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HomeMy WebLinkAbout10/12/15 EDA Meeting   Meeting Location: Municipal Center 7100 147th Street West City of Apple Valley, Minnesota 55124   NOTICE: The Apple Valley Economic Development Authority will hold a special meeting at the Municipal Center, on Monday, October 12, 2015, at 4:00 p.m. to consider the items listed in the following agenda: OCTOBER 12, 2015 ECONOMIC DEVELOPMENT AUTHORITY SPECIAL MEETING TENTATIVE AGENDA 4:00 p.m. 1. Call to Order. 2. Approval of Agenda. 3. Approval of Minutes of September 24, 2015. 4. Approval of Consent Agenda Items*: *None. 5. Regular Agenda Items: A. Karamella, LLC: 1. Adopt Resolution Approving Assignment of TIF Contract and TIF Note. 6. Other. 7. Staff Updates. 8. Adjourn. * Items marked with an asterisk (*) are considered routine and will be enacted with a single motion, without discussion, unless a commissioner or citizen requests the item separately considered in its normal sequence on the agenda  ECONOMIC DEVELOPMENT AUTHORITY City of Apple Valley Dakota County, Minnesota September 24, 2015 Minutes of the meeting of the Economic Development Authority of Apple Valley, Dakota County, Minnesota, held September 24, 2015, at 6:00 p.m., at Apple Valley Municipal Center. PRESENT: Commissioners Bergman, Grendahl, Goodwin, Hamann-Roland, Hooppaw and Maguire ABSENT: Commissioner Melander City staff members present were: Executive Director Tom Lawell, City Attorney Michael Dougherty, Community Development Director Bruce Nordquist, Planner Kathy Bodmer, Planner Margaret Dykes and Department Assistant Joan Murphy. Meeting was called to order at 6:30 p.m. by President Goodwin. APPROVAL OF AGENDA MOTION: of Hamann-Roland, seconded by Grendahl, approving the agenda. Ayes - 6 - Nays - 0. APPROVAL OF MINUTES MOTION: of Bergman, seconded by Hooppaw, approving the minutes of the meeting of July 23, 2015, as written. Ayes - 6 - Nays - 0. CONSENT AGENDA None KARAMELLA LLC Planner Margaret Dykes stated a public hearing has been scheduled for September 24, 2015 to consider a modification to the Master Development Program and the establishment of Tax Increment Financing District No. 17 to address a new project and the provision of a business subsidy. Prior to the establishment of any new Tax Increment Financing (TIF) it is necessary to amend the Master Development District to include the TIF plan for the new district. The City and EDA have received a request for financial assistance from Karamella, LLC to assist in the construction of a new facility located at 147th Street and Johnny Cake Ridge Road by offset a portion of the development cost. One of the pieces of the assistance being considered is in the form of a pay as you go Economic Development TIF District. In addition to this TIF assistance, Karamella will be submitting a Job Creation Fund application for assistance from the State of Minnesota. President Goodwin opened the public hearing at 6:38 p.m. Economic Development Authority City of Apple Valley Dakota County, Minnesota September 24, 2015 Page 2 President Goodwin closed the public hearing at 6:39 p.m. MOTION: of Hamann-Roland, seconded by Hooppaw, adopting Resolution No. 2015-09 approving amendments to Master Development Program, the establishment of Tax Increment Financing District No. 17 and approving the Tax Increment Financing Plan therefor and approving Business Subsidy. Ayes - 6 - Nays - 0. EDA ITEMS AND COMMUNICATIONS 7. STAFF UPDATES A. Job Creation Fund Application for Abdallah Candies Community Development Director Bruce Nordquist commented that the City Council will consider a Job Creation Fund ("JCF ") application from Abdallah Candies ("Abdallah"). The company expects to employ at least 80 people at the new facility. B. Other Updates Recognition was given to Planner Margaret Dykes for her years of service to the City of Apple Valley. ADJOURNMENT MOTION: of Bergman, seconded by Grendahl, to adjourn. Ayes - 6 - Nays - 0. The meeting was adjourned at 6:48 p.m. Respectfully Submitted, n Murphy, DepartmeiM Assi Approved by the Apple Valley Economic Development Authority on City of Apple Valley TO: FROM: DATE: SUBJECT: ••• •••• ••••• •••• ••• President, Economic Development Authority Commissioners, and Tom Lawell, Executive Director Ron Hedberg, Finance Director October 8, 2015 Finance Department Resolution Approving and Authorizing the Execution of Assignment of TIF Contract and TIF Note from Karamella, LLC to KleinBank MEMO Introduction: In September, 2015the EDA entered into a development agreement with Karamella, LLC for the development of the Abdallah expansion located at 147 St and Johnny Cake Ridge Road. The development agreement provided for the development of two separate phases including two buildings, totaling approximately 120,000 square feet of manufacturing/ retail space with an increase of market value of $6.6 million. The agreement also provided for any assistance to be provided through a Tax Increment Financing (TIF) note which would be repaid by the Tax Increment generated by the new construction. Karamella, LLC is requesting a transfer of their rights under the TIF Contract and TIF Note to their lender, KleinBank. Discussion: The first phase of the project is to include the construction of a 73,700 square foot manufacturing and retail facility with an estimated taxable value of $4,051,000. The retail component of the project is approximately 4,200 square feet and the manufacturing component will be approximately 69,500 square feet. The second phase of the project contemplates the addition of 46,341 square feet with an estimated taxable value of $2,549,000. The inclusion of the second phase of the project in the original TIF plan and note provides an incentive for the property owner to create additional taxable value in the district to achieve the maximum amounts provided for the TIF plan. The TIF plan was based on the assumption that the increase in taxable value is to be $6,600,000, which includes both phases. The TIF plan includes estimated total TIF collections of $1,010,000 over the life of the district, resulting in available tax increment returned to the property owner of approximately $908,000, with a present value of 736,000. see exhibit G of the TIF Plan. The present value of $736,000 would be in the form of a pay as you go TIF Note. The TIF note caps the present value amount that would be returned to the owner at the $736,000, repaid with interest at a rate of 4 %. If the resulting values are higher and the TIF collections are also higher the $736,000 TIF note would be repaid quicker and the district would then be required to be decertified when the note is retired. Action Requested Adopt Resolution approving and authorizing the execution of assignment of development agreement. APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. EDA-15- RESOLUTION APPROVING AND AUTHORIZING THE EXECUTION OF ASSIGNMENT OF TIF CONTRACT AND TIF NOTE HELD: OCTOBER 12, 2015 A. WHEREAS, the Apple Valley Economic Development Authority (the "Authority") has entered into a Development Assistance Agreement, dated as of October 1, 2015, (the "TIF Contract ") with Abdallah Incorporated, a Minnesota Corporation ("Abdallah"), Karamella, LLC, a Minnesota limited liability company ("Karamella") pertaining to the construction of a certain manufacturing facility on the Development Property, as defined in the TIF Contract (the "Phase 1 Project"); and B. WHEREAS, pursuant to the TIF Contract, the Authority will, upon satisfaction of the conditions contained in the TIF Contract, execute and deliver to Karamella that certain Tax Increment Revenue Note (Karamella, LLC Project) in a principal amount not to exceed $736,000 (the "TIF Note"); and C. WHEREAS, Klein Bank (the "Lender") is financing the construction and development of the Phase 1 Project and is providing funds to Karamella in the principal amount of up to Nine Million and 00/100 Dollars ($9,000,000.00) (the "Loan"), pursuant to the terms of that certain Construction Loan Agreement (as the same may be amended or restated from time to time, the "Loan Agreement"), executed by and between the Lender and Karamella, and D. WHEREAS, the Loan is evidenced by a certain promissory note in the original principal amount of $9,000,000, executed by Karamella and payable to the order of Lender (as the same may be amended or restated from time to time, collectively, the "Note"); which Note is secured by, among other things, that certain Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents of even date herewith encumbering, among other property, the Phase 1 Project (the "Mortgage"); and E. WHEREAS, to secure the obligations of Karamella to Lender under the Loan Agreement, the Note, the Mortgage and the documents related thereto (collectively, the "Loan Documents"), Lender has required, as an express condition to disbursement of the Loan, (a) that Karamella assign all of its rights under the TIF Contract and the TIF Note to Lender, and (b) that the Authority agree to certain other matters, all as more fully contained in the Assignment of TIF Contract and TIF Note (the "Assignment"); and F. WHEREAS, a draft of the Assignment has been submitted to the Board of Commissioners of the Authority for approval. NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Authority, that the Board of Commissioners hereby approves the Assignment in substantially the form submitted, and the President and the Secretary are hereby authorized and directed to execute the Assignment on behalf of the Authority. In the absence of the President or the 7278307v1 Secretary, any document authorized by this resolution to be executed may be executed by an acting or duly designated official. The approval hereby given to the Assignment includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by the Authority officials authorized by this resolution to execute the Assignment. The execution of the Assignment by the appropriate officer or officers of the Authority shall be conclusive evidence of the approval of the Assignment in accordance with the terms hereof. ATTEST: Pamela J. Gacksetter, Secretary Member introduced the foregoing resolution and moved its adoption and the foregoing resolution was duly seconded by member , and after full discussion thereof and upon vote being taken thereon, the following voted in favor thereof: 7278307v1 ADOPTED this 12th day of October, 2015. and the following voted against the same: Tom Goodwin, President Whereupon said resolution was declared duly passed and adopted. 2 STATE OF MINNESOTA ) ) ss. COUNTY OF DAKOTA ) I, the undersigned, being the duly qualified and acting City Secretary of the Apple Valley Economic Development Authority, DO HEREBY CERTIFY that the attached resolution is a true and correct copy of an extract of minutes of a meeting of the Board of Commissioners of the Apple Valley Economic Development Authority duly called and held, as such minutes relate to authorizing the execution of assignment of TIF Contract and TIF Note. WITNESS my hand as such Secretary of the Apple Valley Economic Development Authority this day of October, 2015. 7278307v1 3 Secretary THIS ASSIGNMENT TIF CONT CT AND TIF NOTE (this "Agreement"), is made and entered into as of the day of October, 2015, by and among the Apple Valley Economic Development Authority, Minnesota, a body corporate and politic, organized and existing under the laws of the State of Minnesota (the "Authority"), Abdallah Incorporated, a Minnesota corporation ("Abdallah"), Karamella, LIAC, a Minnesota limited liability company ("Karamella") and Klein Bank, a Minnesota banking corporation ("Lender"). DOCS-#4893527-v3 ASSIGNMENT OF TIF CONTRACT AND TIF NOTE WITNESSETH: WHEREAS, the Authority, Abdallah and Karamella have entered into that certain Development Assistance Agreement dated as of , 2015 (the "TIF. Contract"), pertaining to the development of a portion of certain real property located in the City of Apple Valley (the "City") legally described on i.1* A attached hereto and hereby made a part hereof (the "Project") and referred to in the TIF Contract as the "Phase 1 Project"; and WHEREAS, pursuant to the TIF Contract, the Authority will, upon satisfaction of the conditions contained in the TIF Contract, execute and deliver to Karamella that certain Tax Increment Revenue Note (Karamella, LLC Project) in a principal amount not to exceed $736,000 (the "TIF Note"); and WHEREAS, Klein Bank is financing the construction and development of the Project and is providing funds to Karamella in the principal amount of up to Nine Million and 00/100 Dollars ($9,000,000.00) (the "Loan"), pursuant to the terms of that certain Construction Loan Agreement of even date herewith (as the same may be amended or restated from time to time, the "Loan Agreement"), executed by and among Lender and Karamella; and WHEREAS, the Loan is evidenced by that certain Promissory Note of even date herewith in the original principal amount of $9,000,000, executed by Karamella and payable to the order of Lender (as the same may be amended or restated from time to time, collectively, the "Note"); which Note is secured by, among other things, that certain Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents of even date herewith encumbering, among other property, the Project (as the same may be amended or restated from time to time, the "Mortgage"), executed by Karamella and The Hegedus Family L.L.P. in favor of Lender and filed of record in the office of the Dakota County Registrar of Titles on 2015, as Document No, and the Dakota County Recorder's office on , 2015, as Document No. ; and • WHEREAS, to secure the obligations of Karamella to Lender under the Loan Agreement, the Note, the Mortgage and the documents related thereto (collectively, the "Loan Documents"), Lender has required, as an express condition to disbursement of the Loan, (a) that Karamella assign all of its rights under the TIF Contract and the TIF Note to Lender, and (b) that the Authority agree to certain other matters, all as more fully contained herein. NOW TFIEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Karamella hereby assigns to Lender, and Lender hereby accepts (subject to the terms of this Assignment), all of Karamella's right, title and interest under and pursuant to the TIF Contract and the TIF Note to secure all of Karamella's obligations to Lender under the Loan Documents; provided, however, that Karamella shall continue to be obligated in all respects to the performance of the TIF Contract. DOCS444893527-0 2. To perfect Lender's security interest in the TIF Note, upon the execution and delivery by the Authority to Karamella of the TIF Note, Karamella agrees to deliver such TIF Note to Lender to be held by Lender pursuant to the terms of this Agreement. 3, The Authority hereby acknowledges and agrees that it has duly noted the assignment of the TIF Note by Karamella to Lender. The TIF Note shall be registered in the name of Karamella subject this Section 3. Upon written notification by Lender of an Event of Default (as that term is defined in the Loan Documents), the Authority hereby agrees to make all payments under the TIF Note directly to Lender, and Karamella hereby consents to the making of such payments directly to Lender. In addition, upon written notification by Lender of an Event of Default, the TIF Note shall be registered in the name of Lender rather than in the name of Karamella, 4. Karamella hereby represents and warrants that there have been no prior assignments of the TIF Contract or the TIF Note, that the TIF Contract is, and the TIF Note upon issuance will be, valid and enforceable agreements and that neither the Authority nor Karamella, as applicable, is in default under the TIF Contract, and that all covenants, conditions and agreements have been performed as required herein, except those not to be performed until after the date hereof, Karamella agrees not to sell, assign, pledge, mortgage or otherwise transfer or encumber its interest in the TIF Contract or the TIF Note as long as this Agreement is in effect. Upon written notification by Lender to the Authority of an Event of Default as described in paragraph 3 above, Karamella hereby irrevocably constitutes and appoints Lender as its respective attorney-in-fact to demand, receive and enforce its rights with respect to the TIF Contract and/or the DOCS-#4893527-v3 TIF Note for and on behalf of and in the name of Karamella, or, at the option of Lender, in the name of Lender, with the same force and effect as Karamella could do if this Agreement had not been made. 5, This Agreement shall constitute a perfected, absolute and present assignment, provided that Lender shall have no right under this Agreement to enforce the provisions of the TIF Contract or the TIF Note, or to collect any funds payable to Karamella pursuant to the TIF Contract or the TIF Note, or exercise any rights or remedies under this Agreement until an Event of Default shall occur and be continuing. 6. Upon the occurrence of an Event of Default, Lender may, without affecting any of its rights or remedies against Karamella under any other instrument, document or agreement, exercise its rights under this Agreement as attorney-in-fact for Karamella in any manner permitted by law and in addition Lender shall have the right to exercise and enforce any and all rights and remedies available after a default to a secured party under the Uniform Commercial Code as adopted in the State of Minnesota. If notice to Karamella of any intended disposition of collateral or of any intended action is required by law in any particular instance, such notice shall be deemed commercially reasonable if given in writing at least ten (10) days prior to the intended disposition or other action. 7, The Authority consents and agrees to the terms and conditions of this Agreement. The Authority further represents and warrants to Lender that the TIF Contract is a valid agreement enforceable in accordance with its terms. 8. The Authority hereby agrees that any agreement of Karamella to indemnify the Authority pursuant to the TIF Contract is not the obligation of, nor shall any provisions in such article impose any obligation upon, Lender, its successors and/or assigns until such time as Lender, in its discretion, exercises its rights hereunder and assumes the obligations of Karamella under the TIF Contract. The Authority hereby agrees that the granting of the Mortgage by Karamella, and the sale of the Project pursuant to a foreclosure of the Mortgage, shall not be deemed to violate Section 3.6 of the TIF Contract. 10, The Authority agrees that all of its rights under the TIF Contract be subject and subordinate to the rights of Lender under the Mortgage. The term "Mortgage" shall include the Mortgage and any amendments, supplements, modifications, renewals, extensions or replacements thereto. 11, The Authority agrees that, contemporaneously with any notice of default given under the TIF Contract to Karamella or Abdallah, the Authority shall also provide Lender with a copy of such notice of default, and Lender shall have the right, but not the obligation, to cure any such default on behalf of Karamella or Abdallah, as the case may be, within any applicable cure period provided for in the TIF Contract, as applicable. 3 DOCS-#4893527-v3 The parties hereto agree that no change or amendment shall be made to the terms of the TIF Contract or TIF Note without the prior written consent of Lender. 13. This Agreement can be waived, modified, amended, terminated or discharged only explicitly in a writing signed by all parties hereto. A waiver by Lender shall be effective only in a specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any of Lender's rights or remedies hereunder. All rights and remedies of Lender shall be cumulative and shall be exercised singularly or concurrently, at Lender's option, and any exercise or enforcement of any one such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. 14. No provision of this Agreement shall be deemed or construed to alter, amend or modify, in any way, the rights and obligations of the Authority with respect to Karamelia or Abdallah, as applicable, with respect to the Authority as contained in the TIF Contract. 15. Any notice, request, demand or other communication hereunder shall be deemed duly given if delivered or postage prepaid, certified or registered, addressed to the party as set forth below: If to the Authority: Apple Valley Economic Development Authority, Minnesota Apple Valley Municipal Center 7100 West 147 Street Apple Valley, 1\4N 55124 If to Karamelia: Karamelia, LLC 5393 River Oak Drive Savage, MN 55378 Attn: Steven Hegedus with a copy to: David A. Brandell 775 Prairie Center Drive Suite 160 Flagship Corporate Center Eden Prairie, MN 55344 If to Abdallah: DOCS414893527-v3 Abdallah, incorporated 3501 West Burnsville Parkway Burnsville, MN 55306 Attn: Steven Hegedus with a copy to: David A. Brandell 775 Prairie Center Drive Suite 160 Flagship Corporate Center Eden Prairie, MI•155344 If to Lender: Klein Bank 14141 Glendale Road Savage, MN 55378 Attention: John McGinnis 16. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. This Agreement may be executed in several counterparts, each of which when executed is an original, but all of which together shall constitute one instrument. Separate signature pages may be signed by various parties and each complete set of pages hereto, with signature pages signed by each party, shall constitute one original of this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have made and entered into this Assignment of TIF Contract and TIF Note as of the day and year first above written. STATE OF MINNESOTA ) ) ss COUNTY OF DAKOTA ) DOCS-#4893527-v3 6 APPLE VALLEY ECONOMIC DEVELOPMENT AUTHORITY, MINNESOTA By Its President By Its Secretary The foregoing instrument was acknowledged before me this day of 2015, by ., the President and s the Secretary, respectively of the Apple Valley Economic Development Authority, Minnesota. Notary Public STATE OF MINNESOTA ) ) ss COUNTY OF STATE OF MINNESOTA ) ) ss COUNTY OF DOCS-#4893527-v3 7 KARAMELLA, LLC By: _ Steven A. Hegedus Its: Chief Manager Notary Public The foregoing instrument was acknowledged before me this _ day of October, 2015, by Steven A. Hegedus, the Chief Manager of KARAMELLA, LLC, a Minnesota limited liability company, on behalf of the limited liability company. ABDALLAH INCORPORATED Its: President Notary Public Steven A. Hegedus The foregoing instrument was acknowledged before me this day of October, 2015, by Steven A. Hegedus, the President of ABDALLAH INCORPORATED, a Minnesota corporation, on behalf of the corporation. STATE OF MINNESOTA ) Lindquist & Vennum, LLP 4200 IDS Center 80 South Eighth Street Minneapolis, vIN 55402 612-371-3211 COUNTY OF DOCS-1 SS THIS INSTRUMENT WAS DRAFTED BY: 8 KLEIN By: John McGinnis Its: Vice President This instrument was acknowledged before me this day of October, 2015, John McGinnis, a Vice President of KLEINBANK, a Minnesota banking corporation, on behalf of the corporation. Notary Public DOCS4/4893527-0 EXHIBIT A (Legal Description) Parcel 1 A parcel of land located in the East Half of the Southwest Quarter, of Section 26, Township 115, Range 20, Dakota County, Minnesota, more particularly described as follows: Commencing at the South quarter onner of said Section 26; then North 00 degrees 05 minutes 31 seconds Last along the East line of said East 1/4 of the Southwest 1/4 a distance €•1 1957.70 Feet to the point or begittning thence South 89 degrees 51 minutes 01 seconds West i distance 01'655.87 feet; theme 583.57 feet along the arc of a tangential curve concave southerly having a radius of 2045,00 feet, central angle of 16 degrees 21 minutes 01 seconds; thence South 73 degrees 30 minutes 00 seconds West a distance of 101.63 feet to the west line of the said East 1/4 of the Southwest 1/4; thence North 00 degrees 02 minutes 52 seconds West along said west line of the East Y2 of the Southwest 1/4 a distance of 799.83 feet to the North line of said East Va of the Southwest 1/4; thence North 89 degrees 53 minutes 15 seconds East along the said north line of said East 1/4 of the Southwest 1/4 a distance of 1330.55 feet to the east line of said East V2 of the Southwest 1/4; thence South 00 degrees 05 minutes 31 seconds West along said East line of the East V2 of the Southwest 1/4 a distance of 687,66 feet to the point of beginning there terminating.