hope Terrace Apartments. New Hope EDA April 27, 1992 Page 5  i REQUEST FOR ACTION Originating Department Approved for Agenda Agenda Section Manager 4-12-93 EDA /~ Item No. By: Dan Donahue By: 5 RESOLUTION AUTHORIZING COMMENCEMENT OF EMINENT DOMAIN PROCEEDINGS TO ACQUIRE PROPERTY AT 5009 WINNETKA AVENUE NORTH (PROJECT #505) On March 22, 1993, a motion was made directing staff to proceed with the purchase of this property. The enclosed resolution authorizes the direct purchase and commencement of eminent domain proceedings if a direct purchase is unsuccessful. One appraisal has already been completed; this resolution authorizes obtaining additional appraisals necessary to establish a fair market value and just compensation for said property in preparation for eminent domain proceedings. Staff recommends approval. MOTION BY ~/'/"~a4~L SECOND BY ~ To: ? /Y7 ¢ -loS Review: Administration: Finance: RFA-O01 ~ A P R -- ? -- 9 ~ 1-.I E :E~ 1 6 : .~ ~ O C~ R R I C K ~ $ 0 N B R A L L P . 0 2 EDA RESOLUTION 93- RESOLUTION AUTHORIZING COMMENCEMENT OF EMINENT DOMAIN PROCEEDINGS TO ACQUIRE PROPERTY AT 5009 WINNETKA AVENUE NORTH, NEW HOPE, MINNESOTA WHEBE~S, the City of New Hope Housing Policy includes goals and objectives of providing safe, healthy and attractive residential environments which offer a broad and full choice of housing types, and to maintain a high quality reetdentta] environments through the rehabiltation or where needed redevelopment of residential units, and WHEREAS, the following legally described real property (Property) is located tn the City of New Hope, Hennepin County, Minnesota, also known as 5009 Winnetka Avenue North: That pert of the Southeast Quarter of the Northeast Quarter, Section 7, Township 118, Range 21, described as beginning at a point on the East tine of said quarter - quarter distant 330 feet south along said East line from the Northeast corner thereof; thence North along said East line 150 feet; thence west parallel to the North line of said quarter - quarter 168 feet; thenoe South parallel to said East line 150 feet; thence East to the point of beginning, except the West 7 feet of the East dO feet thereof, according to the Government Survey thereof, and HER~, the Economic Development Authority in and for the City of New Hope (EDA) does hereby determine that the Property is blighted by reason of delaptdation, obsolescenoe, faulty arrangement or design and that in its judgment the acquisition of this property will be for the benefit of the public health, welfare and safety of the citizens of New Hope, and WHERE&S, Minn. Sta[. §489.101, Subd, 4, gives the Economic Development Authority in and for the City of New Hope the authority to acquire property by power of eminent domain under Min,~ st~t, Chapter 117, and WHEREAS, the Economic Development Authority in and for the City of New Hope has determined it is necessary to acquire this property by eminent domain proceedings, ~PR-- T--9~ WEB ~ 6 : ~4 CORR I CK ~ SOHDR~LL P . 0~ NOW, THEREFORE~ BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope as follows; 1. That the Executive Director and President are hereby authorized to acquire by direct purch&se or if direct purchase is unsuccessful to commence eminent dom&in proceedings under ~_nn..StaI~ Chapter 117 to acquire the property at 5009 Winnetka Avenue North in the City of New Hope, legallly described as follows: That part of the Southeast Quarter of the Northeast Quarter, Section 7, Township 118, Range 21, descriDed as beginning at ~ point on the East line of said quarter - quarter distant 330 feet south along said East line from the Northeast corner thereof; thence North along said East line 150 feet; thence West parallel to the North 3ina of said quarter - quarter 168 feet; thence South parallel to said East line 150 feet; thence East to the point of beginning, except the West 7 feet of the East 40 feet thereof, according to the Government Survey thereof, 2. That the Executive Director is hereby directed and authorized to obtain additional appraisals necessary to establish fair market value and just compensation for said property an preparation for said eminent domain proceedings. 3. That any actions authorized by this Resolution, which have a}ready taken place are hereby approved~ ratified and adopted, Adopted by the Economic Development Authority in &nd for the City of New Hope this day of , 1993. Edw. J. Erickson, President Attest: Dantel J. Donahue, Executive Director REQUEST FOR ACTION Originating Department Approved for Agenda Agenda Section City Manager EDA 1~-~4-12-93 Item No. Kirk McDonald By: Management Assistant By:~/ 6 RESOLUTION AUTHORIZING THE PRESIDENT AND EXECUTIVE DIRECTOR TO EXECUTE PURCHASE AGREEMENT AND LEASE FOR FOREMOST PROPERTY AT 7528 42ND AVENUE NORTH The enclosed resolution authorizes the EDA President and Executive Director to execute the purchase agreement and lease agreement in connection with the Foremost property at 7528 42nd Avenue North. The acquisition price is $450,000 and Foremost will be allowed to occupy the property for a 2-year period commencing on the date of the closing. Foremost is responsible for operating expenses and real estate taxes during the course of the rental period. They also will be allowed to remove all machinery and fixtures from the property when the lease expires. Foremost also is paying all past due real estate taxes and unpaid special assessments. Staff recommends approval of the resolution. MOTION BY ~//~_ .. SECOND BY /F~7~/7-] Review: Administration: Finance: RFA-O01 ~ APR-- ?--95 WEB 15 : 4T CORR I CK & $ONDRALL P . 04 EDA RESOLUTION NO, g3-. RESOLUTION AUTHORIZING THE PRES[DENT AND EXECUTIVE DIRECTOR TO EXECUTE PURCHASE AGREEMENT AND LEASE FOR FOREMOST PROPERTY AT 7528 42ND AVENUE NORTH WHEREA~, the property owners of 7528 42nd Avenue North, commonly known as the Foremost property, are desirous of selling said property to the Economic OeYelopment Authority tn and for the City of New Hope (hereinafter "EDA"), and WHEREAS~ the EDA is desirous of acquiring the &for&described property tn accordance with the Purchase Agreement and Lease Agreement attached to this Resolution. NOW, THEREFORE~ BE IT RESOLVED by the Econom~e Development Authority tn and for the City of New Hope as follows: 1. That tt ts in the best interests of the Economic Development Authority in and for the City of New Hope to ) acquire the Foremost property located at 7528 42nd Avenue North in accordance with the terms and provisions of the Purchase Agreement and Lease Agreement att&chad hereto, 2, That the Economic Development Authority in and for the City of New Hope hereby directs and authorizes the President and Executive Director to enter into the attached Purchase Agreement and Lees& Agreement with the Sellers of the Foremost property and to take whatever additional acts are necessary to complete the acquisition of this property. Adopted by the E~onomi= Development Authority in and for the C~ty of New Hope this . day of , 1993. Edw. J. Erickson, Chairman Attest: Dental J. Donehue, Executive Director ~PR-- 7--95 WED 1 ~ : 46 CORR I CK & SONBR~LL P . 02 April 7, 1993 Mr. Kirk McDonald Management Assistant City of New Hope 4401Xylon Avenue North New Hope, MN 55428 RE; Acquisition of Foremost Property Our File No. 99.11090 Dear Kirk: Please find enclosed a proposed Purchase Agreement and Lease in connection with the acquisition of the Foremost property. Also, ! have enclosed & Resolution for the EDA's adoption in the event they want to pursue the acquisition in accordance with the enclosed Purch&se Agreement and Lease. The acquisition price for the property is proposed at $450,000. Also, Foremost, [nc, will be allowed to occupy the property for a 24 month period commencing on the date of closing pursuant to the terms of the enclosed Lease. Essentially, Foremost will pay operating expenses and real estate taxes during the course of the 24 month rental period in lieu of a specific rental payment. We are also allowing Foremost to remove any personal property, machinery and equipment, trade fixtures or removable fixtures from the property at the termination of the lease. However, their ability to remove said items is conditioned upon payment of o~erating expenses and real estate taxes connected with the rental period, As part of the purchase acquisition, Foremost is also paying past due real estate taxes and unpaid special assessments. This amount equals $110,832,18. Therefore, this amount will be subtracted from the purchase price before the closing is finalized. APR-- 7--9S WE~ I 5 ~ 47 CORR I CK ~ SON~RALL P . 0~ Mr. Ktrk McDonald April 7, 1993 Page 2 ~n other words, the Sellers w~ll not be receiving $450,000 at the closing. $&~d amount will be adjusted based on unpaid taxes, special assessments and other clostng costs. Please contact me if you have any further questions regarding this matter. Very truly yours~ Steven A. Sondrall slt2 Enclosure ¢c: Dante1 J, Donahue (w/eric) Valerte Leone (w/eric) 612425586? APR-- 9--9~ FR I 1 4 = 25 CORR I CK ~ SONBRALL P . ~ 1 LEASE AGREEMENT THIS AGREEMENT made end entered ~nto this_____ day of , 1993, by and between The Economic Development Authority in and for the City of New Hope (hereinafter "Lessor") and Foremost, Inc., a Minnesota Corporation (hereinafter "Lessee"); W I T N E S S E T H: 1. .LEASED PREMISES.,. The Lessor ~n consideration of the rents and covenants herein contained, to be pa~d, kept and performed by the Lessee, does hereby demise, 3ease and let unto the Lessee, and the Lessee does hereby hire and take from the Lessor the following, to- wit: (the "Leased Premises"): 7526 42nd Avenue North, common3y known as the Foremost, Inc. property 2. TERM. The Lessee shall have and hold the Leased Premises herein demised, together with all rights, privi leges and appurtenances thereunto pertaining and belonging unto the said Lessee for a term of two (2) years, commencing on the day of , 19__ and ending the ___._ day of .......... , 19, The Lessee may terminate this lease at any time during the rental period by 9tying Lessor ninety (90) days written notice of their intention to terminate the lease, in the event of termination by the Lessee, the rent shall be adjusted on a pro-rata based to the date of termination, This lease shall automatically terminate at the end of the 24 month period without notice by either party. 3. _RENT~ The Lessee shall pay, during the term of this Lease, One Do31ar ($1.00) and other good and valuable consideration as set forth herein. On the date of execution of this Lease, the Lessee shall pay the rent and the real estate taxes payable in 1993 against the property, On May 15, 1994, Lessee shal3 pay the real estate taxes payable tn 1994 against the property. on February 1, 1995, Lessee shall pay its pro rata share of real estate taxes in 1995 against the property. The payment of real estate taxes shall be deemed as a prepayment of additional rent and not as a security deposit hereunder. 612425586? APR-- 9--95 ER I I 4 : ~8 CORR I OK ~ SONDRALL P . O l, ~UTHORZZEO USE. It is agreed that the Leased Premises shall be used by the Lessee for the Foremost, Inc. sheet metal business and for no other purpose, subject to all local and state regulations regarding the use of said premises. Lessee further acknowledges and agrees that it is accepting the property in an "as is" condition and agrees that the property is fit for Lessee's intended use. Lessee further acknowledges it has occupied this building prior to Lessor's ownership and will indemnify and hold harmless Lessor for any injury or damage caused by the condition of this property and improvements thereon or Lessor's use of the property notwithstanding any contrary language in other provisions of this lease. ADDIT~ONA~_REN~. Lessee shall pay as additional rent ali operating expense as defined herein. Any additional rent pay&bls hereunder which remains unpaid at the end of the term of this Lease shall be due and payable upon the termination date. "Operating Expenses" shall mean and include the following expenses with respect to the building in which the Leased Premises are situated, the parking 3ct serving said building, and the real estate on which said building and parking lot ere located= (a) Real estate taxes, including installments of special assessments payable in the year for which such expenses are being determined; (b) Insurance premiums and any license, permit or inspection fees; and (¢) Costs for all labor, material and services, including, but not limited to, security service, janitor service and utilities, for the operation, repair, maintenance, management and upkeep of the building, including common areas thereof, parking lot, and lands on which the same are situated to the extent that the Lessor is responsible for such expenses under this Le~se. HOL.O~!.~_OVER~ If the Lessee hO~ds over beyond the term of this Lease with the written consent of the Lessor, it is agreed that the LeaSe 2 APR-- 9--9~ FR I 14 : 09 CORR I CK ~ $ONDRALL P . 02 is automatically extended for a period of thirty (30) days under the same terms and conditions. 7. RENEWAL OPTION, Lessee shall have no option to renew this ]ease. 8. CARE AND MAINTENANCE. The Lessee shall be wholly responsible for the exterior and ~nterior maintenance of the Leased Premises and all costs assootated therewith, The Lessee shall further keep the Leased Premises in an orderly, olean and sanitary conditton~ as required by the laws and ordinances applicable thereto; shell neither do nor permit to be done on said premises anything in violation of laws or ordinances applicable thereto; shall neither omit nor suffer waste in said premises; and shall pay for a11 g]ass broken by its fault or negligence, or the fault or negligence of ~ts employees. It is agreed that the maintenance and repair obligations of the Lessee hereunder shall extend to alt parts or portions of the Leased Premises, including the 9rounds, parking areas, entrance and overhead garage doors, and including heating and plumbing, electrical and mechanical fixtures and equipment whether located on the interior or on the exterior of the Leased Premises, It is further understood and agreed by the parties hereto that upon termninat~on of this Lease the building may be demolished by the Lessor and, therefore, that fact will be taken into account regarding painting, upkeep and repair of the premises. 9. ~TILIT[.E.S. The Lessee shall pay for a11 utilities, including gas, electrictty~ c~ty water~ and any other service used by Lessee during the term of th~s Lease. IO. ~NSURANQE, The Lessee shall maintain in full force and effect during the term of its Lease a policy of public liability ~nsurance under which both Lessor and Lessee are named tnsureds. The minimum limits of ltabtllty of such ~nsur&nce shall be $500~O00 for injury or death to any one person~ $1,500,000 for injury or death to more than one person and $100~O00 fop property damage, The policy shall further contain a provision APR-- 9 -- 9 :~; F R I I 4 ' 0 9 C 0 R R I OK & S 0 N D R A L L P . 0--~ requiring ten (10) days written notice to be given to the Lessor before & cancellation of the policy can be effected. Lessee hereby agrees to deltver a duplicate copy of said policy to Lessor, Said coverage may be provided by a combination of primary and excess liability coverage. 11, DESTRUCTION OF LEASED PR..EM[SE~, Should the Leased Premises become untenantable or unfit for occupancy in whole or in part by the total or partial destruction of the building by fire or other casualty, this Lease shall be terminated and Lessee shall have no further r~ghts hereunder. The Lessor shall have no obligation to restore the premises and the rent to be paid hereunder shall be abated in proportion to the loss and impairment of the e~reement between the parttes hereto. t2. CLA.IMS FOR LOS~.~. The Lessee shall make no claim against the Lessor and shall hold the Lessor harmless for any loss of or damage to property of the Lessee caused by theft, burglary, fire, water, windstorm or other casualty or cause, unless said loss or damage was caused by Lessor. 13. ~.IGHT TO..INSPEC~ ..... The Lessor may at all reasonable times enter the Leased Premtses to inspect the same. 14. ALTERATIONS/REMOVA~.L.E FIXTURES~ The Lessee shall pay the cost of any alterations made to the Leased Premises and will not be compensated for any alterations at the termination of the Lease. Further, Lessor agrees Lessee may during the rental period remove al~ personal property, trade f~xtures, machinery and equipment and any other removable fixtures and to otherwise salvage all removable property form the real property. Lessee shall not be required to pay for ~ny salvaged item except all costs of removal and all costs to secure the building shall be paid by Lessee, However, Lessee agrees that nothing shal~ be removed from the property unless Lessee is current on al~ payments due hereunder to Lessor. Lessee further agrees that tt wtll give Lessor at least 24 hours notice before removing any salvagable property from the premises and a description of the property to be removed. R F' R -- 9 -- 9 ~ F R I I 4 : 1 0 C 0 R R I C K ~ $ 0 N I] R ¢~ L L P . 0 4 15. HAZARDOUS MATERIALS. Lessee agrees that tt w~ll not transport, store, use generate, treat and d{spose of any toxic or hazardous substances, and will use the Premises, all in compliance with any local, state or federal zoning, environmental or hazardous waste laws or other environmental laws or regulations from and after the Commencement Date. Lessee will comply with any disposal or tr~ns~)ortat~on of any toxic or hazardous substances ~ncluding, wtthout limitat~on, any reporting requirements relating to any storage tanks located ~n the Leased Premises. If requ~red~ Lessee shall file reports on any such activities w~th the appropriate authority. At the expiration or termination of this Lease, Lessse shall remove any tanks for storage of any toxic or hazardous substances instal led by Lessee ~n compliance with all applicable statues, rules and regulations. If, at any t~me during the Term of this Lease, any local, state or federal authority should request a report on any toxic or hazardous substances Lessee has stored, used or d~sposed of on or from the Leased Premises, Lessee will etther cause sa~d report to be made as soon as practicable at its own ~ost and expense, or {f not made within thirty (~0) days of Lessor's request for the same, w~l~ ~e~mburse Lessor, as Additional Rent, for Lessor's cost of obtaining said report. Lessee agrees to absolutely ~ndemnify, defend and hold Lessor harm]ess of and from any loss, damage, costs, expenses, including a~l attorneys fees~ ar~s~ng out of or in any manner related to the generation, transportation, treatment, storage, manufacture, emission, use or disposal of any toxic or hazardous substances {n, from, to or about the Leased Premises. This warranty shall survive the expiration or termination of this Lease. 16. ~IVER.AND INDEMNITY. Lessor shall not be liable to Lessee, or those claiming by, through or under Lessee, for any tnjury~ death or property damage occurring ~n, on or about the Premises unless caused by the fault of Lessor, Without limitation of the foregoing~ Lessor shall not be iiable to Lessee for any, and Lessee hereby releases Lessor from all damage, compensation or claims arising from: loss or damage to books, records, f~les, money, securtt~es~ negot{able instruments or othe~ papers ~n or about the Premises; the necessity of repairing any portion of the Premises or the amenities within or wtthout the Premises; the ~nterruption ~n the use of the Premises; accident or damage resulting from the use or operation of Lessor, Lessee, or any 5 612~255~67 APR-- 9 -- 9 5 ER I 1 4 other person or persons whatsoever of elevators~ or heating, cooling, electrical or plumbing equipment or apparatus; any fire, robbery, theft, or any other casualty; and leakage or bursting of pipes or water vessels or any roof or wall leakage~ in any part or portion of the Premise;; water, rain, snow or underground water that may leak into, flow on, or flow from, any part of the Premises. Lessee shall defend with counsel approved by Lessor (which approval will not be unreasonably withheld), indemnify and save Lessor harmless from and against all liabilities, obligations, damages, fines, penalties, claims, demands, costs, charges, judgment and expenses, including, but not limited to, reasonable architects' and attorneys' fees, which may be imposed upon or incurred or paid by or asserted against the Lessor, the Property or any interest therein by reason of or in connection with any of the following occurring during the term of this Lease: (t) Any alterations and anything done in, on or about the Premises or any part thereof in connection therewith; (ii) The use, non-use, possession, occupation, condition, operation, maintenance or management part of Lessee or any of its agents, contractors, servants, employees, licensees or invitees; (iv) Any accident, injury, death or damage to any person or property occurring in or on the Premises; and (v) Any f~tlure on the part of Lessee to perform or comply with any of the covenants, agreements, terms, provisions, conditions or limitations conta~ned in this Lease or its part to be performed or complied with. Nothing contained in this Section shall be deemed to require Lessee to indemnify Lessor to any extent prohibited by After termination of this 3ease, it is agreed that Lessee shall not be responsible for any care, upkeep or removal of the four (4) test wells on the Premises. 17. pEFAUL~... Should the Lessee (a) fall to pay rent in accordance with the terms of this Lease, or (b) default in any of the covenants contained herein and said default remains uncured after ten (10) days written notice thereof is given by the Lessor, the Lessor, in either such event, shall hereby be authorized to re-enter the Leased Premises, eject the Lessee and take full possession of the premises, terminate this Lease at its option, and relet the premises should it deem such a reletttng to be in its best interest. The Lessee shall further, in the event of either nonpayment of rent or default, have the right to remove from the Leased Premises all personal property of the Lessee and store the same at the risk and expenses of the 6 ~PR-- 9--95 FR I 14 : i 5 CORR I CK ~ SONBRALL P . 02 Lessee. Should the Lessor determine that any action or proceeding at law or otherwise is necessary to enforce the terms and conditions hereof, the Lessee agrees that reasonable attorney's fees and all other necessary costs and disbursements may be charged against the Lessee as additional rent, which additional rent shall be due and payable upon receipt of an invoice therefor from the Lessor. The Lessee also agrees that tf it, or any permitted sublessee or assignees, if such be the case, be the subject to any voluntary or involuntary proceedings under the Bankruptcy Act of the United States, as amended, or any other insolvency proceeding, or should any proceeding for the appointment of a receiver or trustee be commenced against the Lessee, or any permitted sublessee or assignee, then, and in any such events, the Lessor may in addition to its other remedies at law, and at its option, terminate this Lease and pursue one or more of the remedies set forth in the first paragraph of this Section in the same manner as if the Lessee had defaulted in any covenant contained herein. 18. .ASSIGNMENT. The Lessee shall not assign this Lease or any interest herein, or sublet any part of the Leased Premises, or permit any other person or entity, whether jointly with the Lessee or otherwise, to occupy any part thereof with the exception of Foremost, InCo Should the Lessee make any such assignment or subletting or permit any such occupancy, neither the acceptance of rent by the Lessor thereafter from Lessee or any other person or entity, nor any failure on the part of the Lessor for any particular period of time to take action on account of such breach or to enforce its rights with respect thereof, shall be deemed a waiver of the breach, and such breach shall be a continuing breach ~for so long as may such sub-tenancy or occupancy continue. It is understood and agreed that any assignment of this Lease made with the consent of the Lessor sh&]l not release or discharge the obligations of the Lessee hereunder; further, the Lessee shall remain secondarily 3table for any rent or other obligation to the extent that the same is not satisfied in full by any sub- lessee or assignee. IN WITNESS WHEREOF, the Lessor and Lessee have caused this ]ease to be executed in duplicate as of the day and year first above written. APR-- 9 -- 9 ~ F R I 1 4 -' i -~ C 0 R R I C K ~ S 0 N B R A L i P . 0 1 ~ In the presence of: THE ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE (Lessor) By Its By Its _.. In the presence of: FOREMOST, INC, (Lessee) By Its By Its The undersigned, for and in consideration of the Lessor's execution of thts le&se, do hereby unconditionally guarantee the performance of al1 obligations of the Lessee herein, tnc]uding spec~flcally the obligation to pay rent as set forth ~n the agreement. Allen V. Fredenda11 Kathleen M. Fredenda11 8 fi'~ P R -- '~ -- 9 $ F R I i 4 : 1 8 C 0 R R I C K & $ 0 N D R A I_ L P . 0 2 STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The forego!ng was acknowledged before me this day of j 199__, by Edw. J. Erickson end Daniel J. Oonahue, the and ...................... , respectively, of the Economic Development Authority in and for the City of New Hope. Notary Public STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) The foregoing was &cknowledged before me thts day of ., 199__, by and , 'the and respecttve3y~ of Foremost, Inc., a Minnesota corporation, on behalf of said corporation. Notary Public STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) The foregoing was acknowledged before me th~s _. day of ~ 199__, by Alien V. Fredenda]l and Kathleen M. Fredenda13. Notary Public c:\wp51\cnh\fredenda11.3ea APR-- 9--9~ FR I 1 4 = I 8 CORR I CK & SONI) RALL P . 0~ PURCHASE AGREEMENT THIS AGREEMENT, entered into this day of 1993, by and between the Economic Development Authority in and for the City of New Hope, Minnesota ("EDA") and Alien V. Fredenda11 and Kathleen M. Fredenda11, joint tenants ("Sellers"). W I T N E S S E T H; WHEREAS, Sellers are the owners of certain real property located at 7526 42nd Avenue North~ City of New Hope, Minnesota having a legal description as follows: ("Real Property"); WHEREAS, Sellers desire to sell the Real Property to the EDA and the EDA desires to purchase the Real Property upon the terms and conditions set forth in this Agreement· NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions contained herein, tt ts hereby agreed by and between the parties as follows: 1. PurGhase and Sale_Q~ t. he Real Property. On the Closing Date, Sellers shall sell and EDA shall purchase all right, title and interest in and to the Real Property. The purchase price shall equal Four Hundred and Fifty Thousand Dollars ($450~000.00), which amount shall be pa~d by the EDA to Sellers on the Clostn9 Date, 2. Closin~ Bate. The Closing Date shall be on , I993, at 10:00 a,m. at the offices of 3. Warranty. Deed. Sellers shall convey title to the Real Property to EDA by a general warranty deed subject to the following conditions or exceptions, if any, on the Closing Bate and, effective on the Closing Date, beneficial ownership and the risk of loss to the Real Property shall pass from Sellers to EDA. 4, Baal Estate Taxes ap.d_.Special Assessments, All real estate taxes payable in 1992 and prior years shall be paid by Sellers on the Closing Date· In addition, for 1993 through the Closing Date~ all real property taxes shall be pro-rated to the Closing Date and paid by Sellers. Sellers shall pay all unpaid special assessments, if any, on the Closing Date including all special assessments certified to the taxes payable in 1993. APR-- 9 -- 9 ~ F R I i 4 -" 26 C 0 R R I ~3 K & $ 0 N ]~ R A L L P . 82 5. Damage to Real Prolle.~t.y, If, prior to the Closing Date, the Real Property is damaged, in whole or in part, this Agreement shall nevertheless be enforceable, it being the intention of the parties that the risk of loss shall be with the EDA. However, the purchase price shall be adjusted downward based on the amount of available insurance coverage Sellers ere entitled to on any and all policies in force and effect through the Closing Date. Sellers further agree to include the EPA as a named insured on said policies covering the Real Property. This agreement shall be voidable at Buyer's option if Seller cannot deliver marketable title to the property within a reasonable time notwithstanding the language contained in this paragraph. 6. Rent_al o.f.Real Promer~t.y. Subsequent to the Closing Date, Foremost, Inc. shall retain possession of the Real Property and shall enter into the attached rental agreement with the EPA to rent the same from the EPA for a payment of $1,00 and other good and valuable consideration, and upon the other terms and conditions contained in the attached agreement. 7. Sellers' D..o.cuments, On the Closing Date, Sellers shall deliver to the EPA, the followtn~ documents: (a) Warranty Deed to the Real Property; (b) Mortgage satisfaction from Norwest Bank; (c) Sellers' Affidavit, (d) Any other documents required to provide marketable title to the property as determined by Buyer or its attorneys. 8. EDA's .Documer)ts. On the Closing Bate, the EPA shall deliver to Sellers the check described in Paragraph 1 hereof, 9, Payments_ of Fee~. The payment of fees and expenses in connection with these transactions shall be allocated as follows: (a) Each party will pay their own attorney's fees; (b) The Sellers shall pay the recording fees for all documents necessary to provide marketable title to the EDA including the State Deed Tax. (c) The EPA will pay all other fees and expenses incurred in connection with closing these transactions, 10. M_i_sce 11 aneou_s, The fbi low1 ng provisions shal 1 be applicable to this Agreement, APR-- 9--95 FR I 14 ~ 26 CORR I CK ~ SONBRALL P . 0~ (a) This Agreement shall not be assignable or transferable by e~ther party. (b) This Agreement sets forth the entire agreement and understanding between the parties re3ating to the subject matter contained herein and merges all prior discussions between them. (c) Any notice or request given under this Agreement shall be in writing and shall be sufficiently addressed if sent by postage prepaid, first class mail as follows; If to the EDA to: The Economic Development Authority in and for the City of New Hope 4401Xy]on Avenue North New Hope, MN 55428 If to Sellers to: Allen V. Fredendall and Kathleen M. Fredendall 7526 42nd Avenue North New Hope, MN 55427 With a copy to: Merritt~ Furber & Timmer 2100 Lincoln Centre M~nneapolis~ MN 55402 [N WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date ftrst above written. CITY OF NEW HOPE By Edw. J. Erickson, Mayor By Daniel J. Donehue, City Manager ~PR-- 9--9~ FR I 14 : 27 CORR I CK ~ SON~R~ P . 04 Allen V. Fredenda11 Kathleen M. F~edendall c:\wp51\cnh\Fredendall .eg~ EDA REQUEST FOR ACTION Originating Department Approved for Agenda Agenda Section City Manager 4-12-93  Item No. By:Dan Donahue By: 7 RESOLUTION AUTHORIZING THE PRESIDENT AND EXECUTIVE DIRECTOR TO SIGN CONTAMINATION REMEDIATION AND RIGHT OF ENTRY AGREEMENT (#474) The Agreement requires Electronic Industries to continue the ground water contamination remediation efforts at their property (7516 42nd Avenue North) after demolition of the building despite eminent domain proceedings by the City. Our City Attorney has prepared the enclosed resolution. Staff recommends approval. / Review: Administration: Finance: RFA-O01 ~ EDA RESOLUTION NO. 93-_ RESOLUTION AUTHORIZING THE PRESIDENT AND EXECUTIVE DIRECTOR TO SIGN CONTAMINATION REMEDZATION AND RIGHT OF ENTRY AGREEMENT WHEREA~, the Economic Development Authority in and for the City of New Hope (hereinafter "EDA") has acquired fee title to property previously occupied by Electronic Industries, inc. (hereinafter "EI") located at 7516 42nd Avenue North, and WHEREAS, EI has entered into a January 24th, 1985 Stipulation Agreement with the Minnesota Pollution Control Agency to remediate ground water and soil contamination located at the site, and WH__H~, the EDA has acquired fee title to the property by eminent domain proceedings under the condition that EZ continuea to comply with the January 24th, 1985 Stipul&tion Agreement referenced above. NOW, THEREFORE, BE IT RESOLVED by the Economtc Development Authority in and for the City of New Hope ss follows: 1. That the President and Executive Director of the Economtc Development Authority in and for the City of New Hope are hereby directed and. authorized to enter into a Contamination Remediatton ~nd Right of Entry Agreement with Electronic Industries Holding, Inc. for the purpose of facilit&ting the letter's compliance with the January 24th, 1985 Stipulation Agreement for contamination cleanup of the site required by the Minnesota Pollution Control Agency. Adopted by the Economic Development Authority tn and for the City of New Hope this day of , 1993. Edw. J. Erickson, Chairman Attest: Daniel J. Don&hue, Executive Director ~PR-- 7--9~ WED 15 : 5~ CORR I CK & SONDR~ P . 02 CORRICK & ~)NDRALL 8525 ~b~k FAX (6tm April 7, 1993 Kirk McDonald Management Asst. City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 RE: Electronic Industries Condemnation Matter Our File No: 99.53004 Dear Kirk: Please find enclosed a proposed Contamination Remediation and Right of Entry Agreement executed by Electronic Industries. Said agreement requires Electronic [ndustries to continue the ground water contamination remediation efforts at their property despite the City's acquisition of same by right of eminent domain. ! would like this agreement on the EDA agenda for April 12th for consideration. I am requesting that a resolution be passed authorizing the President and Executive Director of the EDA to sign this agreement so that contamination remediation efforts can continue at the Electronic Industries site after demo3ttion of the buildtng. Contact me if you have any questions. Very truly yours, St even A. $ondral 1 Enclosures cc= Daniel J. Donahue (w/eno) Valerie Leone (w/enc) ~PR-- 7--9~ WEB 1 6 ~ 0 1 CORR I CK CONTAMINATION REMEDIATION AND RIGHT OF ENTRY AGREEMENT WHEREAS, certain'ground water and soil contamination have been found on property described on Exhibit A attached and previously occupied by Electronic Industries Holding, [nc, (hereinafter "EI"), and WHEREAS, E! has entered into a Stipulation Agreement effective January 24, 1985 with the Minnesota Pollution Control Agency (hereafter "MPCA") for the stated purpose to remediate said ground water and soil contamination, and WHEREAS, the Economic Development Authority in and for the City of New Hope (hereafter "EOA") has acquired fee title to the property through eminent domain proceedings in accordance with ~jnn. Stat. Chap. 117, and WHEREAS, notwithstanding the EDA~s acquisition of the property through eminent domain proceedings E! has agreed to complete ground water and soil contamination remediation efforts in accordance with the terms of the Stipulation Agreement and all subsequent amendments thereto between E! and the MPCA, and WHEREAS, to facilitate E['s compliance with its Stipulation Agreement with the MPCA the EDA has agreed to execute the herein Agreement with EI, and WHEREAS~ the part,es wish to reach an agreement regarding the continued remediatton of the contamination on the EDA's property. NOW~ THEREFORE, IT IS HEREBY AGREED AS FOLLOWS= I, Permission. The EDA grants permission to E! to enter upon the Property to operate and maintain the existing ground water and soil contamination remediation program in accordance with the January 24, 1984 MPCA Stipulation Agreement and al3 amendments thereto and in accordance with the terms set forth below. This permission shall require E! to make necessary electrical and sewer connections to any existing Remedial Withdrawal Wells so that all water discharged into the City's sanitary sewer system can be monitored for billing purposes. 2. Remedial W~lls. The Remedial Withdrawal Wells shall be for the purpose of pumping contaminated ground water out of the ground, treating it, and then discharging the treated ground water into the City's sanitary sewer system. All Remedial Withdrawal Wells shall be approved by the MPCA, shall have a direot sewer hookup for the treated output water, shall have s locking cap to prevent tampering, and protective posts to prevent well damage. All remedial monitoring wells shall also conform with MPCA regulations to prevent tampering and damage. 3. pet.mi..ts and___~pDrovsls. A direct sewer connection to the Remedial Withdrawal Wells shall be discussed with and approved by the Director of New Hope Public Works before any construction on the Remedia3 Withdrawal Wells or the sewer connection is started, All necessary permits for all work contemplated by this Agreement, including electrical permits and sewer connection permits, must be obtained by Et prior to any work being commenced at the Property. All necessary approvals for the sewer connection and the well installation must be obtained by E! from the Metropolitan Waste Control Commission and the Minnesota Department of Health prior to beginning of the work for which these approvals are necessary. 4, Abandonment or Other Relocation. When the need for any Well has ended, the We3ls shall be abandoned in accordance with Federal, State and City statutes and regulations, all at EZ's sole expense. At the EDA's written request, E! shall immediately relocate any well, however the EPA she13 pay the relocation costs unless relocation ts required by the MPCA. Zn the latter event, E! shall be responsible for said relocation costs. 5. ~sts and Expenses. All costs associated w~th the installation and operation of the remed~ation system and the necessary sewer and electrical connections shall be borne by Any hookup to a City sewer system shall include a meter to measure the amount of water entering the s~nitary sewer. E! shall pay the appropriate sewer charges based upon the flow of water as shown by the meter~ as we33 as the cost of the meter and its installation. 6. Re__.~. EI shall keep the EDA updated and informed as to the installation and use of the Remedial Wells, and shall provide the EDA with a31 reports that E! makes to the Minnesota Pollution Contro~ Agency regarding the Remedia~ We~l in particular and the contamination origtnattn~ from the site in generalo 7. Indemnification. E! agrees to defend, save and keep the EPA and City, its officers, agents and employees harmless from claims, demands, actions or causes of actions and expenses (including, without limitation, reasonable attorney's fees, witness fees and disbursements incurred in the defense thereof) arising out of or in connection with any activity performed by E[, its officers, a~ents or employees in conjunction with the installation and operation of the remediation system~ and any re3sted activities contemplated by this Agreement. 8. Bestoration of .U. ti3ity Servi.~e, Zndemnification. EPA a~rees that if~ by reason of ~ts activities, or the activities of APR-- ?--95 WED 16 : 02 CORR I CK & SONDRALL P . 04 any of its contractors, agents, successors or ass~gns~ utility service to the property is disrupted the EDA shall use its best efforts to restorer such servtce at the earliest practicable time. [f as a result of such d~sruption EZ's equipment must be reconnected following any such d~sruption, the reconnect~on shall be made under the supervls~on of EI (and the MPCA if they so require) ~t EDA expense, ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE, A MINNESOTA MUNICIPAL CORPORATION Dated: By Its President By Its Executive Director Dated: ~..2.-~ ELECTRONIC. IblDUSTRIE$ HOLDING INC, As ~n Officer of the C~rpor~tton c:\wp51\cnh\EI .agr ~ EDA '.,~~~)b.] REQUF~T FOR ACTION originating Department Approved for Agenda Agenda Section City Manager EDA /~ 4-12-93 Kirk McDonald p / Item No. By: Management Assistant By:fi/ . 8 / CONSIDERATION OF REQUEST F~R EXTENSION ON DEVELOPMENT CONTRACT IMPROVEMENTS, AUTOHAUS, INC., 7709 42ND AVENUE NORTH (IMPROVEMENT PROJECT 467) On April 4, 1991, Autohaus, Inc. and the City of New Hope executed a Development Contract regarding specific improvements to be made to the Autohaus property, such as the installation of concrete curb, landscaping improvements, storm drainage improvements, paving and lighting improvements and the demolition of the Animal Hospital building. The contract called for the improvements to be made to the property by April 14, 1992. Autohaus subsequently requested an extension of time in which to complete the improvements which the Council approved on June 8, 1992. The new extension required all site/building improvements north of the south line of the building to be completed by October 31, 1992, and improvements on the rear portion of the property to be completed by October 31, 1993. An Addendum setting forth this extension was mailed to Autohaus on June 12th for signatures and when it was not returned a second follow-up letter was sent in November. The improvements agreed to were not completed last fall and in February, 1993, the City sent correspondence indicating that Autohaus was in default of the agreement. Autohaus has met with staff and sent the attached March 18th letter requesting a further extension to complete the improvements. Staff requests to discuss said extension with the EDA. LEASING & SALES / FOREIGN AND DOMESTIC AUTOMOBILES Audi March 18, 1993 GM FORD Mr. Dan Donahue, City Manager Mr. Kirk. McDonald Management Assistant/Community Development Coordinator NISSAN City of New Hope 4401 Xylon Avenue North HONDA New Hope, Minnesota 55428 RE: Addendum to City of New Hope Development Contract CilRYSI,ER 'with Autohaus of Minneapolis, Inc. ~ Dear Mr. Donahue and Mr. McDonald, Thank you for your letter of February 19, 1993. As you know, we wo(dd like to BMW Complete the proposed work as soon as practical, but would reiterate some of the things that I told you of. MERCEDE$ First of all, we were planning on doing the work north of the south line of the , building last fall. Because of the weather and scheduling conflicts, that could VOLVO not be accomplished. We are planning on having that work completed as soon as the spring weather and road conditions would allow. ACUI~A We would request the City, though, to help this project, release the certificate of deposit in the amount of $26,~.00 to fund a portion of this work. As you know, T O Y O T A the car sale business has been slow and I have had some internal accounting problems here that have delayed and affected our ability to complete the work initially contemplated in a timely fashion. PORSCHE I would also like to remind you of the $187,000 initially borrowed. That balance JAGUAR is now down to approximately $118,000. We have been trying to pay that in advance as cash flow would allow, and our ~cords reflect that we have paid approximately $23,000 ahead of schedule. I would request that you take Iltat into consideration in re,easing the certificate of deposit. .... . _ 7709 4lind Avenue North ~ ltlitsncepolis, MIV 55~7 · (6llt) 535.5707 Page 2 , City of New Hope, March 18, 1993 I would also like to note that we have done a substantial amount of improvements and betterment to the property. We have painted the building, installed new awnings and ha.ye a new sign ordered to be installed this spring. The building's appearance has been dramatically improved by these efforts. In regard to the back portion of the lot, we would request that you allow a delay of between three and four years to complete that part of the work. You know that we have done a lot of work back on that property, too, and have done grading after removing bad material and products that have been dumped there. We have also grassed in the area, so it will be neat in appearance. The automobile industry has been severely hampered by the economic recession that we have had. In the history of the United States, automobile companies themselves have suffered some of the largest losses in history. Our business is progressing, but we have not made the s(rides, nor had the sales that we had hoped for, and that is another reason for the request for delaying some of this additional work. We have removed the building in the front part, which was an eyesore, and are doing everything within our power to meet these development goals and deadlines. We would appreciate your consideration for this last request. I will be waiting to hear from you in the hopes that we can resolve these matters on an amicable basis. Thank you for your consideration. Sincerely// / , Thorrffis I~ul Oestrelch, Vice President Th&lrth ,~'I~E~. B o & ~cher, president "/~d~~ 4401 Xylon Avenue North New Hope, Minnesota 55428 Phone: 531-5100 FAX (612) 531-5' February 19, 1993 Mr. Thomas Boettcher, President Autohaus of Minneapolis, Inc. 7709 42nd Avenue North New Hope, MN 55427 Subject: ADDENDUM TO CITY OF NEW HOPE DEVELOPMENT CONTRACT WITH AUTOHAUS OF MINNEAPOLIS, INC. Dear Mr. Boettcber: I am writing to inform you that the City has some serious concerns about your ability or willingness to satisfy your obligations under the Development Contract and Mortgage involving the Autohaus property. As you are well aware, the original Development Contract called for improvements to be made to the property by April 14th, 1992. You subsequently requested an extension, which the City Council granted at the June 8th Council meeting. That new extension required all site/building improvements north of the south line of the building to be completed October 31st, 1992, and improvements on the rear portion of the property to be completed by October 31st, 1993. An Addendum setting forth this extension was mailed to you on June 12th for your signature and has not been returned. A second follow-up letter requesting your signature was sent to you on November 13th, with copies of the Addendum, and has not been returned. Without the signed Addendum, you are in default under the Development Contract and the Mortgage. Even if the Addendum is signed, you are still in default under the extended deadlines because all of the improvements north of the south building line were not completed by October 31, 1992, as outlined in the Addendum. As you are aware, the City holds a Certificate of Deposit in the amount of $26,300.00 which was irrevocably assigned to the City by Autohaus to secure performance under the Development Contract. The City is currently reviewing its options, which include drawing on the Certificate of Deposit. The assignment contains an authorization for the City to redeem the Certificate by presenting the Certificate of Deposit and a written notification by the City Manager or Mayor that Autohaus is in default on the Development Contract. In addition, you are in default under your mortgage, which the City may foreclose upon. In order to get this development back on track, the City requests that you take the following action by March 15th: 1. Execute both copies of the Addendum and return the same to the City. 2. Provide the City with an acceptable schedule for completing ~e various improvements required under the Development Contract and other agreements you signed with ~e City. 3. Apply to the City Council for a further extension so as to allow you to complete the improvements per the revised schedule~ Family Styled City'l,,JC]~-/~ ICTI~ For Family Living Thank you for your attention to this matter and please contact me if you have any questions. Sincerely, Kirk McDonald Management Assistant/Community Development Coordinator Enclosures: Addendum to Development Contract cc: Dan Donahue, City Manager Steve Sondrall, City Attorney Mark Hanson, City Engineer Doug Sandstad, Building Official Valerie Leone, City Clerk Thomas Oestreich, Autohaus Project File/Planning Case File February 3, 1993 Mr. Kirk McDonald Management Asst. City of New Hope 4401Xylon Avenue North New Hope, MN 55428 RE: Autohaus Addition Our File No: 99.15025 Dear Kirk: A review of our file indicates that the City holds a Certificate of Deposit in the amount of $26,300.00 which was irrevocably assigned to the City by Autohaus to secure performance under the Development Contract. The assignment contains an authorization for the City to redeem the Certificate by presenting the Certificate of Deposit and a written notification by the City Manager or Mayor that Autohaus is in default on the Development Contract. Additional options available to the City include foreclosure on Autohaus's mortgage due to the failure of Autohaus to sign the extension, as well as failure to meet the deadline set forth in that extension. You may wish to include the following in your next correspondence to Autohaus: The City has some serious concerns about your ability or willingness to satisfy your obligations under the Development Contract and mortgage involving the Autohaus property. As you are well aware, the original Development Contract called for improvements to be made to the property by April 4th, 1992. You subsequently .requested an extension, which the Council granted. That new extension required all site/building improvements north of the south line of the building to be completed October 31st, 1992, and improvements on the rear portion of the property to be completed by October 31st, 1993. An Addendum setting forth this extension was mailed to you for your signature, and has not been returned. Without the signed Addendum, you are in default under the Development Contract and the Mortgage. Even if the Addendum is signed, you are still in default under the extended deadlines. Mr, Kirk McDonald February 3, 1993 Page 3 The City is currently reviewing its options, which include drawing on the Certificate of Deposit in the amount of $25,300.00 plus accrued interest, which Certificate the City currently holds under an assignment from Autohaus. In addition, you are in default under your mortgage, which the City may foreclose upon. In order to get this development back on track, you wilt have to do the following within the next (four weeks) (or whatever number of weeks you think is appropriate, Kirk): 1. Execute the Addendum and return the same to the City. 2. Provide the City with an acceptable schedule for completing the various improvements required under the Development Contract and other agreements you signed with the City. 3. Apply to the City Council for a further extension so as to allow you to complete the improvements per the revised schedule. If you want some additional or stronger language, be sure and let me know. Sincerely, Martin P. Malecha s3w2 cc: Daniel J. Donahue Steven A. Sondral-1, Esq. 4401 Xyton Avenue North New Hope, Minnesota 55428 Phone: 531-5100 FAX (612) 531-517.: 13, 1992 Mr. Thomas Boettcher, President Autohaus of Minneapolis, Inc. 7709 42nd Avenue North New Hope, MN 55427 Subject: ADDENDUM TO CITY OF NEW HOPE DEVELOPMENT CONTRACT WITH AUTOHAUS OF MINNEAPOLIS, INC. Dear Tom: As you are aware, earlier this year Autohaus requested an extension of time on the Development Contract with the City which required that specific improvements be made to the property by April 4, 1992. At the Sune 8th meeting, the New Hope City Council approved an addendum to the Development Contract which approved an extension of time on the improvements. The Addendum basically required that all site/building improvements north of the south line of the building be completed by October 31, 1992, and that the improvements on the rear portion of the property be completed by October 31, 1993. The Addendum was sent to you on June 12th for signature. The City is contacting you for two reasons: 1. In review of our records, the City Clerk has informed me that the City has not yet received an executed copy of the Addendum from Autohaus. Please execute the Addendum and return it to the City Hall as soon as possible. If you have misplaced your copies, please give me a call and I will forward you additional copies for your signature. 2. City Manager Dan Donahue has informed me that you stopped at the City Hall several weeks ago and indicated that you would not be able to complete all the improvements, as outlined in the Addendum, by October 31st. This will probably necessitate that the Council approve another extension or Addendum to the Development Contract. Please review the enclosed copy of the Addendum, outline the improvements that you were not able to complete, and submit a letter to the City outlining your intentions to complete the improvements and/or requesting an extension on the improvements. Thank you for your attention to this matter and please contact me if you have any questions. Sincerely~ ,-,, Kirk McDonald Management Assistant/Community Development Coordinator Enclosures: Addendum to Development Contract cc: Dan Donahue, City Manager Steve Sondrall, City Attorney Mark Hanson, City Engineer Doug Sandstad, Building Official Valerie Leone, City Clerk Thomas Oestreich, Autoha~amily Styled City~ For Family Livinl P~o~ect/Planning Case Files 4401Xylon Avenue North New Hope, Minnesota 55428 Phone: 531-5100 FAX ~612) 53!-57 June 12, 1992 Mr. Thomas Boettcher, President Autohaus of Minneapolis, Inc. 7709 42nd Avenue North New Hope, MN 55427 Subject: ADDENDUM TO CITY OF NEW HOPE DEVELOPMENT CONTRACT WITH AUTOHAUS OF MINNEAPOLIS, INC. Dear Tom: Enclosed please find two copies of the addendum to City of New Hope Development Contract with Autohaus of Minneapolis, Inc. which was approved by the New Hope Economic Development Authority at their June 8th meeting. The Addendums have been executed by the Mayor and City Manager with signatures notarized. Please execute both copies and have the signature notarized, retain one copy for your files, and return one copy to the City. Sincerely, Kirk McDonald Management Assistant/Community Development Coordinator KM/lb Enclosures: Two (2) Addendums to Development Contract cc: Dan Donahue, City Manager Steve Sondrall, City Attorney Mark Hanson, City Engineer Doug Sandstad, Building Official Valerie Leone, City Clerk Thomas Oestreich, Autohaus Project File $467 Family Styled City'~~ For Family Living ADDENDUM TO CITY OF NEW HOPE DEVELOPMENT CONTRACT 1. Parties. The part'les to this Addendum are the City of New Hope (hereafter City), Autohaus of Minneapolis, [nc. (hereafter Autohaus) and Thomas W. Boettcher, individually (hereafter Boettcher). 2. Purpose. This Addendum shall modify the April 4, 1991 Development Contract entered into by the parties. Autohaus and Boettcher acknowledge and agree that they are in breach of the performance conditions of said contract and ~n consideration for the City's agreement not to immediately pursue its remedies under the terms of the April 4, 1991 contract Boettcher and Autohaus have agreed to enter into this Addendum. 3. Unperformed Conditions. Specifically, Autohaus and Boettcher acknowledge and agree that they have failed to perform all the requirements of paragraphs 2.A) through I) and 3 of the Development Contract. With respect to ~he work required by these provisions the parties hereto agre~ as follows: a.) The installation of concrete curb from the most southerly wall of the building northward to the property line shall be completed by October 31, 1992. The remainder of the curbing as shown on the site plan shall be installed by October 31, 1993. All curbing shall be of a surmountable type as approved by the City. Autohaus and Boettcher shall submit a diagram of said curbing for approval to the City prior to installation. b.) Installation of bituminous paving in' the body shop and repair storage area shall be completed by October 31, 1993. c.) All plantings shown on the site plan north of the buildings most southerly wall shall be installed by October 31, 1992. All other plantings shown on the site plan shall be installed by October 31, 1993. d.) The six-foot opaque security fence around the perimeter of the body shod and collision repair storage area shall be installed by October 31, 1993. The existing fencing shall remain in place until the new security fence is installed. e.) The installation o{ lighting shown on the site plan shall be completed by October 31, 1992. However, the parties agree that the existing lighting for the collision repair area as of the date of this Addendum is adequate and no further lighting is required notwithstanding the lighting required by the site plan. f.) All planted areas completed in 1992 will be sprinkled by October 31, 1992. All planted areas completed ~n 1993 will be sprinkled by October 31, 1993. 9.) The installation of the outdoor trash enclosures will be completed by October 31, 1993. h.) The front display area will be completed by October 31, 1993. However, the parties agree that the installation of bomanite paving will occur not later than six months after termination of Universal Color Lab's existing lease or vacation of the property by Universal Color Lab, whichever occurs earlier. The parties further agree that during the interim period the front display area can be paved with concrete and bituminous. i.) The islands in the transport lane aCea will be installed by October 31, 1993. j.) The public improvements for storm water drainage and erosion control required by paragraph 3 of the Development Contract must be completed in conjunction with the construction of the bituminous paving in the body shop and repair storage area. Autohaus and Boettcher acknowledge and agree said bituminous paving will not be allowed unless the drainage and erosion cont,'ol work'is completed simultaneously with the paving work all to be completed no later than October 31, 1993. However, Autohaus and Boettcher will complete seeding of this area by June 15, 1992 to minimize the erosion until the drainage improvements are constructed. Effect of Addendum. The parties agree that this Addendum shall not change the other provisions of the April 4, 1991 Development Contract which shall remain in full force and effect. This Addendum shall be construed as supplemental to and not inconsistent with the Development Contract. The parties further agree that a breach of this Addendum shall also constitute a breach of the April 4, 1991 Mortgage, Security Agreement and Fixture Financing Statement given by Boettcher to secure the April 4, 1991 Mortgage Note executed 2 by Boettcher, Au~ohaus'further agrees that assignment of the Certificate of Deposit given as financial security to insure performance of the Development Contract shall also extena to the herein Addendum, AUTOHAUS OF MINNEAPOLIS, ~NC. Dated: By Its President Dated: Thomas W. Boettcher, individually STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) egoing was acknow]edged before me this //,//L~ day of .~'~/ , 1992, by Edw. J. Erickson and Daniel J. Donah~e, the Mayor and City Manager, respectively, of the City of New Hope, a Minnesota municipal corporation, on behalf of said municipal corporation.  No{ a~--~ub ~ c~ ' 1~ HENNEPI~ COUN~ ~ %.~ )~C0mm. ExP. Ju~ 12, 1~ .~ STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing was acknowledged before me this day of 1992, by , the President of Autohaus of Minneapolis, Inc., a Minnesota corporation, on behalf of said corporation. Notary Public STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEP[N ) The foregoing was acknowledged before me this day of , 1992, by Thomas W. Boettcher, individually. Notary Public