HomeMy WebLinkAbout[02] Public Hearing - TIF, Bayou Blues •
CITY OF ST. JOSEPH
www.cityolstjoseph.com
DATE: November 5, 2014
Administrator MEMO TO: Honorable Mayor Schultz; EDA Chairperson Wick
Judy Weyrens Members of the City Council; Economic Development Authority
Administrator Weyrens
Mayor
Richard Schultz FROM: Cynthia Smith-Strack, Municipal Development Group
Councilors RE: Consideration of TIF Assistance: Bayou Blues/Alley Flats
Steve Frank
Bob Loso
Renee Symanietz MEETING PURPOSE
Dale Wick The purpose of this meeting is to solicit public comment, discuss the use of TIF for the
aforementioned project, and consider authorization/approval of TIF District 2-3.
EDA
Doug Danielson REQUEST
Larry Hosch Jon Petters d.b.a. Collegeville Companies submitted a final request for tax increment financing
Steve Frank assistance in conjunction the Bayou Alley Flats project. Subsequent to application submittal the
Gary Osberg City's TIF Consultant, Traci Ryan, has prepared a TIF plan. In advance of this meeting the plan
Dale wick has been submitted to the Stearns County and ISD 742 as required by state law.
Projections contained in the plan are forecasts and not factual representations. The projections
are dependent on a number of unknown factors most importantly actual estimated market value
of the project post-construction and actual eligible costs paid by the Developer. Furthermore,
unlike past projects, it is important to understand the"Note Payable"will only be executed after
proof of eligible expenses(i.e. actual paid invoices)are submitted to the City.
The preliminary TIF request for this project was$225,000 net present value(NPV)over a term
of ten years, meaning interest would be paid on the principal amount over the length of the term.
The Applicant increased the principal value request upon final application submittal to$627,030
NPV with an unspecified term and without gap analysis.The Applicant revised the final
application principal amount upward to$647,030 net present value on Monday Nov. 3rd.
An attached terms sheet splits the costs represented initially and subsequently and is based on
a term of 13 years NPV(4%)for a total amount of assistance equating to$776,660 and a
present value of$498,253 over the 13 years. To achieve the enhanced request submitted on
November 3rd($647,030)the term under the current projections would need to extend to 18
years and the total amount of assistance would be$1,045,518(at 4% interest)over the term.
The Applicant is concerned about the accuracy of projections, a proposed market value inflation
rate of two percent, and adequacy of the 4% NPV interest calculation. A letter regarding these
concerns is attached for your information.
The City/EDA has not received: a written letter of commitment from a lead lender; written
evidence of a commitment from a restaurant tenant; written evidence of prelease commitments
for the rental units or homestead units; or confirmation of owner equity injection.
BUT/FOR TEST
The City must make a finding that'but for'the use of TIF the project would not be feasible. The
basic premise is TIF fills a financing gap and is not the lead lender. Factors to consider when
making such a finding include, but are not limited to: evidence supporting a demonstrated gap in
financing; evidence of project viability; public benefit of the project; project costs eligible for
reimbursement; and, appropriate level of public participation.
Page 113
PROJECT DESCRIPTION
The project entitled Bayou Alley Flats includes two independent aspects, both of which Mr.
Petters proposes to employ for tax increment purposes.
Bayou Mixed Use Building
Description: The first aspect of the project is a three story mixed use structure with
5,508 s.f. of commercial space on the street level combined with
second story residential rental units. The commercial component
would include 4,000 sf of restaurant space and 1,508 sf of retail/office
space. The second and third story rental units would be comprised of
10 one-bedroom and four two-bedroom loft style apartments with
porches. The mixed use structure would front on College Avenue
North. The building design concept is reminiscent of New Orleans
style architecture. Second and third story balconies with wrought iron
railings and gas lanterns are project accents.
Income Generated: Commercial lease rates in the project proforma are$15/sf triple net
plus a .03%annual increase for interior space. Patio space is extra at
$4.26/sf.
One bedroom apartment rent is$950 with a .03% annual increase.
Garages are an additional $50/month.
Two bedroom apartment rent is$1,495 per unit with a .03%annual
increase. Garages are an additional $50/month.
Projected Value: Upon completion the Stearns County Assessor estimates the market
value of commercial portion of the income producing property at
$807,400.The Assessor's Office estimates the value of the
residential portion(i.e. second and third story)upon completion at at
$1,386,500.
Alley Flats Residential Condominium
Description: The second aspect of the project includes one freestanding
residential condominium structure containing four attached dwelling
units of approximately 1,000 sf each. The structure is accessed from
an east/west alley between College Avenue North and 1st Street NE.
Income Generated: The proforma illustrates each of the four units priced for sale at
$270,000 to$300,000.
Projected Value: Upon completion of the structure and all four units the Stearns County
Assessor estimates the value of the structure at$906,100.
REPORTS:
Traci Ryan, Ryan Consulting will be present at the meeting to review the attached TIF plan,
projections, terms sheet, and the development agreement. City Administrator Weyrens and EDA
Director Strack will be present to provide information as needed. Applicant Petters and his
representatives are also expected to attend the meeting.
Page 213
PROCESS/ACTION:
Following presentation of information by Ryan the joint public hearing shall be held. Discussion
should follow the hearing.
If the EDA is supportive of utilizing TIF for this project, a MOTION is in order to recommend the
City Council approve the TIF plan, including specifying a principal amount,whether or not interest
is to be paid (also what rate), and a repayment term length.
If the Council is supportive of utilizing TIF for the project a RESOLUTION is attached for
consideration of action.
ATTACHMENTS:
1. TIF Plan: TIF 2-3.
2. Proposed terms sheet.
3. TIF Projections.
4. Letter from Applicant regarding concerns about TIF projections.
5. Draft TIF Development Agreement.
6. Council Resolution.
NOTICE: ANY ADDITIONAL INFORMATION RECEIVED AFTER THE PACKET DEADLINE
OF 3 P.M. ON NOVEMBER 5, 2014 WILL BE DISTRIBUTED AT THE MEETING AND
ENTERED INTO THE PUBLIC RECORD AT THAT TIME
Page 313
THIS PAGE INTENTIONALLY BLANK
ATTACHMENT 1 :
TIF 2 -3 PLAN
THIS PAGE INTENTIONALLY BLANK
CITY OF ST. JOSEPH, MINNESOTA
Modification of the Tax Increment Financing Plan for
REDEVELOPMENT TAX INCREMENT FINANCING
DISTRICT #2-1
&
Tax Increment Financing Plan for
REDEVELOPMENT TAX INCREMENT FINANCING
DISTRICT #2-3
In connection with the Bayou Blues&Alley Flats Projects
Final DRAFT
Proposed for Adoption on November 10,2014
TALE OF CONTENTS
Modification of Redevelopment TIF District No.2-1
Creation of Redevelopment TIF District No.2-3-Introduction
SECTION 1—CREATION OF TIF DISTRICT
Section 1.1 Definitions
Section 1.2 Statement of Need&Public Purpose
Section 1.3 Statutory Authorizations
Section 1.4 Statements of Objectives
Section 1.5 Designation as a Redevelopment TIF District
Section 1.6 Statement as to the Property the Authority May Acquire
Section 1.7 Development Activities Proposed for which Development Agreements have been
Entered
Section 1.8 Specific Development Reasonably Expected to Occur
Section 1.9 Estimated Costs
Section 1.10 Amount of Bonds to be Issued
Section 1.11 Original Net Tax Capacity&Captured Net Tax Capacity
Section 1.12 Duration of the tax increment financing district
Section 1.13 Estimates of Impact
Section 1.14 Studies and Analyses used to make the Findings
Section 1.15 Parcels to be included in the district
Section 1.16 Findings&Need for Tax Increment Financing
SECTION 2—ADMINISTRATION OF TIF DISTRICT
Section 2.1. Use of Tax Increments—Redevelopment Districts
Section 2.2. Use of Tax Increments—General
Section 2.3. "Green Acres"
Section 2.4. 4-Year Knock-Down Rule
Section 2.5. Tax Increment Pooling—5-year Rule
Section 2.6. Excess Tax Increment
Section2. 7. Limitation on Administrative Expenses
Section 2.8. Prior Planned Improvements
Section 2.9. Development Agreements
Section 2.10. Business Subsidy Laws
Section 2.11. Assessment Agreements
Section 2.12. Modifications of the Tax Increment Financing Plan
Section 2. 13. Administration of the Tax Increment Financing Plan
Section 2.14. Financial Reporting and Disclosure Requirements
EXHIBITS
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Modification of the Tax Increment Financing Plan for
REDEVELOPMENT TAX INCREMENT FINANCING DISTRICT #2-1
Modification of Redevelopment TIF District No. 2-1
Redevelopment TIF District#2-1 was originally created on May 3,2007 to facilitate the Millstream mixed
use redevelopment project. The only modification proposed to TIF District#2-1 is the removal of the
following parcels so that they may be included in the proposed Redevelopment TIF District#2-3.
84.53876.0000 Collegeville Communities LLC
84.53733.0152 Collegeville Communities LLC
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Tax Increment Financing Plan for
REDEVELOPMENT TAX INCREMENT FINANCING DISTRICT#2-3
Introduction
The City of St.Joseph has been asked to provide Tax Increment Financing(TIF)assistance to the
developers of Bayou Blues,an approximately 16,941 square foot mixed use commercial/residential
project along with parking facilities and Alley Flats,a four unit residential for sale condominium project,
located in downtown. Pay-as-you-go TIF assistance will be considered to help reduce the extraordinary
cost associated with redeveloping the site which include, but are not limited to acquisition,demolition,
site improvements and other costs allowable by TIF law. A second development,which is similar in
nature but located along Minnesota Avenue,is also in the early stages of discussions and TIF would likely
be considered for use for similar purposes.
SECTION 1 - CREATION OF TIF DISTRICT
Section 1.1 Definitions
The terms defined in this section have the meanings given herein, unless the context in which they are
used indicates a different meaning:
"Authority" means the City Council of the City of St.Joseph, Minnesota.
"City" means the City of St.Joseph, Minnesota,a municipal corporation and political subdivision of the
State of Minnesota.
"City Council" means the City Council of the City;also referred to as the"Governing Body."
"County" means Stearns County, Minnesota.
"Development District" means Development District No.2 of the City,which has been created and
established pursuant to and in accordance with the Development District Act,the boundaries of which
are and described in Exhibit 1.
"Development District Act" means Minnesota Statutes,Sections 469.124 through 469.134, both
inclusive.
"Development Program" means the Development Program for the Development District No.2.
"Project Area" means the geographic area of the Development District.
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"Public Costs" means the costs of land acquisition, public and site improvements, repayment of debt
service on tax increment bonds,and other eligible costs as set forth in the Development Program and
Tax Increment Financing Plan(s).
"School District" means the Independent School District No.740 in Minnesota.
"State" means the State of Minnesota.
"TIF Act" means Minnesota Statutes,Sections 469.174 through 469.1794, both inclusive.
"TIF District" means Tax Increment Financing district No. 2-3.
"TIF Plan" means the respective Tax Increment Financing Plan for each TIF District located within the
Development District.
Section 1.2 Statement of Need &Public Purpose
The'Need &Public Purpose'remains consistent with those listed in Section 2.01 of the Development
Program for Municipal Development District No. 2.
Section 1.3 Statutory Authorization
Statutory Authorization remains consistent with those listed in Section 2.02 of the Development
Program for Municipal Development District No. 2.
Section 1.4 Statement of Objectives
The objectives remain consistent with those listed in Section 3.01 of the Development Program for
Municipal Development District No.2.
Section 1.5 Designation as a Redevelopment TIF District
"Redevelopment district" means a type of tax increment financing district consisting of a project,or
portions of a project,within which the authority finds by resolution that one or more of the following
conditions,reasonably distributed throughout the TIF District,exists:
(1) parcels consisting of 70 percent of the area of the TIF District are occupied by buildings,
streets,utilities, paved or gravel parking lots,or other similar structures and more than 50
percent of the buildings, not including outbuildings,are structurally substandard to a degree
requiring substantial renovation or clearance;
(2) the property consists of vacant,unused, underused, inappropriately used,or infrequently
used rail yards, rail storage facilities,or excessive or vacated railroad rights-of-way;
(3) tank facilities,or property whose immediately previous use was for tank facilities if the tank
facilities:
(i) have or had a capacity of more than 1,000,000 gallons;
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(ii)are located adjacent to rail facilities;and
(iii)have been removed or are unused, underused,inappropriately used,or infrequently
used;or
(4) a qualifying disaster area
For TIF Districts consisting of two or more noncontiguous areas,each area must qualify under the
criteria above. A city may not find that a building is structurally substandard without an interior
inspection,unless it cannot gain access to the property and there exists evidence which supports the
structurally substandard finding.
The draft Plan for TIF District No.2-3 initially had two noncontiguous areas,each consisting of four
parcels, both of which met the requirements above. One of the areas has been removed and the
remaining area consists of four parcels. One of the four parcels do not meet the 15%improved rule but
is required to assemble a site of a sufficient size to carry out the proposed development as provided for
in Minnesota Statues 469.176 Subd.4j. This parcel contains a substandard structure but is not 15%
improved. One of the parcels has no structure but does meet the 15%improved criteria. The
remaining two parcels are considered improved and contain structures that have been found to be
substandard.
Section 1.6 Statement as to the Property the Authority May Acquire
While the City does not anticipate acquiring property within the TIF District, it reserves the right to do so
and/or reimburse developer(s)for TIF eligible costs including but not limited to land acquisition.
Section 1.7 Development Activities Proposed for which
Development Agreements have been Entered
The City has not entered into development agreements but anticipates that it will do so upon creation of
the TIF District to provide pay-as-you-go assistance to reimburse private developers for TIF authorized
improvements.
Section 1.8 Specific Development Reasonably Expected to Occur
Bayou Alley Flats, LLC proposes to construct a mixed use structure with main floor retail shops and a
restaurant and two additional floors for housing along with onsite parking facilities. In addition,the
developers are proposing to construct four loft style apartments that will be for sale units. This
development is proposed to commence construction in 2014 and be completed by year end 2015. The
loft apartments will not begin construction until a sufficient number are presold.
Similar development is being contemplated along Minnesota Avenue. The City anticipates that this
development will occur within the next 1-3 years.
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Section 1.9 Estimated Costs
The following budget is proposed for the TIF District. The budget reflects the maximum revenues and
expenditures for the TIF District based upon the increments that could be realized from development
that is reasonably anticipated within the TIF District.
REVENUES
Tax Increments $2,493,281
Interest Earnings 24,933
Loan/Advance Repayments -
Lease Proceeds -
Repayments/Return of Increments -
Sale of Property -
TOTAL $2,518,214
EXPENDITURES
Land Acquisition $500,000
Site Improvements 500,000
Utilities 100,000
Public Improvements 128,685
Affordable Housing -
Small City Authority Costs -
Administration Costs 251,821
County Admin Costs -
TOTAL $1,480,507
Financing Costs $1,037,707
Maximum Bonds $1,480,507
The Authority reserves the right to adjust the amount of Capital and Administration line items listed
above or to incorporate additional eligible items,so long as the total Capital and Administration costs
are not increased. Adjusting financing costs, principal or interest,will require a public hearing.
The City anticipates providing financial assistance on a pay-as-you-go basis for acquisition and site
improvement and site preparation costs as well as other TIF eligible expenses related to the proposed
development. In doing so, increments collected in future years will be used to reimburse
developers/the city for eligible costs incurred.
Section 1.10 Amount of Bonds to be Issued
The maximum principal amount of bonds to be secured in whole or in part with increments from TIF
District No. 2-3 shall not exceed$ 1,480,507.The Authority reserves the right to fund all Project costs
permitted by law using internal funding,general obligation bonds, pay-as-you-go financing or any other
financing mechanism authorized by law.
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Internal Loans, including a negative balance in the TIF fund, must be authorized by resolution of the
entity advancing the loan before money is transferred,advanced or spent. The resolution must include
the terms and conditions for repayment of the loan to include,at a minimum,the principal amount of
the loan,the interest rate and the maximum term. The interest rate to be charged on internal loans
shall be 4%based upon the limit of the greater of the rates specified under Minnesota Statutes 270C.40
or 549.09 as of the date this Plan is approved.
Section 1.11 Original &Estimated Captured Net Tax Capacity
The County Auditor shall certify the original net tax capacity of the TIF District. This value will be equal
to the total net tax capacity of all property in the TIF District as certified by the State Commissioner of
Revenue. For districts certified between January 1 and June 30,inclusive,this value is based on the
previous assessment year. For districts certified between July 1 and December 31,inclusive,this value
is based on the current assessment year.
The Estimated Market Value of all property within TIF District as of January 2, 2013,for taxes payable in
2014, is$255,360 and the estimated tax capacity is$2,554,which is estimated to be the original net tax
capacity of the TIF District upon establishment and subsequent certification.
Each year the County Auditor shall certify the amount that the original net tax capacity has increased or
decreased as a result of:
1. Changes in the tax-exempt status of property;
2. Reductions or enlargements of the geographic area of the TIF District;
3. Changes due to stipulation agreements or abatements;or
4. Changes in property classification rates
The County Auditor shall also certify the Original Local Tax Rate of the TIF District. This rate shall be the
sum of all local tax rates that apply to property in the TIF District. This rate shall be for the same taxes
payable year as the Original Net Tax Capacity.
In future years,the amount of tax increment generated by the TIF District will be calculated using the
lesser of(a)the sum of the current local tax rates at that time or(b)the Original Local Tax Rate of the TIF
District. The maximum captured net tax capacity for the TIF District is estimated to be$96,822.
The sum of all local tax rates that apply to property in the TIF District for taxes levied in 2013 and
payable in 2014 is 128.4618%. The final Original Local Tax Rate may be higher or lower than this value,
depending upon the final local tax rates for payable 2015.
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2013/2014
Taxing Jurisdiction Local Tax Rate
City of St.Joseph 52.0569%
Stearns County 54.7913%
School District 742 20.0983%
Other 1.5153%
Total 128.4618%
The projected original local tax rate does not include the State of Minnesota property tax rate on
commercial, industrial and seasonal recreation property of 52.160%(2014),which is not captured as tax
increment.
Section 1.12 Duration of the Tax Increment Financing District
Redevelopment districts may remain in existence 25 years from receipt of the first tax increment,
resulting in 26 TIF collections. The Authority anticipates that the TIF District may receive the first
increment in 2016. The authority may specify in the tax increment financing plan the first year in which
it elects to receive increment, up to four years following the year of approval of the TIF District,with the
exception of economic development districts. The City elects to have the first collection year be 2017.
The TIF District is expected to remain in existence the maximum duration allowed by law(projected to
be through 2042). Modifications of this plan shall not extend these duration limits.
Section 1.13 Estimates of Impact
Exhibit 5 shows the estimated impact on other taxing jurisdictions if the maximum projected retained
captured net tax capacity of the TIF District was hypothetically available to the other taxing jurisdictions.
The City believes that there will be no adverse impact on other taxing jurisdictions during the life of the
TIF District,since the proposed development would not have occurred without the establishment of the
TIF District and the contemplated public assistance. A positive impact on other taxing jurisdictions will
occur when the TIF District is decertified and the development therein becomes part of the general tax
base.
The fiscal and economic implications of the proposed TIF District, pursuant to Minnesota Statutes,
Section 469.175,Subd. 2, are listed below:
a. The total amount of tax increment that will be generated over the life of the TIF District is
estimated to be$ 2,493,281.
b. To the extent the facility in the proposed TIF District generates any public cost impact on
city-provided services such as police and fire protection, public infrastructure,and
borrowing cost attributable to the TIF District,such costs will be levied upon the taxable net
tax capacity of the City,excluding that portion captured by the TIF District. The City does
not anticipate issuing bonds in conjunction with this project.
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c. The amount of tax increments over the life of the TIF District that would be attributable to
the respective taxing, assuming the total local tax rate for all jurisdictions remained the
same is estimated to be:
Estimated Life of
Annual TIF District
City 28.82% $ 27,638 $ 718,587
County 30.33% $ 29,090 $ 756,332
School 11.13% $ 10,671 $ 277,434
Other 0.84% $ 805 $ 20,917
State C/I 28.88% $ 27,693 $ 720,010 *
100.00% $ 95,895 $ 2,493,281
* Not Captured As Increment
Section 1.14 Studies &Analyses
No specific studies were conducted directly by the City. However, promoting downtown redevelopment
has been a priority and objective for the City for a number of years and there has been significant
discussion in public meetings regarding the needs of the downtown.
Section 1.15 Parcels to be Included in the TIF District
The property proposed to be included within the boundaries of TIF District No. 2-3 includes four parcels.
The property includes the following:
Noncontiguous Area #1
1 84.53879.0000 Deutz Housing LLC
2 84.53876.0000 Collegeville Communities LLC
3 84.53733.0152 Collegeville Communities LLC
4 84.53867.0000 Bayou Alley Flats LLC
Section 1.16 Findings &Need for Tax Increment Financing
Before or at the time of approval of the tax increment financing plan,the municipality shall make the
following findings, and shall set forth in writing the reasons and supporting facts for each determination:
(1)that the proposed TIF District is a redevelopment district,a renewal or renovation district, a
housing district, a soils condition district, or an economic development district; if the proposed
district is a redevelopment district or a renewal or renovation district,the reasons and supporting
facts for the determination that the district meets the criteria of section 469.174,subdivision 10,
paragraph (a), clauses (1) and (2),or subdivision 10a, must be documented in writing and retained
and made available to the public by the authority until the district has been terminated;
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Statement of Fact: Exhibit 2 provides a list of the parcels to be included in the TIF District along
with a listing of what parcels are improved, which have buildings and whether the buildings are
substandard or not. The TIF District contains four parcels. One of the areas has been removed
and the remaining area consists of four parcels. One of the four parcels do not meet the 15%
improved rule but is required to assemble a site of a sufficient size to carry out the proposed
development as provided for in Minnesota Statues 469.176 Subd.4j. This parcel contains a
substandard structure but is not 15%improved. One of the parcels has no structure but does
meet the 15%improved criteria. The remaining two parcels are considered improved and contain
structures that have been found to be substandard.
The local building official has conducted a thorough inspection of all of the primary structures
which are available at city offices and will be included as a part of the final transcript of documents
for the TIF District. With the information collected,it has been substantiated that the TIF District
does in fact qualify as a Redevelopment TIF District.
(2)that, in the opinion of the municipality:
(i)the proposed development or redevelopment would not reasonably be expected to occur
solely through private investment within the reasonably foreseeable future;and
(ii)the increased market value of the site that could reasonably be expected to occur without the
use of tax increment financing would be less than the increase in the market value estimated to
result from the proposed development after subtracting the present value of the projected tax
increments for the maximum duration of the TIF District permitted by the plan.The requirements
of this item do not apply if the TIF District is a housing district;
Statement of Fact: The developer(s)have indicated in their applications and verbally, that were it
not for the use of Tax Increment Financing assistance they would not be able to move forward with
their project. The use of increment is necessary to cover the extraordinary costs associated with
redevelopment versus bare ground development, but will also afford the development to contain
leasing and rental rates in the early years that will serve to market the development and enhance
the economic viability of the project for the developer as well as the community.
(3)that the tax increment financing plan conforms to the general plan for the development or
redevelopment of the municipality as a whole;
Statement of Fact: The proposed development and plan is consistent with the planning efforts,
zoning ordinances and efforts of the City of St.Joseph to promote development within the City.
(4)that the tax increment financing plan will afford maximum opportunity,consistent with the
sound needs of the municipality as a whole,for the development or redevelopment of the project
by private enterprise;
Statement of Fact: The City of St.Joseph and the St.Joseph Economic Development Authority
have worked diligently to promote redevelopment efforts in the downtown and believe that
projects contemplated in this TIF District will afford maximum opportunity consistent with the
needs of the municipality as a whole.
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SECTION 2 -ADMINISTRATION OF TIF DISTRICT
Section 2.1. Use of Tax Increments - Redevelopment Districts
At least 90 percent of the revenues derived from tax increments from a redevelopment district or
renewal and renovation district must be used to finance the cost of correcting conditions that allow
designation of redevelopment and renewal and renovation districts. These costs include, but are not
limited to,acquiring properties containing structurally substandard buildings or improvements or
hazardous substances,pollution,or contaminants,acquiring adjacent parcels necessary to provide a site
of sufficient size to permit development,demolition and rehabilitation of structures,clearing of the
land,the removal of hazardous substances or remediation necessary to development of the land,and
installation of utilities, roads,sidewalks,and parking facilities for the site.The allocated administrative
expenses of the authority, including the cost of preparation of the development action response plan,
may be included in the qualifying costs.
Section 2.2. Use of Tax Increments - General
Each year the county treasurer will deduct an estimated 0.36%of the annual tax increment generated
by the TIF District and pay such amount to the state general fund. Such amounts will be appropriated to
the state auditor for the cost of financial reporting and auditing of tax increment financing information
throughout the state. Exhibit 3 shows the projected deduction for this purpose over the anticipated life
of the TIF District.
The Authority has determined that it will use 100%of the remaining tax increment generated by the TIF
District for any of the following purposes:
1. pay for the estimated public costs of the TIF District(including administrative expenses,see Section
7)and City administrative costs associated with the TIF District(see Section 22);
2. pay principal and interest on tax increment bonds, notes or other financial obligations issued to
finance the public costs of the TIF District;
3. accumulate a reserve securing the payment of tax increment bonds or other bonds issued to finance
the public costs of the TIF District;
4. pay all or a portion of the county road costs as may be required by the County Board under M.S.
Section 469.175,Subdivision la;or
5. return excess tax increments to the County Auditor for redistribution to the City,County and School
District in proportion to their local tax capacity rates.
Tax increments from property located in one county must be expended for the direct and primary
benefit of a project located within that county, unless both County Boards involved waive this
requirement. Tax increments shall not be used to circumvent levy limitations.
Tax increment cannot be used to finance the acquisition,construction, renovation,operation,or
maintenance of a building to be used primarily and regularly for conducting the business of a
municipality,county,school district,or any other local unit of government or the State or Federal
government. This prohibition does not apply to the construction or renovation of a parking structure,a
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common area used as a public park,or a facility used for social, recreational,or conference purposes
and not primarily for conducting the business of the community.
If there exists any type of agreement or arrangement providing for the developer,or other beneficiary
of assistance,to repay all or a portion of the assistance that was paid or financed with tax increments,
such payments shall be subject to all of the restrictions imposed on the use of tax increments.
Assistance includes sales of property at less than the cost of acquisition or fair market value,grants,
ground or other leases at less than fair market rent, interest rate subsidies,utility service connections,
roads,or other similar assistance that would otherwise be paid for by the developer or beneficiary.
Section 2.3. "Green Acres"
A TIF District may NOT include parcels that qualified as"green acres" in any of the five(5)years
preceding the request for certification, unless 85%of development in the district is restricted to
qualified manufacturing or distribution facilities directly related to production of tangible personal
property and paying at least 90%of its employees'wages equal to or greater than 160%of the federal
minimum wage,or the development in the TIF District is a qualified housing project
Section 2.4. 4-Year Knock-Down Rule
If after four years from certification of the TIF District no demolition, rehabilitation, renovation,or
qualified improvement of an adjacent street has commenced on a parcel located within the TIF District,
then that parcel shall be excluded from the TIF District and the Original Net Tax Capacity shall be
adjusted accordingly. Qualified improvements of a street are limited to construction or opening of a
new street, relocation of a street,or substantial reconstruction or rebuilding of an existing street. The
Authority must submit to the County Auditor, by February 1 of the fifth year,evidence that the required
activity has taken place for each parcel in the TIF District.
If a parcel is excluded from the TIF District and the Authority or owner of the parcel subsequently
commences any of the above activities,the Authority shall certify to the County Auditor that such
activity has commenced and the parcel shall once again be included in the TIF District. The County
Auditor shall certify the Net Tax Capacity of the parcel,as most recently certified by the Commissioner
of Revenue,and add such amount to the Original Net Tax Capacity of the TIF District.
Section 2.5. Tax Increment Pooling- 5-year Rule
At least 75%of the tax increments from the TIF District must be expended on activities in the district or
to pay bonds,to the extent that the proceeds of the bonds were used to finance activities in the TIF
District or to pay,or secure payment of,debt service on credit enhanced bonds. For districts,other than
redevelopment districts for which the request for certification was made after June 30, 1995,the in-
district percentage for purposes of the preceding sentence is 80 percent. Not more than 25 percent of
the total revenue derived from tax increments paid by properties in the TIF District may be expended,
through a development fund or otherwise,on activities outside of the TIF District but within the defined
13
geographic area of the project except to pay,or secure payment of,debt service on credit enhanced
bonds. All administrative expenses are considered to have been spent outside of the TIF District. Tax
increments are considered to have been spent within the TIF District if such amounts are:
1. actually paid to a third party for activities performed within the TIF District within five years after
certification of the TIF District;
2. used to make payments or reimbursements to a third party under binding contracts for activities
performed within the TIF District,which were entered into within five years after certification of the
TIF District;or
3. used to pay bonds that were issued and sold to a third party,the proceeds of which are reasonably
expected on the date of issuance to be spent within the later of the five-year period or a reasonable
temporary period or are deposited in a reasonably required reserve or replacement fund.
Beginning with the sixth year following certification of the TIF District,at least 75%of the tax increments
must be used to pay outstanding bonds or make contractual payments obligated within the first five
years. When outstanding bonds have been defeased and sufficient money has been set aside to pay for
such contractual obligations,the TIF District must be decertified.
The Authority also elects the option provided by M.S.469.1763 to increase the amount of expenditures
permitted outside the TIF District by up to an additional 10%. However,these expenditures are limited
to assisting housing which meets the requirements of a low income housing building defined under
section 42(c)of the Internal Revenue Code.
The Authority expects that a portion of tax increments may be used for housing expenses elsewhere
within the Development District.
Section 2.6. Excess Tax Increment
On December 31st of each year,the Authority must determine the amount of excess increments for the
TIF District. See M.S.Section 469.176 subdivision 2 for a complete definition. Excess increments may
only be used to:
1. prepay any outstanding tax increment bonds, notes or other obligations;
2. discharge the pledge of tax increments thereon.
3. pay amounts into an escrow account dedicated to the payment of the tax increment bonds, notes or
other obligations;or
4. return excess tax increments to the County Auditor for redistribution to the City,County and School
District in proportion to their local tax capacity rates. The County Auditor must report to the
Commissioner of Education the amount of any excess tax increment redistributed to the School
District within 30 days of such redistribution.
Allocation of excess increments must be completed by September 30th in the year following the year in
which the excess increments were generated.
14
Section2. 7. Limitation on Administrative Expenses
Administrative expenses are defined as all costs of the Authority other than:
1. amounts paid for the purchase of land;
2. amounts paid for materials and services, including architectural and engineering services directly
connected with the proposed development within the TIF District;
3. relocation benefits paid to,or services provided for, persons or businesses located within the TIF
District;or
4. amounts used to pay principal or interest on,fund a reserve for,or sell at a discount,tax increment
bonds.
5. amounts used to make payments on other financial obligations used to finance costs outlined
above.
Administrative expenses include amounts paid for services provided by bond counsel,fiscal consultants,
planning or economic development consultants,and actual costs incurred by the City in administering
the TIF District. Tax increments may be used to pay administrative expenses of the TIF District up to the
lesser of(a) 10%of the total estimated public costs authorized by the TIF Plan or(b) 10%of the total tax
increment expenditures of the project.
Section 2.8. Prior Planned Improvements
The City shall accompany its request for certification to the County Auditor with a listing of all properties
within the TIF District for which building permits have been issued during the 18 months immediately
preceding approval of the TIF Plan. The County Auditor shall increase the Original Net Tax Capacity of
the TIF District by the Net Tax Capacity of each improvement for which a building permit was issued.
Section 2.9. Development Agreements
If more than 10%of the acreage of a project(which contains a housing district) is to be acquired by the
Authority with proceeds from tax increment bonds then, prior to such acquisition,the Authority must
enter into an agreement for the development of the property.Such agreement must provide recourse
for the Authority should the development not be completed.
Section 2.10. Business Subsidy Laws
Minnesota Statutes 116J.991 requires an Authority providing a business with a subsidy worth$25,000 to
complete a subsidy approval process. Housing assistance is exempt from the requirements.
Section 2.11. Assessment Agreements
The Authority may, upon entering into a development agreement,also enter into an assessment
agreement with the developer,which establishes a minimum market value of the land and
improvements for each year during the life of the TIF District.
The assessment agreement shall be presented to the County or City Assessor who shall review the plans
and specifications for the improvements to be constructed, review the market value previously assigned
to the land,and so long as the minimum market value contained in the assessment agreement appears
15
to be a reasonable estimate,shall certify the assessment agreement as reasonable. The assessment
agreement shall be filed for record in the office of the County Recorder of each county where the
property is located. Any modification or premature termination of this agreement must first be
approved by the City,and if the project is valued below the minimum market value,also approved by
the County and School District.
Section 2.12. Modifications of the Tax Increment Financing Plan
Any reduction or enlargement in the geographic area of the Project Area or the TIF District;increase in
the amount of bonded indebtedness to be incurred; increase in the amount of capitalized interest;
increase in that portion of the Captured Net Tax Capacity to be retained by the Authority;increase in the
total estimated public costs;or designation of additional property to be acquired by the Authority shall
be approved only after satisfying all the necessary requirements for approval of the original TIF Plan.
These restrictions do not apply if:
1. the only modification is elimination of parcels from the Project Area or the TIF District;and
2. the current Net Tax Capacity of the parcels eliminated equals or exceeds the Net Tax Capacity of
those parcels in the TIF District's Original Net Tax Capacity,or the Authority agrees that the TIF
District's Original Net Tax Capacity will be reduced by no more than the current Net Tax Capacity of
the parcels eliminated.
The Authority must notify the County Auditor of any modification that reduces or enlarges the
geographic area of the Project Area or the TIF District. The geographic area of the TIF District may be
reduced but not enlarged after five years following the date of certification.
Section 2. 13. Administration of the Tax Increment Financing Plan
Upon adoption of the TIF Plan,the Authority shall submit a copy of such plan to the State Auditor's
Office. The Authority shall also request that the County Auditor certify the Original Net Tax Capacity and
Net Tax Capacity Rate of the TIF District. To assist the County Auditor in this process,the Authority shall
submit copies of the TIF Plan,the resolution establishing the TIF District and adopting the TIF Plan,and a
listing of any prior planned improvements. The Authority shall also send the County Assessor any
assessment agreements establishing the minimum market value of land and improvements in the TIF
District,and shall request that the County Assessor review and certify any assessment agreements as
reasonable.
The County shall distribute to the Authority the amount of tax increment as it becomes available. The
amount of tax increment in any year represents the applicable property taxes generated by the Retained
Captured Net Tax Capacity of the TIF District. The amount of tax increment may change due to
development anticipated by the TIF Plan,other development, inflation of property values,or changes in
property classification rates or formulas.
In administering and implementing the TIF Plan,the following actions should occur on an annual basis:
16
1. Prior to July 1,the Authority shall notify the County Assessor of any new development that has
occurred in the TIF District during the past year to insure that the new value will be recorded in a
timely manner.
2. If the County Auditor receives the request for certification of a new TIF District,or for modification
of an existing TIF District, before July 1,the request shall be recognized in determining local tax rates
for the current and subsequent levy years. Requests received on or after July 1 shall be used to
determine local tax rates in subsequent years.
Each year the County Auditor shall certify the amount of the Original Net Tax Capacity of the TIF District.
The amount certified shall reflect any changes that occur as a result of the following:
a) the value of property that changes from tax-exempt to taxable shall be added to the Original Net
Tax Capacity of the TIF District. The reverse shall also apply;
b) the Original Net Tax Capacity may be modified by any approved enlargement or reduction of the TIF
District;
c) if the TIF District is classified as an economic development district,then the Original Net Tax
Capacity shall be increased by the amount of the annual adjustment factor;and
d) if laws governing the classification of real property cause changes to the percentage of Estimated
Market Value to be applied for property tax purposes,then the resulting increase or decrease in Net
Tax Capacity shall be applied proportionately to the Original Net Tax Capacity and the Retained
Captured Net Tax Capacity of the TIF District.
The County Auditor shall notify the Authority of all changes made to the Original Net Tax Capacity of the
TIF District.
Section 2.14. Financial Reporting and Disclosure Requirements
The Authority is responsible for information and financial reporting on the activities of the TIF District.
These responsibilities include:
1. Prepare and Publish an Annual Statement. No later than August 1 of each year,the Authority must
prepare and publish an annual statement which includes at least the following information:
(a) tax increment received and expended in that year
(b) Original Net Tax Capacity
(c) captured Net Tax Capacity
(d) amount of outstanding bonded indebtedness
(e) increments paid to other government bodies
(f) administrative costs
(g) increments paid directly or indirectly outside of the district
(h) if a fiscal disparities contribution is computed under section 469.177,Subd.3(a),the increase in
property tax imposed on other properties in the municipality as a result of the fiscal disparities
contribution in the manner prescribed by the commissioner of revenue.
17
A copy of the annual statement must also be provided to the State Auditor,county board and county
auditor,school board,and the municipality.
2. Prepare an Annual Report. (469.175 Subds. 5 and 6) The State Auditor enforces the provisions of
the TIF Act and has full responsibility for financial and compliance auditing of the Authority's use of
tax increment financing. The State Auditor's office provides detailed tax increment reporting forms
for use in complying with annual reporting requirements. On or before August 1 of each year,the
Authority and/or the City must prepare a status and financial report for the TIF District and submit it
to the state auditor,the county board,the county auditor,the school board,and the governing body
of the municipality, if the municipality is not also the authority.
18
EXHIBITS
Map(s)
Municipal Development District No. 2 Exhibit 1-1
TIF District No.2-3 Exhibit 1-2
Parcel Values, Improvements&Qualification as a Redevelopment TIF District Exhibit 2
TIF Projections—Bayou Blues&Alley Flats Project Exhibit 3
TIF Projections—Ultimate Exhibit 4
Estimated Impact on Respective Taxing Jurisdictions Exhibit 5
Market Value Analysis Exhibit 6
SAMPLE-Pay-As-You Go Schedule Exhibit 7
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EXHIBIT 6
City of Saint Joseph, Minnesota
Redevelopment Tax Increment Financing District No. 2-3
Bayou Blues,Alley Flats&Schneider Property Redevelopment Projects
Proposed Plan Adoption Date: 11/10/2014
MARKET VALUE ANALYSIS
Increased Market Value of Site $ 4,214,100
Less Present Value of TIF Revenues $ 1,206,246
$ 3,007,854
Reasonably expected increase w/out TIF* $ 500,000
Net Value Increase $ 2,507,854
Present Value Calculation
Calculation Date 2014
Present Value Factor 4%
Gross Tax Present
Period Year Increment Value
-
2014 -
1 2015 - -
2 2016 - -
3 2017 43,354 38,541
4 2018 59,008 50,440
5 2019 78,592 64,597
6 2020 80,164 63,355
7 2021 81,767 62,136
8 2022 83,403 60,941
9 2023 85,071 59,770
10 2024 86,772 58,620
11 2025 88,508 57,493
12 2026 90,278 56,387
13 2027 92,083 55,303
14 2028 93,925 54,239
15 2029 95,803 53,196
16 2030 97,719 52,173
17 2031 99,674 51,170
18 2032 101,667 50,186
19 2033 103,701 49,221
20 2034 105,775 48,274
21 2035 107,890 47,346
22 2036 110,048 46,435
23 2037 112,249 45,542
24 2038 114,494 44,667
25 2039 116,784 43,808
26 2040 119,119 42,965
27 2041 121,502 42,139
28 2042 123,932 41,328
2,493,281 1,340,273
EXHIBIT 7
City of Saint Joseph, Minnesota
Redevelopment Tax Increment Financing District No. 2-3
Bayou Blues,Alley Flats&Schneider Property Redevelopment Projects
t t;,[,osP 'Plan Adoption Date:11/12/2014
Pay-as-you-go Payment Schedule
4% TIF
Date Principal Rate Interest Payment Balance
1/1/2015 Starting Reimbursable Expenses> 600,000
2/1/2016 (24,000) 4.00% 24,000 $ - 624,000
2/1/2017 (24,960) 4.00% 24,960 $ - 648,960
1 2/1/2018 10,431 4.00% 25,958 $ 36,389 638,529
2 2/1/2019 24,885 4.00% 25,541 $ 50,426 613,644
3 2/1/2020 26,889 4.00% 24,546 $ 51,435 586,755
4 2/1/2021 28,993 4.00% 23,470 $ 52,463 557,762
5 2/1/2022 31,202 4.00% 22,310 $ 53,512 526,560
6 2/1/2023 33,520 4.00% 21,062 $ 54,583 493,040
7 2/1/2024 35,953 4.00% 19,722 $ 55,674 457,087
8 2/1/2025 38,504 4.00% 18,283 $ 56,788 418,583
9 2/1/2026 41,180 4.00% 16,743 $ 57,924 377,403
10 2/1/2027 43,986 4.00% 15,096 $ 59,082 333,417
11 2/1/2028 46,927 4.00% 13,337 $ 60,264 286,490
12 2/1/2029 50,009 4.00% 11,460 $ 61,469 236,480
13 2/1/2030 53,239 4.00% 9,459 $ 62,698 183,241
14 2/1/2031 56,623 4.00% 7,330 $ 63,952 126,618
15 2/1/2032 60,167 4.00% 5,065 $ 65,231 66,452
16 2/1/2033 63,878 4.00% 2,658 $ 66,536 2,574
17 2/1/2034 67,764 4.00% 103 $ 67,867 (65,190)
18 2/1/2035 71,832 4.00% (2,608) $ 69,224 (137,022)
19 2/1/2036 76,089 4.00% (5,481) $ 70,609 (213,111)
20 2/1/2037 80,545 4.00% (8,524) $ 72,021 (293,656)
21 2/1/2038 85,207 4.00% (11,746) $ 73,461 (378,864)
22 2/1/2039 90,085 4.00% (15,155) $ 74,930 (468,949)
23 2/1/2040 95,187 4.00% (18,758) $ 76,429 (564,136)
24 2/1/2041 100,523 4.00% (22,565) $ 77,958 (664,659)
25 2/1/2042 106,103 4.00% (26,586) $ 79,517 (770,762)
26 2/1/2043 111,938 4.00% (30,830) $ 81,107 (882,699)
This Schedule is for illustrative purposes only. The actual TIF Note will be based upon
actual increment generated.
ATTACHMENT 2 :
PROPOSED
TERMS SHEET
THIS PAGE INTENTIONALLY BLANK
October 30, 2014
City of St. Joseph
Attention: Ms. Judy Weyrens, Administrator
25 College Avenue, PO Box 668
St. Joseph, MN 56374
Mr. Jon Petters
Bayou Alley Flats LLC
15 East Minnesota Street
St. Joseph, MN 56374
RE: Bayou Blues & Alley Flats Project
Terms of TIF Assistance
To Those It May Concern:
On November 10, 2014 the St. Joseph City Council will be conducting a public hearing to consider the
creation of Redevelopment Tax Increment Financing (TIF) District No. 2-3 and a Business Subsidy. Upon
consideration of the creation of TIF District No. 2-3, the City Council will consider the TIF assistance
request from Bayou Alley Flats LLC. This letter is intended to spell out the terms of assistance that will
be considered.
The Project will consist of the redevelopment of three parcels of property that include PIN 84.53867.000,
84.53733.0152 and 84.53876.000. For practical purposes, I have identified the project in two phases.
Phase One will involve the redevelopment of Parcel Identification Numbers (PIN) 84.53867.000 and
84.53733.0152. The developer will construct and maintain a three story mixed use structure that will
have commercial/retail space on the main floor and 10 one-bedroom and four two-bedroom traditional
apartment dwelling units on the second and third level. Traditional apartment dwelling units do not
include hotels, motels or extended stay lodging uses. This phase will also involve the construction of
14 garage stalls and renovation of an existing building for use as an art gallery.
Phase Two will involve the redevelopment of PIN 84.53876.000 and construction of a four (4) unit for
sale condominium project. Because this is a Redevelopment TIF District, no income restrictions will
apply to the housing units. In addition, because the units are proposed for upper income residents,
increments generated by this phase are not intended to write down the cost of this development.
Rather, increments generated by this phase will help to write down the costs of Phase I improvements.
Terms for TIF assistance are proposed as follows:
1. Commencement -
a. Phase One is proposed to commence immediately with demolition, site work and footings
in before 12/31/2014 so that construction may continue over the winter
Traci Ryan1 Ryan Consulting 146918 Earle Brown Drive
Garrison,Minnesota 56450 1320.248.2739 I traciryan8888@gmail.com
b. Phase Two will proceed upon the presale of three units
2. Completion of Phase One, defined as complete build out of all three stories into individual units
as defined above shall occur not later than 12/31/2015 and Phase Two will have no completion
date requirement but is anticipated to be not later than 12/31/2016.
3. The first year that increment is anticipated to be generated is 2016. Because this first
increment is expected to be only a partial increment, the City is electing to delay receipt of the
first increment until 2017.
4. The City will execute a TIF Pay-as-you-go Note upon completion of the project to reimburse the
developer for land acquisition, demolition, building rehabilitation, site improvement and
plan/development agreement costs incurred in connection with the creation of the TIF District
and drafting of the development agreement. Terms of the TIF Pay-as-you-go Note shall be:
a. The City will reimburse a maximum of $627,030 (less any public sources of funds
provided to cover these costs) of land acquisition, demolition, building rehabilitation, site
improvement and plan/development agreement costs plus interest on the principal
balance at a rate of 4% OR provide thirteen (13) years of assistance, whichever occurs
first.
b. Payments on the Note will be made semi-annually on February 1 and August 1, based
upon the actual increment generated by Phase I and Phase II of the Project (as identified
above) in the previous six months.
c. The actual increment will be based upon the market vale established by the County
Assessor for the respective tax year and not upon estimates provided prior to
construction.
d. The first payment will be made on August 1, 2017 and the final payment will be made
on February 1, 2030
e. Developer is responsible for the full cost of creating the District and legal costs
associated with the negotiation of the terms and preparation of the Development
Agreement. The City acknowledges the receipt of a deposit for these costs and other
city fees and agrees that any unused portion of the funds will be returned to the
developer.
f. The TIF Note will not be transferrable without the approval of the City and
documentation of the continued need for assistance.
5. The developer will provide the City will documentation of the actual costs incurred within three
months of occupancy certificates being issued by the local building official so that the actual
final amount of the TIF Note may be determined and the Note Executed.
6. The total amount of projected TIF assistance exceeds the $150,000 threshold for a Business
Subsidy according to Minnesota Statutes 116J.993-994 and will require a public hearing which
was noticed and will be held in conjunction with the public hearing to create the TIF District and
will require a Business Subsidy Agreement, the terms of which will include:
a. Job Creation & Wage goals - Because job creation is not the primary purpose of
assistance, the City will require only 1 Full Time equivalent job paying not less than
100% of the median wage for the applicable general occupation classification within the
St. Cloud Metropolitan Statistical Area, as defined by the Minnesota Workforce Center's
most current report. The applicable classification shall be
b. The criteria met by the proposed development include the following items of the City's
adopted Business Subsidy Criteria:
i. To redevelop blighted or under-utilized areas of the community.
Wage
ii. To encourage redevelopment in the City's commercial and industrial areas to
stimulate high levels of property maintenance and private reinvestment in those
areas.
iii. To increase the number and diversity of the employment base.
iv. To offset increased costs of redevelopment (i.e. contaminated site clean-up), over
and above those costs that a developer would normally incur.
v. To facilitate the development process and to achieve development on sites this
would not be developed without this assistance.
vi. To meet other uses of public policy including promotion of quality urban design,
quality architectural design, energy conservation, decreasing the capital and
operating costs of local government, etc.
c. The developer will provide the City will information necessary to complete business
assistance forms to the state, not later than March 1 of each year.
Legal counsel for the City has begun work on the development agreement so that it may be available
following the public hearing on November 10. The goal of this letter is to develop consensus on the
basic terms of the agreement so that they may be incorporated into the final agreement. As noted
above, the final TIF Note amount will not be determined until documentation of eligible costs actually
incurred are provided to the City following completion of the project.
Should you have any questions, please feel free to call. If the above terms are acceptable to both
parties or either have changes, please let me know so that I may get this information to legal counsel
for the City.
Best regards,
_, _. ./11/?4-----.1
4ce
Traci M. Ryan
Consulting Staff
31I'aae
Bayou Alley Flats
Eligible TIF Expenses
Bayou Flats Phase One Alley Flats Phase Two
Land Land
84.53687.0000 $205,000 84.53876.0000 $ 60,000
84.53733.0152 $ 75,000
Survey $ 1,500 Survey $ 1,500
Testing& Soil Bearings $ 4,500 Testing & Soil Bearings $ 3,000
Excavation $ 20,000 Excavation $ 36,360
Site Utilities $ 11,300 Site Utilities $ 7,900
Parking Lot. (Agg base Parking Lot. (Agg base
Curb,gutter, bit paving, Curb,gutter, bit paving,
Storm Utilities) $149,766 Storm Utilities) $ 10,000
Fencing $ 9,700 Fencing $ 2,500
Sidewalks $ 26,001 Sidewalks $ 3,003
TOTAL $502,767 TOTAL $124,263
TOTAL Eligible Expenses Phase One and Two $627,030
Tuesday,October 28,2014
ATTACHMENT 3 :
TIF
PROJECTIONS
THIS PAGE INTENTIONALLY BLANK
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ATTACHMENT 4 :
APPLICANT
LETTER
REGARDING TIF
PROJECTION
CONCERNS
THIS PAGE INTENTIONALLY BLANK
Dear City Council and EDA Members,
I am writing to supplement my application materials concerning the proposed Bayou Alley Flats project
in Downtown.
We have been working with City Staff on our tax increment financing assistance request. Traci Ryan has
produced a financial projection showing the anticipated tax increment revenues that this project will
produce. If this project can move forward it is anticipated to generate more than 1.8 million dollars of
new taxes over the next 25 years.
However, without assistance this project cannot move forward. This project involves significant
redevelopment. Houses have been and will be purchased and demolished. This is an expensive
proposition. In addition to these costs,the quality and character of the building we anticipate requires
considerable expense. The goal is to create a centerpiece to downtown. To do this cement block and
cheap finish won't work. However, local rents just can't cover the cost of redevelopment with this type
of character and quality.
Tax increment eligible expenses are anticipated to exceed$645,000. This is an expense that we will
have to borrow for and include in the project costs. We anticipate only being able to lock in an interest
rate for the first 5 years,and we believe that based upon current discussions that rate will be in the 4.5%
range.
We ask that the Council and EDA will look to the uniqueness of this project and see that it is not your
typical project. It will provide benefits beyond those created on the property by shoring up the
downtown area by providing new market rate housing in downtown,and additional retail/restaurant
opportunities. Downtowns flourish when market rate housing is available within walking distance of
shops and restaurants.
Based upon the current estimates,which include anticipated inflation and only a 4%anticipated interest
rate it will take nearly 18 years of tax increment to provide the assistance that is needed for this project.
As mentioned,our anticipated interest rate is higher. In addition,an increasing real estate market can't
always be anticipated as we have all seen over the past 8 years. For this reason we ask that the Council
and EDA consider providing for reimbursement of tax increment eligible expenses actually incurred at
a rate of 4.5%. We believe that limiting the potential payback period to 19 years would provide us
and our lender with reasonable assurance of repayment while limiting the actual payback to a time
frame 6 years shorter than otherwise allowed by law.
This consideration by the EDA and Council will also provide us with the opportunity to work with
perspective tenants for the restaurant space knowing we could use part of the tax increment
reimbursement to assist in covering costs of property taxes.
Jon Petters
[21380-0002/1899049/1]
[21380-0002/1899049/1]
ATTACHMENT 5 :
TIF
DEVELOPMENT
AGREEMENT
THIS PAGE INTENTIONALLY BLANK
DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE CITY OF ST. JOSEPH,MINNESOTA
AND
BAYOU ALLEY FLATS,LLC
This document drafted by: BRIGGS AND MORGAN(MLI)
Professional Association
2200 First National Bank Building
St. Paul,Minnesota 55101
6658784v2
Table of Contents
Page
ARTICLE 1 DEFINITIONS 2
Section 1.1 Definitions 2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES 4
Section 2.1 Representations and Warranties of the City 4
Section 2.2 Representations and Warranties of the Developer 4
ARTICLE 3 UNDERTAKINGS BY DEVELOPER AND CITY 6
Section 3.1 Project, Development Property and Site Improvements 6
Section 3.2 Limitations on Undertaking of the City 6
Section 3.3 Reimbursement: TIF Note 6
Section 3.4 Business Subsidies Act 7
ARTICLE 4 EVENTS OF DEFAULT 9
Section 4.1 Events of Default Defined 9
Section 4.2 Remedies on Default 9
Section 4.3 No Remedy Exclusive 10
Section 4.4 No Implied Waiver 10
Section 4.5 Agreement to Pay Attorney's Fees and Expenses 10
Section 4.6 Indemnification of City 10
ARTICLE 5 ADDITIONAL PROVISIONS 12
Section 5.1 Restrictions on Use 12
Section 5.2 Conflicts of Interest 12
Section 5.3 Titles of Articles and Sections 12
Section 5.4 Notices and Demands 12
Section 5.5 Counterparts 13
Section 5.6 Law Governing 13
Section 5.7 Expiration 13
Section 5.8 Provisions Surviving Rescission or Expiration 13
Section 5.9 Assignability of Agreement 13
EXHIBIT A Description of Development Property A-1
EXHIBIT B Form of TIF Note B-1
EXHIBIT C Site Improvements C-1
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DEVELOPMENT AGREEMENT
THIS AGREEMENT, made as of the 10th day of November, 2014, by and between the
City of St. Joseph, Minnesota(the "City"), a municipal corporation organized and existing under
the laws of the State of Minnesota and Bayou Alley Flats, LLC (the "Developer"), a Minnesota
limited liability company under the laws of the United States of America.
WITNESSETH:
WHEREAS, pursuant to Minnesota Statutes, Section 469.124 through 469.133, the City
has heretofore established Development District No. 2 (the "Development District") and has
adopted a development program therefor(the "Development Program"); and
WHEREAS, pursuant to the provisions of Minnesota Statutes, Section 469.174 through
469.1794, as amended (hereinafter,the "Tax Increment Act"), the City has heretofore established
within the Development District, Tax Increment Financing District No. 2-3 (the "Tax Increment
District"), and has adopted a tax increment financing plan therefor (the "Tax Increment Plan")
which provides for the use of tax increment financing in connection with certain development
within the Development District; and
WHEREAS, in order to achieve the objectives of the Development Program and
particularly to make the land in the Development District available for development by private
enterprise in conformance with the Development Program, the City has determined to assist the
Developer with the financing of certain costs of a Project(as hereinafter defined)to be constructed
within the Tax Increment District as more particularly set forth in this Agreement;and
WHEREAS, the City believes that the development and construction of the Project, and
fulfillment of this Agreement are vital and are in the best interests of the City, the health, safety,
morals and welfare of residents of the City, and in accordance with the public purpose and
provisions of the applicable state and local laws and requirements under which the Project has
been undertaken and is being assisted; and
WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section
116J.993 through 116J.995, apply to this Agreement; and
WHEREAS,the City has adopted criteria for awarding business subsidies that comply with
the Business Subsidy Law, after a public hearing for which notice was published; and
WHEREAS, the Council has approved this Agreement as a subsidy agreement under the
Business Subsidy Law.
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each of them does hereby covenant and agree with the other as follows:
ARTICLE 1
DEFINITIONS
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Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:
Agreement means this Agreement, as the same may be from time to time modified,
amended or supplemented;
Business Day means any day except a Saturday, Sunday or a legal holiday or a day on
which banking institutions in the City are authorized by law or executive order to close;
City means the City of St. Joseph,Minnesota, its successors and assigns;
County means Stearns County, Minnesota;
Developer means Bayou Alley Flats,LLC,its successors and assigns;
Development District means the real property included in the Development Program for
Development District No. 2 heretofore established;
Development Program means the development program approved in connection with the
Development District;
Development Property means the real property described in Exhibit A attached to this
Agreement;
Event of Default means any of the events described in Section 4.1 hereof;
Legal and Administrative Expenses means the fees and expenses incurred by the City in
connection with the adoption and administration of the Tax Increment Financing Plan, the
preparation of this Agreement and the issuance of the TIF Note;
Note Payment Date means August 1,2017,and each February 1 and August 1 of each year
thereafter to and including February 1,2030;provided,that if any such Note Payment Date should
not be a Business Day,the Note Payment Date shall be the next succeeding Business Day;
Phase I Project means the redevelopment of Parcel Identification Numbers (PIN)
84.53867.000 and 84.53733.0152. The Developer will construct and maintain a three story mixed
use structure that will have commercial/retail space on the main floor and 10 one-bedroom and
four two-bedroom traditional apartment dwelling units on the second and third level. Traditional
apartment dwelling units do not include hotels, motels or extended stay lodging uses. This phase
will also involve the construction of 14 garage stalls and renovation of an existing building for use
as an art gallery;
Phase II Project means the redevelopment of PIN 84.53876.000 and construction of a
housing project consisting of four for sale condominiums units.
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Prime Rate means the rate of interest from time to time publicly announced by U.S. Bank
National Association in St.Paul,Minnesota,as its "prime rate"or"reference rate"or any successor
rate, which rate shall change as and when that rate or successor rate changes;
Project means collectively the Phase I Project and the Phase II Project;
Site Improvements means the site improvements to be undertaken in connection with the
Phase I Project,more particularly described on Exhibit C attached hereto;
State means the State of Minnesota;
Tax Increment Act means Minnesota Statutes, Sections 469.174 through 469.1794, as
amended;
Tax Increment District means Tax Increment Financing District No.2-3,located within the
Development District, a description of which is set forth in the Tax Increment Financing Plan,
which was qualified as a redevelopment district under the Tax Increment Act;
Tax Increment Financing Plan means the tax increment financing plan approved for the
Tax Increment District by the City Council on November 10, 2014, and any future amendments
thereto;
TIF Note means the Tax Increment Revenue Note (Bayou Alley Flats Project) to be
executed by the City and delivered to the Developer pursuant to Article III hereof,a copy of which
is attached hereto as Exhibit B;
Tax Increments means 90%of the tax increments derived from the Development Property
which have been received and retained by the City in accordance with the provisions of Minnesota
Statutes, Section 469.177;
Termination Date means the earlier of(i)February 1,2030,(ii)the date the Reimbursement
Amount is paid in full, (iii) the date on which the Tax Increment District expires or is otherwise
terminated,or(iv)the date this Agreement is terminated or rescinded in accordance with its terms;
and
Unavoidable Delays means delays,outside the control of the party claiming its occurrence,
which are the direct result of strikes, other labor troubles, unusually severe or prolonged bad
weather, acts of God, fire or other casualty to the Project, litigation commenced by third parties
which, by injunction or other similar judicial action or by the exercise of reasonable discretion,
directly results in delays, or acts of any federal, state or local governmental unit (other than the
City)which directly result in delays.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the City. The City makes the following
representations and warranties:
(1) The City is a municipal corporation and has the power to enter into this
Agreement and carry out its obligations hereunder.
(2) The Tax Increment District is a "redevelopment district"within the meaning of
Minnesota Statutes, Section 469.174, Subdivision 10, and was created,adopted and approved in
accordance with the terms of the Tax Increment Act.
(3) The development contemplated by this Agreement is in conformance with the
development objectives set forth in the Development Program.
(4) To finance certain costs within the Tax Increment District,the City proposes,
subject to the further provisions of this Agreement,to apply Tax Increments to reimburse the
Developer for a portion of the costs of acquisition of the Development Property and a portion of
the costs of construction of Site Improvements incurred in connection with the Phase I Project as
further provided in this Agreement.
(5) The City makes no representation or warranty, either express or implied, as to the
Development Property or its condition or the soil conditions thereon,or that the Development
Property shall be suitable for the Developer's purposes or needs.
Section 2.2 Representations and Warranties of the Developer. The Developer makes
the following representations and warranties:
(1) The Developer is a Minnesota limited liability company and has the power and
authority to enter into this Agreement and to perform its obligations hereunder,and doing so will
not violate its articles of organization,member control agreement or operating agreement,or the
laws of the State and by proper action has authorized the execution and delivery of this
Agreement.
(2) The Developer shall cause the Project to be constructed in accordance with the
terms of this Agreement,the Development Program, and all local, state and federal laws and
regulations(including,but not limited to, environmental,zoning, energy conservation,building
code and public health laws and regulations).
(3) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not be economically feasible within the reasonably
foreseeable future,without the assistance and benefit to the Developer provided for in this
Agreement.
(4) The Developer will use its best efforts to obtain,or cause to be obtained,in a
timely manner, all required permits,licenses and approvals, and will meet, in a timely manner,
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all requirements of all applicable local, state, and federal laws and regulations which must be
obtained or met before the Project may be lawfully constructed.
(5) Neither the execution and delivery of this Agreement,the consummation of the
transactions contemplated hereby,nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a breach of,
the terms, conditions or provision of any contractual restriction, evidence of indebtedness,
agreement or instrument of whatever nature to which the Developer is now a party or by which it
is bound,or constitutes a default under any of the foregoing.
(6) The Developer will cooperate fully with the City with respect to any litigation
commenced with respect to the Project.
(7) The Developer will cooperate fully with the City in resolution of any traffic,
parking,trash removal or public safety problems which may arise in connection with the
construction of the Project.
(8) The Developer shall commence construction of the Phase I Project no later than
May 1, 2015, and barring Unavoidable Delays,the Phase I Project will be substantially
completed by December 31,2016. The Developer shall commence construction of the Phase II
Project upon the presale of three condominium units of the Phase II Project.
(9) The Developer acknowledges that Tax Increment projections contained in the Tax
Increment Financing Plan are estimates only and the Developer acknowledges that it shall place
no reliance on the amount of projected Tax Increments and the sufficiency of such Tax
Increments to reimburse the Developer for a portion of the costs of the acquisition of the
Development Property and a portion of the costs of the Site Improvements as provided in Article
III.
(10) The Developer will not seek a reduction in the market value as determined by the
Stearns County Assessor of the Project or other facilities, if any, that it constructs on the
Development Property,pursuant to the provisions of this Agreement, for so long as the TIF Note
remains outstanding.
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ARTICLE 3
UNDERTAKINGS BY DEVELOPER AND CITY
Section 3.1 Project,Development Property and Site Improvements.
(1) The parties agree that the acquisition of the Development Property and the
installation of the Site Improvements is essential to the successful completion of the Project. The
costs of the Development Property and the Site Improvements shall be paid by the Developer.
The City shall reimburse the Developer for the lesser of$642,000 or the costs of acquisition of
the Development Property and the construction of Site Improvements for the Phase I Project
actually incurred and paid by the Developer(the "Reimbursement Amount"), as further provided
in Section 3.3 hereof.
(2) The Developer shall reimburse the City for its actual out of pocket Legal and
Administrative Expenses incurred in connection with the adoption of the Tax Increment
Financing Plan and the preparation of this Agreement.
Section 3.2 Limitations on Undertaking of the City. Notwithstanding the provisions
of Sections 3.1,the City shall have no obligation to the Developer under this Agreement to
reimburse the Developer for the Reimbursement Amount,if the City, at the time or times such
payment is to be made is entitled under Section 4.2 to exercise any of the remedies set forth
therein as a result of an Event of Default which has not been cured.
Section 3.3 Reimbursement: TIF Note. The City shall reimburse the payments made
by the Developer under Section 3.1 for the Reimbursement Amount through the issuance of the
City's TIF Note in substantially the form attached to this Agreement as Exhibit B, subject to the
following conditions:
(1) The TIF Note shall be dated,issued and delivered when the Developer shall have
demonstrated in writing to the reasonable satisfaction of the City that the construction of the Site
Improvements has been completed and that the Developer has incurred and paid the costs of the
acquisition of the Development Property and of the construction of Site Improvements for the
Phase I Project and a settlement statement or other evidence of payment of the costs of the
Development Property, as described in and limited by Section 3.1 and shall have submitted paid
invoices for the costs of construction of the Site Improvements and a settlement statement or
other evidence of payment of the costs of the Development Property in an amount not less than
the Reimbursement Amount.
(2) The unpaid principal of the TIF Note shall bear simple,non-compounding interest
from the date of issuance of the TIF Note,at 4.00%per annum. Interest shall be computed on
the basis of a 360 day year consisting of twelve(12) 30-day months.
(3) The principal amount of the TIF Note and the interest thereon shall be payable
solely from the Tax Increments.
(4) On each Note Payment Date and subject to the provisions of the TIF Note,the
City shall pay, against the principal and interest outstanding on the TIF Note, any Tax
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Increments received by the City during the preceding 6 months. All such payments shall be
applied first to accrued interest and then to reduce the principal of the TIF Note.
(5) The TIF Note shall be a special and limited obligation of the City and not a
general obligation of the City, and only Tax Increments shall be used to pay the principal and
interest on the TIF Note. If, on any TIF Note Payment Date,the Tax Increments for the payment
of the accrued and unpaid interest on the TIF Note are insufficient for such purposes,the
difference shall be carried forward,without interest accruing thereon,and shall be paid if and to
the extent that on a future TIF Note Payment Date there are Tax Increments in excess of the
amounts needed to pay the accrued interest then due on the TIF Note.
(6) The City's obligation to make payments on the TIF Note on any Note Payment
Date or any date thereafter shall be conditioned upon the requirements that(A)there shall not at
that time be an Event of Default that has occurred and is continuing under this Agreement and
(B) this Agreement shall not have been rescinded pursuant to Section 4.2.
(7) The TIF Note shall be governed by and payable pursuant to the additional terms
thereof, as set forth in Exhibit B. In the event of any conflict between the terms of the TIF Note
and the terms of this Section 3.3,the terms of the TIF Note shall govern. The issuance of the
TIF Note pursuant and subject to the terms of this Agreement, and the taking by the City of such
additional actions as bond counsel for the TIF Note may require in connection therewith, are
hereby authorized and approved by the City.
Section 3.4 Business Subsidies Act.
(1) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993 to
116J.995 (the "Business Subsidies Act"), the Developer acknowledges and agrees that the
amount of the "Business Subsidy" granted to the Developer under this Agreement is $642,000
which is the Reimbursement Amount for the acquisition of the Development Property and the
installation of the Site Improvements and that the Business Subsidy is needed because the Phase
I Project is not sufficiently feasible for the Developer to undertake without the Business Subsidy.
The Tax Increment District is an redevelopment district and the public purpose of the Business
Subsidy is to encourage the demolition of substandard structures and the construction of
commercial/retail facilities in the City. The Developer agrees that it will meet the following
goals (the "Goals")in connection with the development of the Phase I Project. It will create at
least one(1) full time jobs at an hourly wage and benefits totaling of at least$15.83 per hour
within two years from the "Benefit Date",which is the earlier of the date the Developer
completes or occupies the Phase I Project.
(2) If the Goals are not met,the Developer agrees to repay all or a part of the
Business Subsidy to the City,plus interest("Interest") set at the implicit price deflator defined in
Minnesota Statutes, Section 275.70, Subdivision 2, accruing from and after the Benefit Date,
compounded semiannually. If the Goals are met in part,the Developer will repay a portion of
the Business Subsidy(plus Interest)determined by multiplying the Business Subsidy by a
fraction, the numerator of which is the number of jobs in the Goals which were not created at the
wage level set forth above and the denominator of which is one(1) (i.e. number of jobs set forth
in the Goals).
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(3) The Developer agrees to(i)report its progress on achieving the Goals to the City
until the later of the date the Goals are met or two years from the Benefit Date, or,if the Goals
are not met,until the date the Business Subsidy is repaid, (ii)include in the report the
information required in Minnesota Statutes, Section 116J.994, Subdivision 7 on forms developed
by the Minnesota Department of Employment and Economic Development, and(iii)send
completed reports to the City. The Developer agrees to file these reports no later than March 1
of each year commencing March 1, 2016, and within 30 days after the deadline for meeting the
Goals. The City agrees that if it does not receive the reports,it will mail the Developer a
warning within one week of the required filing date. If within 14 days of the post marked date of
the warning the reports are not made, the Developer agrees to pay to the City a penalty of$100
for each subsequent day until the report is filed up to a maximum of$1,000.
(4) The Developer agrees to continue operations within the City for at least five(5)
years after the Benefit Date.
(5) There are no other state or local government agencies providing financial
assistance for the Project other than the City and the demolition grants in the amount of$5,000
from the St. Joseph Economic Development Authority.
(6) There is no parent corporation of the Developer.
(7) The Developer certifies that it does not appear on the Minnesota Department of
Employment and Economic Development's list of recipients that have failed to meet the terms of
a business subsidy agreement.
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ARTICLE 4
EVENTS OF DEFAULT
Section 4.1 Events of Default Defined. The following shall be "Events of Default"
under this Agreement and the term "Event of Default" shall mean whenever it is used in this
Agreement any one or more of the following events:
(a) Failure by the Developer to timely pay any ad valorem real property taxes
assessed and special assessments or other City charges with respect to the Development
Property while such property is owned by Developer.
(b) Failure of the Developer to observe or perform any covenant, condition,
obligation or agreement on its part to be observed or performed under this Agreement.
(c) The holder of any mortgage on the Development Property or any
improvements thereon, or any portion thereof, commences foreclosure proceedings as a
result of any default under the applicable mortgage documents.
(d) If the Developer shall
(A) file any petition in bankruptcy or for any reorganization,
arrangement, composition,readjustment,liquidation, dissolution, or similar relief
under the United States Bankruptcy Act of 1978, as amended or under any similar
federal or state law; or
(B) make an assignment for the benefit of its creditors; or
(C) admit in writing its inability to pay its debts generally as they
become due; or
(D) be adjudicated a bankrupt or insolvent; or if a petition or answer
proposing the adjudication of the Developer as bankrupt or its reorganization
under any present or future federal bankruptcy act or any similar federal or state
law shall be filed in any court and such petition or answer shall not be discharged
or denied within sixty(60)days after the filing thereof; or a receiver, liquidator or
trustee of the Developer,or of the Project,or part thereof, shall be appointed in
any proceeding brought against the Developer, and shall not be discharged within
sixty(60)days after such appointment, or if the Developer, shall consent to or
acquiesce in such appointment.
Section 4.2 Remedies on Default. Whenever any Event of Default referred to in
Section 4.1 occurs and is continuing,the City, as specified below,may take any one or more of
the following actions after the giving of thirty(30) days'written notice to the Developer,but only
if the Event of Default has not been cured within said thirty(30) days:
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(a) The City may suspend its performance under this Agreement and the TIF
Note until it receives assurances from the Developer,deemed adequate by the City,that
the Developer will cure its default and continue its performance under this Agreement.
(b) The City may cancel and rescind the Agreement and the TIF Note.
(c) The City may take any action, including legal or administrative action, in
law or equity,which may appear necessary or desirable to enforce performance and
observance of any obligation, agreement,or covenant of the Developer under this
Agreement.
Section 4.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to
the City is intended to be exclusive of any other available remedy or remedies,but each and
every such remedy shall be cumulative and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof,but any such right and power may be
exercised from time to time and as often as may be deemed expedient.
Section 4.4 No Implied Waiver. In the event any agreement contained in this
Agreement should be breached by any party and thereafter waived by any other party, such
waiver shall be limited to the particular breach so waived and shall not be deemed to waive any
other concurrent,previous or subsequent breach hereunder.
Section 4.5 Agreement to Pay Attorney's Fees and Expenses. Whenever any Event of
Default occurs and the City shall employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or observance of any
obligation or agreement on the part of the Developer herein contained,the Developer agrees that
it shall,on demand therefor,pay to the City the reasonable fees of such attorneys and such other
expenses so incurred by the City.
Section 4.6 Indemnification of City.
(1) The Developer(a)releases the City and its governing body members, officers,
agents,including the independent contractors, consultants and legal counsel, servants and
employees(collectively,the "Indemnified Parties") from,(b) covenants and agrees that the
Indemnified Parties shall not be liable for, and(c) agrees to indemnify and hold harmless the
Indemnified Parties against, any claim, cause of action, suit or liability for loss or damage to
property or any injury to or death of any person occurring at or about or resulting from any
defect in the Project or on the Development Property.
(2) Except for any willful misrepresentation or any willful or wanton misconduct of
the Indemnified Parties,the Developer agrees to protect and defend the Indemnified Parties,now
and forever, and further agrees to hold the aforesaid harmless from any claim,demand, suit,
action or other proceeding whatsoever by any person or entity whatsoever arising or purportedly
arising from the actions or inactions of the Developer(or if other persons acting on its behalf or
under its direction or control)under this Agreement,or the transactions contemplated hereby or
the acquisition, construction, installation, ownership, and operation of the Project;provided, that
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this indemnification shall not apply to the warranties made or obligations undertaken by the City
in this Agreement or to any actions undertaken by the City which are not contemplated by this
Agreement,but shall, in any event and without regard to any fault on the part of the City, apply
to any pecuniary loss or penalty(including interest thereon from the date the loss is incurred or
penalty is paid by the City at a rate equal to the Prime Rate) as a result of the Project causing the
Tax Increment District to not qualify or cease to qualify as a redevelopment district"under
Section 469.174, Subdivision 10, of the Act and Section 469.176, Subdivision 4(j). or to violate
limitations as to the use of Tax Increments as set forth in Section 469.176, Subdivision 4(j).
(3) All covenants, stipulations,promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations,promises, agreements and
obligations of the City and not of any governing body member, officer, agent, servant or
employee of the City.
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ARTICLE 5
ADDITIONAL PROVISIONS
Section 5.1 Restrictions on Use. Until termination of this Agreement,the Developer
agrees for itself, its successors and assigns and every successor in interest to the Development
Property,or any part thereof,that the Developer and such successors and assigns shall operate,or
cause to be operated,the Project as a housing/retail/commercial facility and shall devote the
Development Property to, and in accordance with,the uses specified in this Agreement.
Section 5.2 Conflicts of Interest. No member of the governing body or other official
of the City shall have any financial interest,direct or indirect,in this Agreement,the
Development Property or the Project, or any contract, agreement or other transaction
contemplated to occur or be undertaken thereunder or with respect thereto,nor shall any such
member of the governing body or other official participate in any decision relating to the
Agreement which affects his or her personal interests or the interests of any corporation,
partnership or association in which he or she is directly or indirectly interested. No member,
official or employee of the City shall be personally liable to the City in the event of any default
or breach by the Developer or successor or on any obligations under the terms of this Agreement.
Section 5.3 Titles of Articles and Sections. Any titles of the several parts, articles and
sections of the Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.
Section 5.4 Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice,demand or other communication under this Agreement by any party to any
other shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid,return receipt requested, or delivered personally, and
(a) in the case of the Developer is addressed to or delivered personally to:
Bayou Alley Flats, LLC
Attention: Jon Petters
15 East Minnesota Street
Suite 104
St. Joseph, Minnesota 56374
(b) in the case of the City is addressed to or delivered personally to the City
at:
City of St. Joseph,Minnesota
Attention: Administrator
St. Joseph City Hall
25 College Avenue North
P.O. Box 668
St. Joseph,Minnesota 56374-0668
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with a copy to:
Briggs and Morgan, P.A.
Attention: Mary Ippel
W2200 First National Bank Building
332 Minnesota Street
St. Paul,MN 55101
or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.
Section 5.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.
Section 5.6 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State.
Section 5.7 Expiration. This Agreement shall expire on the Termination Date.
Section 5.8 Provisions Surviving Rescission or Expiration. Sections 3.3,4.5 and 4.6
shall survive any rescission,termination or expiration of this Agreement with respect to or
arising out of any event, occurrence or circumstance existing prior to the date thereof.
Section 5.9 Assignability of Agreement. This Agreement may be assigned only with
the consent of the City. The TIF Note may only be assigned pursuant to the terms of the TIF
Note.
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IN WITNESS WHEREOF,the City has caused this Agreement to be duly executed in its
name and on its behalf the Developer has caused this Agreement to be duly executed in its name
and on its behalf, on or as of the date first above written.
CITY OF ST. JOSEPH,MINNESOTA
By
Its Mayor
By
Its Administrator
This is a signature page to the Development Agreement by and between the City of St.Joseph and
Bayou Alley Flats,LLC.
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BAYOU ALLEY FLATS, LLC
By
Its
This is a signature page to the Development Agreement by and between the City of St.Joseph and
Bayou Alley Flats, LLC.
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EXHIBIT A
Description of Development Property
Property located in the City of St. Joseph, Stearns County, Minnesota with the following Parcel
Identification Numbers:
Phase I Project
84.53867.0000
84.53733.0152
Phase II Project
84.53876.0000
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EXHIBIT B
Form of TIF Note
No. R-1 $
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF STEARNS
CITY OF ST. JOSEPH
TAX INCREMENT REVENUE NOTE
(BAYOU ALLEY FLATS PROJECT)
The City of St. Joseph, Minnesota(the "City"),hereby acknowledges itself to be indebted
and, for value received,hereby promises to pay the amounts hereinafter described (the "Payment
Amounts")to Bayou Alley Flats, LLC(the"Developer")or its registered assigns(the"Registered
Owner"), but only in the manner, at the times, from the sources of revenue, and to the extent
hereinafter provided.
The principal amount of this Note shall equal from time to time the principal amount stated
above, as reduced to the extent that such principal installments shall have been paid in whole or in
part pursuant to the terms hereof;provided that the sum of the principal amount listed above shall
in no event exceed $642,000 as provided in that certain Development Agreement, dated as of
November 10, 2014 as the same may be amended from time to time (the "Development
Agreement"), by and between the City and the Developer. The unpaid principal amount hereof
shall bear interest from the date of this Note at the simple non-compounded rate of four and zero
hundredths percent(4.00%)per annum. Interest shall be computed on the basis of a 360 day year
consisting of twelve(12) 30-day months.
The amounts due under this Note shall be payable on August 1,2017,and on each February
1 and August 1 thereafter to and including February 1,2030,or,if the first should not be a Business
Day(as defined in the Development Agreement),the next succeeding Business Day(the"Payment
Dates"). On each Payment Date the City shall pay by check or draft mailed to the person that was
the Registered Owner of this Note at the close of the last business day of the City preceding such
Payment Date an amount equal to the sum of the Tax Increments(hereinafter defined)received by
the City during the six month period preceding such Payment Date. All payments made by the
City under this Note shall first be applied to accrued interest and then to principal.
The Payment Amounts due hereon shall be payable solely from 90%of tax increments(the
"Tax Increments") from the Development Property (as defined in the Development Agreement)
within the City's Tax Increment Financing District No. 2-3 (the "Tax Increment District") within
its Development District No. 2 which are paid to the City and which the City is entitled to retain
pursuant to the provisions of Minnesota Statutes,Sections 469.174 through 469.1794,as the same
may be amended or supplemented from time to time(the "Tax Increment Act"). This Note shall
terminate and be of no further force and effect following the last Payment Date defined above,on
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any date upon which the City shall have terminated the Development Agreement under Section
4.2(b)thereof or the Developer shall have terminated the Development Agreement under Article V
thereof, on the date the Tax Increment District is terminated, or on the date that all principal and
interest payable hereunder shall have been paid in full,whichever occurs earliest.
The Tax Increment District includes properties other than the Development Property and
Stearns County remits Tax Increment to the City on the basis of the Captured Tax Capacity of the
entire Tax Increment District. For purposes of this Tax Increment Revenue Note, the City will
determine Tax Increment generated from the Development Property and improvements thereon in
its sole discretion.
The City makes no representation or covenant,express or implied,that the Tax Increments
will be sufficient to pay,in whole or in part,the amounts which are or may become due and payable
hereunder.
The City's payment obligations hereunder shall be further conditioned on the fact that no
Event of Default under the Development Agreement shall have occurred and be continuing at the
time payment is otherwise due hereunder,but such unpaid amounts shall become payable if said
Event of Default shall thereafter have been cured; and, further,if pursuant to the occurrence of an
Event of Default under the Development Agreement the City elects to cancel and rescind the
Development Agreement, the City shall have no further debt or obligation under this Note
whatsoever. Reference is hereby made to all of the provisions of the Development Agreement,
including without limitation Section 3.3 thereof,for a fuller statement of the rights and obligations
of the City to pay the principal of this Note, and said provisions are hereby incorporated into this
Note as though set out in full herein.
This Note is a special, limited revenue obligation and not a general obligation of the City
and is payable by the City only from the sources and subject to the qualifications stated or
referenced herein. This Note is not a general obligation of the City and neither the full faith and
credit nor the taxing powers of the City are pledged to the payment of the principal of this Note
and no property or other asset of the City, save and except the above-referenced Tax Increments,
is or shall be a source of payment of the City's obligations hereunder.
This Note is issued by the City in aid of financing a project pursuant to and in full
conformity with the Constitution and laws of the State of Minnesota,including the Tax Increment
Act.
This Note may be assigned only with the consent of the City which shall not be reasonably
withheld. In order to assign the Note, the assignee shall surrender the same to the City either in
exchange for a new fully registered note or for transfer of this Note on the registration records for
the Note maintained by the City. Each permitted assignee shall take this Note subject to the
foregoing conditions and subject to all provisions stated or referenced herein.
IT IS HEREBY CERTIFIED AND RECITED that all acts,conditions,and things required
by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be
performed precedent to and in the issuance of this Note have been done,have happened, and have
been performed in regular and due form,time, and manner as required by law; and that this Note,
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together with all other indebtedness of the City outstanding on the date hereof and on the date of
its actual issuance and delivery, does not cause the indebtedness of the City to exceed any
constitutional or statutory limitation thereon.
IN WITNESS WHEREOF,City of St. Joseph,Minnesota,by its City Council,has caused
this Note to be executed by the manual signatures of its Mayor and Administrator and has caused
this Note to be dated as of
Administrator Mayor
DO NOT EXECUTE UNTIL PAID INVOICES FOR LAND ACQUISITION AND SITE
IMPROVEMENTS ARE GIVEN TO THE CITY-REFER TO SECTION 3.3(1).
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CERTIFICATION OF REGISTRATION
It is hereby certified that the foregoing Note was registered in the name of Bayou Alley
Flats, LLC, and that, at the request of the Registered Owner of this Note,the undersigned has this
day registered the Note in the name of such Registered Owner, as indicated in the registration
blank below,on the books kept by the undersigned for such purposes.
NAME AND ADDRESS OF DATE OF SIGNATURE OF CITY
REGISTERED OWNER REGISTRATION ADMINISTRATOR
Bayou Alley Flats, LLC
15 East Minnesota Street
Suite 104
St. Joseph,Minnesota 56374
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EXHIBIT C
Site Improvements
Landscaping, including irrigation
Grading/earthwork
Survey
Environmental Testing
Soil Borings
Site Preparation
Onsite Utilities
Storm Water/Ponding
Outdoor Lighting
Onsite Road, Curb,Gutter,Driveway, Sidewalk and Streetscape Improvements
Parking
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ATTACHMENT 6 :
CITY COUNCIL
RESOLUTION
THIS PAGE INTENTIONALLY BLANK
EXTRACT OF MINUTES OF A MEETING OF THE
CITY COUNCIL OF THE CITY
OF ST.JOSEPH, MINNESOTA
HELD: November 10, 2014
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of
St. Joseph, Stearns County, Minnesota, was duly called and held on the 10th day of November,
2014, at 6:00 p.m.
The following members of the Council were present:
and the following were absent:
Member introduced the following resolution and moved its adoption:
RESOLUTION#
APPROVING THE ESTABLISHMENT OF REDEVELOPMENT TAX INCREMENT FINANCING
DISTRICT NO 2-3 WITHIN DEVELOPMENT DISTRICT NO. 2, THE PROPOSED ADOPTION OF
TAX INCRMENT FINANCING PLAN RELATING THERETO, MODIFICATION OF TAX INCREMENT
FINANCING DISTRICT NO. 2-1 TO REMOVE PARCELS AND CONSIDERATION OF A BUSINESS
SUBSIDY FOR THE DEVELOPERS OF THE BAYOU BLUES&ALLEY FLATS PROJECT
WHEREAS:
A It has been proposed that the City of St. Joseph, Minnesota(the"City"),establish Tax
Increment Financing District No. 2-3 and adopt a Tax Increment Financing Plan relating
thereto, and the modification of Tax Increment Financing District No. 2-1 to remove parcels
that will be included in the proposed Tax Increment Financing District No. 2-3, all under the
provisions of Minnesota Statutes, Sections 469.124 to 469.134 and 469.174 to 469.1799
(collectively, the"Act"); and
B. The City of St. Joseph has investigated the facts and has caused to be prepared the a tax
increment financing plan for Tax Increment Financing District No. 2-3; and
C. The City has performed all actions required by law to be performed prior to the the creation
of Tax Increment Financing District No. 2-3 and the adoption of the tax increment financing
plan relating thereto, including, but not limited to, notification of Stearns County and School
District No. 742, having taxing jurisdiction over the property to be included in Tax Increment
Financing District No. 2-3, and the holding of a public hearing upon published notice as
required by law.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of St. Joseph as follows:
1. Tax Increment Financing Plan. The Tax Increment Financing Plan is adopted as the tax
increment financing plan for Tax Increment Financing District No. 2-3, and the City
Council makes the following findings;
(a) Tax Increment Financing District No. 2-3 is a redevelopment district as defined in
Minnesota Statutes, Section 469.174, Subd. 10;
Criteria for this type of district is described in Section 1.5 of the Tax Increment
Financing Plan. One of the areas has been removed and the remaining area consists of
four parcels. One of the four parcels do not meet the 15%improved rule but is required
to assemble a site of a sufficient size to carry out the proposed development as provided
for in Minnesota Statues 469.176 Subd.4j. This parcel contains a substandard structure
but is not 15%improved. One of the parcels has no structure but does meet the 15%
improved criteria. The remaining two parcels are considered improved and contain
structures that have been found to be substandard.
(b) The proposed development, in the opinion of the City Council, would not occur
solely through private investment within the reasonably foreseeable future and that
the increased market value of the site that could reasonably be expected to occur
without the use of tax increment financing would be less than the increase in the
market value estimated to result from the proposed development after subtracting
the present value of the projected tax increments for the maximum duration of Tax
Increment Financing District No. 2-3 permitted by the Tax Increment Financing Plan.
The developer(s)have indicated in their applications and verbally,that were it not for
the use of Tax Increment Financing assistance they would not be able to move
forward with their project. The use of increment is necessary to cover the
extraordinary costs associated with redevelopment versus bare ground
development, but will also afford the development to contain leasing and rental rates
in the early years that will serve to market the development and enhance the
economic viability of the project for the developer as well as the community.
A comparative analysis of estimated market values both with and without
establishment of the TIF District and the use of tax increments has been performed
as described above. Such analysis is included as Exhibit 5, and indicates that:
1. The increase in estimated market value of the proposed developments
is$4,214,100; and
2. The present value of expected tax increments collected over the
maximum duration of the TIF District is$1,206,246;and
3. The expected increased estimated market value of the site without the
use of tax increment is$500,000.
The Tax Increment Financing Plan for Tax Increment Financing District No. 2-3
conforms to the general plan for development or redevelopment of the City of St.
Joseph as a whole.
The reasons and facts supporting this finding are that the proposed development
and plan is consistent with the planning efforts, zoning ordinances and efforts of the
City of St. Joseph to promote development within the City.
(c) The Tax Increment Financing Plan will afford maximum opportunity, consistent with
the sound needs of the City of St.Joseph as a whole,for the development or
redevelopment of Tax Increment Financing District No. 2-3 by private enterprise.
The reasons and facts supporting this finding are The City of St. Joseph and the St.
Joseph Economic Development Authority have worked diligently to promote
redevelopment efforts in the downtown and believe that projects contemplated in
this TIF District will afford maximum opportunity consistent with the needs of the
municipality as a whole.
3. Public Purpose. The adoption of the Tax Increment Financing Plan conforms in all
respects to the requirements of the Act and will help fulfill a need to develop an area of
the City which is already built up to provide employment opportunities to improve the tax
base,and to improve the general economy of the State and thereby serves a public
purpose.
4. Authorization of Interfund Loan. The City hereby authorizes internal funding in a
principal amount equal to all Project costs listed in the TIF Budget. Funds will be
provided from the General Fund, repaid over the term of the TIF District, and include
interest at a fixed rate of 4.0%. (This interest rate is the greater of the rates specified
under Minnesota Statutes 270C.40 and 549.09.)
5. Certification. The Auditor of Stearns County is requested to certify the original net tax
capacity of Tax Increment Financing District No. 2-3 as described in the Tax Increment
Financing Plan, and to certify in each year thereafter the amount by which the original
net tax capacity has increased or decreased in accordance with the Act; and the City
Clerk is authorized and directed to forthwith transmit this request to the County Auditor
in such form and content as the Auditor may specify, together with a list of all properties
within Tax Increment District No. 2-3 for which building permits have been issued during
the 18 months immediately preceding the adoption of this Resolution.
6. Filing. The City Clerk is further authorized and directed to file a copy of the Tax
Increment Financing Plan with the Commissioner of Revenue and the Office of the State
Auditor.
The motion for the adoption of the foregoing resolution was duly seconded by member
and upon vote being taken thereon, the following voted in favor thereof:
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted.
STATE OF MINNESOTA )
COUNTY OF STEARNS )SS
CITY OF ST.JOSEPH )
I, the undersigned, being the duly qualified and acting City Clerk of the City of St.Joseph,
Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of
minutes with the original thereof on file in my office, and that the same is a full, true and complete
transcript of the minutes of a meeting of the City Council of said City, duly called and held on the
date therein indicated, insofar as such minutes relate to the e establishment Tax Increment
Financing District No. 2-3 in the City.
WITNESS my hand this 10th day of November, 2014
Judy Weyrens, City Administrator