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HomeMy WebLinkAbout05/29/1985CITY OF APPLE VALLEY Dakota County, Minnesota May 29, 1985 Minutes of the special meeting of the City Council of Apple Valley, Dakota County, Minnesota, held May 29th, 1985, at 9:45 o'clock p.m. at the City Hall pursuant to due call and notice thereof. PRESENT: Mayor Branning; Councilmembers Goodwin, Holton, Humphrey and Savanick; Administrator Asleson and City Clerk Mueller ABSENT: None. Mayor Branning called the meeting to order at 9:47 p.m. and said the purpose of the meeting is to consider a development agreement with AV Development for the Commons project related to tax increment financing and property valuation. The Council received an amended draft of Article III of the Agreement AV DEVELOPMENT prepared by James O'Meara, the City's Attorney. Mr. Asleson said the COMMONS only changes being discussed apply to Article III, Land Transactions, AGREEMENT of the Agreement which the Council received for its May 23, 1985, meeting. The other aspects of the Agreement are mutually agreeable between the City and the Developers. Mr. Asleson said the effect of Article III is that on the date of the industrial development bond closing, scheduled for August 1 to 15, 1985, $458,000 of the tax increment financing would be paid to AV Development. The balance of $257,000 would be paid when the Certificate of Completion is issued, approximately February 1st, for a total of $715,000. Mr. O'Meara said an appraisal of $740,000 is being required on the property to allow for payment of any accrued interest on the balance. Mr. Asleson said First Bank Minneapolis has committed to the industrial development bond financing. The Developers want to proceed as soon as possible, however they must have title to the property from Land Holding Company. Unless something else is arranged, this would not happen until the approximately August 1, 1985, closing date. John Bossardt, Construction Management Consultant for the Developers, said financing has been difficult to arrange for this project and timing is a problem. If the tax increment funds are not available at an early date, a short term loan would be required. Their plans anticipated the funds would be available to assist with land improvement costs. If construction doesn't start until August 1st, it would mean winter construction and increased costs. Mr. O'Meara said the City does not have money available until the bonds are sold. Until there is an executed agreement, there is no basis on which the City can even issue the bonds. Steve Mattson, of Juran & Moody, said a very optimistic date for closing on a bond sale would be July 15, 1985, if procedures for it were started now. Mr. Bossardt said Land Holding Company would also like to complete the transaction as soon as possible, however, it will not permit ground breaking until title is transferred. Mike Dougherty said Land Holding wants more assurance of payment than the agreement that the City will be selling bonds. Mr. Asleson said he believes it would be a problem for the City to guarantee payment of $458,000 to Land Holding for the land and then pay AV Development $715,000 later. If the earliest the City can get the money is July 15th, the problem with Land Holding would still not be resolved. The Developers would need interim financing CITY OF APPLE VALLEY Dakota County, Minnesota May 29, 1985 Page 2 for 15 days, until the August 1st closing. It would be better to extend this financing and keep the bond sale clean. Mr. Mattson said he had explored the possibility of using temporary bonds for the tax increment financing. The bond market rates are very favorable now and rates on a 10-year issue are 7.5 to 7.8 percent. The timing on either temporary or 10- year bonds would be the same and he would recommend proceeding with the longer term bonds now. In any event, July 15th would be the earliest date money would be available. Mr. Bossardt said they have been operating under the assumption the $715,000 would be paid up front. First Bank Minneapolis's loan commitment was made on that basis. There are two issues important to them; obtaining the tax increment funds as soon as possible and receiving the full amount at closing. He has been involved in other tax increment projects and the purpose is to use the money for something which might not otherwise be built. The money is used up front for land costs and improvements. Mayor Branning asked what the timing is. Mr. Bossardt said the purchase of the land and construction start as soon as possible. He said a temporary bond sale for $300,000 had been discussed and understands it could be completed in two weeks. Mr. Mattson said State Law permits the City to arrange a negotiated bond sale for up to $300,000 and this can be completed quickly. However, any additional money the City might want within 91 days of such a sale must be a public sale. The $300,000 would not be adequate for the Land Holding transaction and he would re- commend proceeding with the longer term bond issue. Mayor Branning consulted with the Staff members and said $715,000 could be avail- able to the Developers at the point of closing provided there is an independent appraisal on the property for at least that amount. Councilmember Holton questioned on what basis the appraisal would be done. Councilmember Humphrey said it would be based on improved land. Mr. Asleson said between now and August 1st, the Developers would be doing site work and the appraisal would reflect that value. The maximum the City would pay would be the appraisal amount up to $715,000 and there would be no accrued interest. MOTION: of Goodwin, seconded by Humphrey, authorizing payment of $715,000 to AV Development for the property at the point of closing (approximately August 1, 1985) subject to receipt of an independent appraisal of at least $715,000 and sale of the City's tax increment bonds. LAND TRANS- ACTION PAYMENT Mr. Asleson clarified the intent of the motion that, if passed, would insert the amount of $715,000 in the base document the Council received for its May 23, 1985, meeting and the amended Article III, received tonight, would not be included. Vote was taken on the motion. Ayes - 5 - Nays - 0. CITY OF APPLE VALLEY Dakota County, Minnesota May 29, 1985 Page 3 Mayor Branning commented on the second issue raised by Mr. Bossardt; can the City advance funds prior to closing, by temporary bonds or other means. If the City advances funds, it is effectively buying the land. If $458,000 were paid in ad- vanhe, the City could be in the .position of not legally being able to pay anything additional. Mr. Bossardt said if the City will pay $715,000 at closing, the Agree- ment would be acceptable to them. Mr. Asleson said Mr. O'Meara will change the amount in the document to $715,000, remove the occupancy language and define the closing (upon industrial development bond issuance) in the Agreement if approved by the Council. MOTION: of Humphrey, seconded by Goodwin, adopting Resolution No. 1985- 110 approving and authorizing execution of a Contract for Private Development with AV Development Company with payment of $715,000 by the City upon closing, subject to receipt of an independent appraisal, and language changes necessary to conform to the action taken in the previous motion. Ayes - 5 - Nays - 0. RES. 1985-110 APPROVE AV DEVELOPMENT AGREEMENT Mr. Asleson said the details of the tax increment bond issue and other City bonds, to be issued under Chapter 429 for improvements, will be prepared for the Council's June 6, 1985, special meeting. Mr. O'Meara noted the City would not be in a posi- tion to sell the tax increment bonds until the Agreement is executed. MOTION: of Humphrey, seconded by Goodwin, to adjourn. Ayes - 5 - Nays - 0. The meeting was adjourned at 11:14 o'clock p.m.